PLAYSTUDIOS, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

2011 and 2021 Equity Incentive Plans

The Company has two equity incentive plans: Old PLAYSTUDIOS' 2011 Omnibus Stock and Incentive Plan (the “2011 Plan”) and the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other stock awards, and performance awards to employees, officers, non-employee directors and independent service providers of the Company. The 2021 Plan became effective immediately upon the closing of the Acies Merger and replaced the 2011 Plan. No additional awards will be available under the 2011 Plan.

Each Old PLAYSTUDIOS stock option from the 2011 Plan that was outstanding immediately prior to the Acies Merger and held by current employees or service providers, whether vested or unvested, was converted into an option to purchase 0.233 shares of Class A common stock (each such option, an “Exchanged Option”). Except as specifically provided in the Merger Agreement, following the Acies Merger, each Exchanged Option continues to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Old PLAYSTUDIOS option immediately prior to the consummation of the Acies Merger. All equity awards activity was retroactively restated to reflect the Exchanged Options.

The number of shares of Class A common stock available under the 2021 Plan will increase annually on the first day of each calendar year, beginning with the calendar year ended December 31, 2022, with such annual increase equal to the lesser of (i) 5% of the number of shares of common stock issued and outstanding on the last business day of the immediately preceding fiscal year and (ii) an amount determined by the Company's Board of Directors. If any award (or any award under the 2011 Plan) is forfeited, cancelled, expires, terminates or otherwise lapses or is settled in cash, in whole or in part, without the delivery of Class A common stock or Class B common stock, then the shares (including both the Class A common stock and Class B common stock) covered by such forfeited, expired, terminated or lapsed award shall again be available as shares for grant under the 2021 Plan.

As of December 31, 2022, the Company had 18.9 million shares of Class A common stock reserved for issuance upon exercise of outstanding awards under the 2011 Plan or vesting and settlement of outstanding awards under the 2021 Plan, 1.9 million shares of Class B common stock reserved for issuance upon exercise of outstanding awards under the 2011 Plan, and 10.6 million shares of Class A common stock reserved for future issuance under the 2021 Plan.

Stock-Based Compensation

In connection with the Domestication and the closing of the Acies Merger, the Founder Group beneficially owned 16.1 million shares of Class B common stock, resulting in 74.6% of voting power of the Company. In addition, on the Closing Date of the Acies Merger, the Founder Group was the beneficial owner of 2.2 million fully vested options underlying shares of Class B common stock, which accounted for all of Mr. Pascal's outstanding options on the Closing Date of the Acies Merger. As a result of the Acies Merger, the Founder Group has a controlling interest in the Company. As the Founder Group did not have control of Old PLAYSTUDIOS immediately prior to the Acies Merger, and as Mr. Pascal is an employee of the Company, the incremental value resulting from the super vote premium is accounted for as incremental compensation costs. During the year ended December 31, 2022, the Company incurred $1.1 million of additional compensation expense related to the Founder Group's beneficial ownership interest in Class B common stock and the underlying vested options as of the Closing Date.

The following table summarizes stock-based compensation expense that the Company recorded in (loss) income from operations for the periods shown:


	Years Ended December 31,
	2022		2021		2020
Selling and marketing	$	813	$	72	$	94
General and administrative	8,547		1,704		1,044
Research and development	8,367		2,679		2,381
Stock-based compensation expense	$	17,727	$	4,455	$	3,519
Capitalized stock-based compensation	$	2,530	$	657	$	605

Stock Options

All of the options granted under the 2011 Plan have time-based vesting periods vesting over a period of three to four years and a maximum term of 10 years from the grant date.

The following is a summary of stock option activity for time-based options for the year ended December 31, 2022 (in thousands, except weighted-average exercise price and remaining term):


	No. of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Term (in Years)	Aggregate Intrinsic Value
Outstanding - December 31, 2021	14,749	$	0.85
Granted	—	—
Exercised	(5,178)	0.31
Forfeited	(245)	1.90
Expired	(104)	1.99
Outstanding - December 31, 2022	9,222	1.11		5.5	$	25,969
Unvested - December 31, 2022	1,249	0.96		6.7	3,866
Exercisable - December 31, 2022	7,973	1.14		5.3	22,103

The following table presents the weighted-average assumptions used to estimate the fair value of the stock options granted in the Company’s consolidated financial statements:


	For the Years Ended December 31,
	2022	2021	2020
Expected term (in years)	0.00	5.86	5.96
Expected volatility	—%	51.24%	59.56%
Risk-free interest rate range	0.00% – 0.00%	0.54% – 0.60%	0.24% – 0.51%
Dividend yield	0%	0%	0%
Grant-date fair value	$—	$4.01	$0.60

As of December 31, 2022, there was approximately $2.3 million of total unrecognized compensation expense related to stock options to employees. As of December 31, 2022, this cost is expected to be recognized over a remaining average period of 0.60. The total intrinsic value of stock options exercised under the provisions of the 2011 Plan during the years ended December 31, 2022, 2021, and 2020, was $20.0 million, $17.6 million, and $19.6 million, respectively.

Restricted Stock Units ("RSUs")

RSUs are typically granted using a three or four year vesting schedule, either vesting pro rata annually or a cliff vest over the requisite service period, subject to continued employment. Except as provided in an award agreement between the Company and the employee, if an employee is terminated (voluntarily or involuntarily), any unvested awards as of the date of termination will be forfeited. RSUs settle for outstanding shares of the Company’s Class A common stock upon vesting.

The following is a summary of RSU activity for the year ended December 31, 2022 (in thousands, except weighted-average grant date fair value):


	No. of RSUs	Weighted-Average Grant Date Fair Value		Total Fair Value of Shares Vested
Outstanding - December 31, 2021	—	$	—
Granted	13,922	4.28
Vested	(1,884)	4.34		$	8,170
Forfeited	(517)	4.11
Outstanding - December 31, 2022	11,521	$	4.28

As of December 31, 2022, there was approximately $39.6 million of total unrecognized compensation expense related to RSUs granted to employees and other service providers and this cost is expected to be recognized over a remaining average period of 3.0 years. The total intrinsic value of RSUs vested during the years ended December 31, 2022, 2021, and 2020, was $9.0 million, $0.0 million, and $0.0 million, respectively.