Equity Incentive Plans

9 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

2012 Stock Plan

Under our Amended and Restated 2012 Stock Plan (the “Plan”), we may grant incentive and nonqualified stock options, restricted stock, and restricted stock units (“RSUs”) to employees, officers, directors, and consultants. As of March 31, 2023, the maximum number of shares of common stock which may be issued under the Plan is

146,209,197 Class A shares. As of March 31, 2023 and June 30, 2022, there were 37,230,979 and 31,156,746 shares of Class A common stock, respectively, available for future grants under the Plan.

Stock Options

For stock options granted before our IPO in January 2021, the minimum expiration period is seven years after termination of employment or 10 years from the date of grant. For stock options granted after our IPO, the minimum expiration period is three months after termination of employment or 10 years from the date of grant. Stock options generally vest over a period of four years or with 25% vesting on the 12 month anniversary of the vesting commencement date, and the remainder vesting on a pro-rata basis each month over the next three years.

The following table summarizes our stock option activity for the nine months ended March 31, 2023:


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balance as of June 30, 2022	19,310,706	$	15.22	6.94
Granted	1,991,427	19.10
Exercised	(726,425)	4.39
Forfeited, expired or cancelled	(993,984)	37.14
Balance as of March 31, 2023	19,581,724	14.92		6.27
Vested and exercisable, March 31, 2023	14,385,171	$	10.14	5.61	$	62,657
Vested and exercisable, and expected to vest thereafter(1) March 31, 2023	19,341,889	$	14.66	6.25	$	64,261

(1)Options expected to vest reflect the application of an estimated forfeiture rate.

The weighted-average grant date fair value of options granted during the nine months ended March 31, 2023 was $10.92. As of March 31, 2023, unrecognized compensation expense related to unvested stock options was approximately $50.2 million, which is expected to be recognized over a remaining weighted-average period of 2.3 years.

When an employee exercises stock options, we collect and remit taxes on the employee’s behalf to applicable taxing authorities. As of March 31, 2023 and June 30, 2022, the balance of equity exercise taxes payable was $3.2 million and $10.9 million, respectively, which is included in accounts payable on the interim condensed consolidated balance sheets.

Value Creation Award

In November 2020, in connection with an overall review of the compensation of Max Levchin, our Chief Executive Officer, in advance of the IPO, and taking into account Mr. Levchin’s leadership since the inception of the Company, the comparatively modest level of cash compensation he had received from the Company during his many years of service, and that he did not hold any unvested equity awards, the Company’s Board of Directors approved a long-term, multi-year performance-based stock option grant providing Mr. Levchin with the opportunity to earn the right to purchase up to 12,500,000 shares of the Company’s Class A common stock (the “Value Creation Award”). We recognize stock-based compensation on these awards based on the grant date fair value using an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied. During the three and nine months ended March 31, 2023, we incurred stock-based compensation expense of $20.3 million and $75.2 million, respectively, associated with the Value Creation Award as a component of general and administrative expense within the interim condensed consolidated statements

of operations and comprehensive loss. For the three and nine months ended March 31, 2022, we incurred stock-based compensation expense of $29.0 million and $113.5 million, respectively.

As of March 31, 2023, unrecognized compensation expense related to the Value Creation Award was approximately $132.2 million, which is expected to be recognized over a remaining weighted-average period of 2.8 years.

Restricted Stock Units

RSUs granted prior to the IPO were subject to two vesting conditions: a service-based vesting condition (i.e., employment over a period of time) and a performance-based vesting condition (i.e., a liquidity event in the form of either a change of control or an initial public offering, each as defined in the Plan), both of which must be met in order to vest. The performance-based condition was met upon the IPO. We record stock-based compensation expense for those RSUs on an accelerated attribution method over the requisite service period, which is generally four years. RSUs granted after IPO are subject to a service-based vesting condition. We record stock-based compensation expense for service-based RSUs on a straight-line basis over the requisite service period, which is generally one to four years.

The following table summarizes our RSU activity during the nine months ended March 31, 2023:


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested as of June 30, 2022	21,387,592	$	38.41
Granted	15,977,301	23.18
Vested	(10,118,647)	34.01
Forfeited, expired or cancelled	(4,911,072)	37.43
Non-vested as of March 31, 2023	22,335,174	$	29.72

As of March 31, 2023, unrecognized compensation expense related to unvested RSUs was approximately $574.3 million, which is expected to be recognized over a remaining weighted-average period of 1.8 years.

2020 Employee Stock Purchase Plan

On November 18, 2020, our Board of Directors adopted and approved the 2020 Employee Stock Purchase Plan (“ESPP”). The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum effort towards the success of the Company and that of its affiliates. A total of 11.3 million shares of Class A common stock are reserved and available for issuance under the ESPP and 649,580 shares have been issued as of March 31, 2023. The ESPP provides for six-month offering periods beginning December 1 and June 1 of each year, with the initial six-month offering period beginning December 1, 2021. At the end of each offering period, shares of our Class A common stock are purchased on behalf of each ESPP participant at a price per share equal to 85% of the lesser of (1) the fair market value of the Class A common stock on first day of the offering period (the grant date) or (2) the fair market value of the Class A common stock on the last day of the offering period (the purchase date). We use the Black-Scholes-Merton option pricing model to measure the fair value of the purchase rights issued under the ESPP at the first day of the offering period, which represents the grant date. We record stock-based compensation expense on a straight-line basis over each six-month offering period, the requisite service period of the award.

Stock-Based Compensation Expense

The following table presents the components and classification of stock-based compensation (in thousands):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
General and administrative	$	54,789	$	58,100	$	188,788	$	187,789
Technology and data analytics	45,040		33,639		137,002		75,133
Sales and marketing	5,840		5,998		19,517		15,655
Processing and servicing	1,120		650		3,065		1,536
Total stock-based compensation in operating expenses	106,789		98,387		348,372		280,113
Capitalized into property, equipment and software, net	19,113		14,618		62,760		39,691
Total stock-based compensation expense	$	125,902	$	113,005	$	411,132	$	319,804

In connection with the acquisition of Returnly on May 1, 2021, we issued 304,364 shares of our Class A common stock, which are held in escrow. Because the future payment of the escrowed shares is contingent on continued employment of certain employees, the arrangement represents stock-based compensation in the post combination period. The grant-date fair value was estimated based on the value of the shares at the date of closing. The escrowed shares have a requisite service period of two years and contain a performance-based vesting condition (i.e., the achievement of certain revenue targets). We record stock-based compensation expense on a straight-line basis for each tranche over the requisite service period, as long as the performance-based conditions are considered probable of being satisfied. During the nine months ended March 31, 2023, the arrangement was modified, resulting in the release of 45,459 shares from escrow and the remittance of 243,384 shares back to the Company. The modification resulted in the recognition of $2.0 million of incremental compensation cost within general and administrative expenses in our interim condensed statement of operations. As of March 31, 2023, 15,521 shares remain in escrow.