Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Equity Plans

In 2011, the Company adopted the Remitly Global, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), as amended, which provided for the issuance of up to 43,899,677 incentive stock options, nonqualified stock options, restricted common stock, and RSUs and stock appreciation rights to employees, directors, officers, and consultants of the Company.

In September 2021, the Company adopted the Remitly Global, Inc. 2021 Equity Incentive Plan (the “2021 Plan”, and together with the 2011 Plan, the “Plan”) as a successor to the 2011 Plan. The 2021 Plan authorizes the issuance of incentive stock options, nonqualified stock options, restricted common stock, stock appreciation rights, RSUs, and performance and stock bonus awards. Pursuant to the 2021 Plan, incentive stock options may be granted only to Company employees. The Company may grant all other types of awards to its employees, directors, and consultants. The 2021 Plan is administered by the Company’s board of directors, which determines the terms of the grants, including exercise price, number of equity awards granted, and vesting schedule. The 2021 Plan provides for the issuance of up to 25,000,000 shares of common stock, plus any reserved shares not issued or subject to outstanding grants under the 2011 Plan, which was 552,736 on the effective date of the 2021 Plan, for a total of 25,552,736 shares reserved for issuance under the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of common stock as of the immediately preceding December 31, or a lesser number as may be determined by the Company’s talent and compensation committee, or by the Company’s board of directors acting in place of the talent and compensation committee.

In addition, in September 2021, the Company adopted the Remitly Global, Inc. 2021 Employee Stock Purchase Plan (the “2021 ESPP” or “ESPP”) to enable eligible employees to purchase shares of common stock with accumulated payroll deductions at a discount. The ESPP provides for the issuance of up to 3,500,000 shares of common stock. The number of shares reserved for issuance and sale under the ESPP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 1% of the aggregate number of outstanding shares of all classes of common stock as of the immediately preceding December 31, or a lesser number as may be determined by the Company’s talent and compensation committee, or by the Company’s board of directors acting in place of the talent and compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than 35,000,000 shares of common stock may be issued over the term of the ESPP. The ESPP is intended to qualify under Section 423 of the Code, provided that the administrator may adopt sub-plans under the ESPP designed to be outside of the scope of Section 423 for participants who are non-U.S. residents.

As of December 31, 2021 and December 31, 2020, 23,599,005 and 206,529 equity awards remain available for issuance under the 2021 Plan and 2011 Plan, respectively. As of December 31, 2021, there have been no issuances of shares under the ESPP, therefore all 3,500,000 shares of common stock remain available for issuance.

Stock Options

Stock options granted under the Plan generally vest over a period from two years to four years from the vesting commencement date on a monthly basis with or without a one-year cliff or, for non-employees, ratably on a monthly basis over a shorter period, depending upon anticipated duration of services. Other vesting terms are determined by the Company’s board of directors. All options granted under the Plan are exercisable for up to ten years from the grant date, subject to vesting. In the event of termination of service, options will generally remain exercisable, to the extent vested, for three months following the termination of service.

The following is a summary of the Company’s stock option activity during the year ended December 31, 2021:


	Stock Options
(in thousands, except share and per share amounts)	Number of Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (1)
Balances as of January 1, 2021	21,034,424	$	1.88	7.82	$	64,604
Granted	8,219,753	7.26
Exercised	(4,495,889)	1.85			72,208
Forfeited	(1,371,346)	3.16
Balances as of December 31, 2021	23,386,942	3.70		7.66	395,676
Vested and exercisable as of December 31, 2021	10,200,154	1.77		6.38	192,296
Vested and expected to vest as of December 31, 2021	23,788,236	$	3.69	7.66	$	402,847

_________________

(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock.

The fair value of each employee stock option granted during the years ended December 31, 2021, 2020, and 2019 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

Years Ended December 31,

2021

2020

2019

Risk-free interest rates

0.32% to 1.19%

0.30% to 1.47%

1.51% to 2.47%

Expected term (in years)

3.5 to 6.8 years

5.0 to 6.6 years

5.0 to 10.0 years

Volatility

37.8% to 50.5%

37.3% to 54.0%

53.8% to 54.0%

Dividend rate

—

Fair value of underlying common stock

Prior to the completion of the IPO, the Company’s board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered included, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. After the completion of the IPO, the fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the NASDAQ.

The weighted-average grant date fair value of options granted during the years ended December 31, 2021, 2020, and 2019 was $5.22, $1.10, and $1.23 respectively. The aggregate grant-date fair value of options vested for the years ended December 31, 2021, 2020, and 2019 was $7.3 million, $5.4 million, and $3.7 million, respectively. The intrinsic value of options exercised for the years ended December 31, 2021, 2020, and 2019 was $72.2 million, $2.4 million, and $3.0 million, respectively.

Restricted Stock Units

Prior to the IPO, the Company granted performance-based RSUs (“PRSUs”) to employees and directors that continued both service-based and performance-based vesting conditions. The service-based vesting condition for these awards is typically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance-based vesting condition is satisfied on the earlier of (i) the effective date of a registration statement of the Company filed under the Securities Act for the sale of the Company’s common stock or (ii) immediately prior to the closing of a change in control of the Company. Both events were not deemed probable until consummated, and therefore, stock-based compensation expense related to these PRSUs remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation expense of $1.1 million, using the accelerated attribution method for the portion of the awards for which the service-based vesting condition has been fully or partially satisfied. The remaining grant-date fair value of these PRSUs will be recognized over the remaining requisite service period.

Beginning in August 2021, the Company began granting RSUs to employees and directors with service-based vesting conditions. The service-based vesting condition for these awards is typically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The grant-date fair value of these RSUs will be recognized over the requisite service period.

Restricted stock unit activity, including PRSUs, during the year ended December 31, 2021 was as follows:


	Number of Shares	Weighted-Average Grant-Date Fair Value Per Share
Unvested at January 1, 2021	437,369	$	3.54
Granted	3,112,492	27.16
Vested	(124,026)	5.07
Cancelled/forfeited	(53,250)	32.11
Unvested at December 31, 2021	3,372,585	24.83

The weighted-average grant date fair value of RSUs, including PRSUs, granted during the years ended December 31, 2021 and 2020 was $27.16 and $3.54, respectively. The aggregate grant-date fair value of RSUS, including PRSUs, vested for the years ended December 31, 2021 and 2020 was $0.6 million and zero, respectively. There were no RSUs granted or vested during the year ended December 31, 2019.

Employee Stock Purchase Plan

The ESPP provides for consecutive offering periods during which eligible employees can participate in the ESPP and be granted the right to purchase shares. The offering period that commenced on September 22, 2021 shall end on August 31, 2023 with the first purchase period ending on February 28, 2022, the second purchase period ending on August 31, 2022, the third purchase period ending on February 28, 2023, and the fourth purchase period ending on August 31, 2023. Thereafter, subsequent offering periods shall commence on each subsequent March 1 and September 1, with each offering period consisting of four six-month purchase periods, for a total of a 24-month offering period. No offering periods may last longer than 27 months.

Eligible employees can contribute up to 15% of their eligible compensation, subject to limitation as provided for in the ESPP, and purchase the common stock at a purchase price per share equal to 85% of the lesser of the fair market value of the common stock on (i) the offering date, which is defined as the first business day of the offering period, or (ii) the purchase date, which is the final business day of the purchase period.

The fair value of ESPP offerings was estimated at the date of each offering using the Black-Scholes option-pricing model with the following assumptions during the year ended December 31, 2021:

Year Ended December 31,

2021

Risk-free interest rates

0.06% to 0.30%

Expected term (in years)

0.4 to 1.9 years

Volatility

37.7% to 56.0%

Dividend rate

—

The Company’s ESPP began in 2021, therefore no awards were granted under the ESPP during the year ended December 31, 2020.

Stock-Based Compensation Expense

Stock-based compensation expense for stock options, RSUs, PRSUs, and the ESPP, included in the consolidated statements of operations, net of amounts capitalized to internal-use software, as described in Note 4, were as follows:


	Years Ended December 31,
(in thousands)	2021		2020		2019
Customer support and operations	$	153	$	22	$	25
Marketing	2,325		869		541
Technology and development	6,931		2,130		1,486
General and administrative	7,607		2,243		1,596
Total	$	17,016	$	5,264	$	3,648

As of December 31, 2021, the total unamortized compensation cost related to all non-vested equity awards, including options, RSUs, and PRSUs was $122.6 million, which will be amortized over a weighted-average remaining requisite service period of approximately 3.3 years. As of December 31, 2021, the total unrecognized compensation expense related to the ESPP was $3.9 million, which is expected to be amortized over the next 1.7 years.

The Company did not record a material income tax benefit related to stock-based compensation expense and stock option exercises, during the years ended December 31, 2021, 2020, and 2019, since the Company currently maintains a full valuation allowance against its net deferred tax assets in the jurisdictions where material stock-compensation expense charges are incurred, and stock option exercises occurred.

Tender Offer

In connection with the 2019 Tender Offer, as discussed in Note 9, the Company repurchased and retired 2,053,690 shares of the Company’s common stock for an aggregate purchase price of $11.0 million. The amounts paid in excess of the fair value of the common shares repurchased from the Company’s employees and founders, totaling $4.0 million were recorded as compensation expense for the year ended December 31, 2019, and are in addition to the amounts included as stock-based compensation expense in the above table. The $4.0 million of excess fair value was recorded in the following line items in the consolidated statements of operations: $0.2 million in marketing, $2.0 million in technology and development, and $1.8 million in general and administrative. The remaining $7.0 million was recorded as a decrease to par value of common stock and an increase in accumulated deficit, as the additional paid-in capital balance at the time of the transaction was zero. There were no such transactions during the years ended December 31, 2021 or 2020.