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Note 9 - Stockholders' Equity and Stock-based Compensation

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Shareholders' Equity and Share-Based Payments [Text Block]

NOTE 9.

Stockholders' Equity and Stock-based Compensation

Equity Incentive Plans

2000 Equity Incentive Plan

Under the 2000 Equity Incentive Plan (the "2000 Plan"), the Company was authorized to grant to eligible participants either incentive stock options ("ISOs") or non-statutory stock options (“NSOs”). The 2000 Plan was terminated in connection with the closing of the Company's initial public offering, and accordingly, no shares are currently available for grant under the 2000 Plan. The 2000 Plan continues to govern outstanding awards granted thereunder.

2012 Equity Incentive Plan

Under the 2012 Equity Incentive Plan (the "2012 Plan"), the Company is authorized to grant to eligible participants ISOs, NSOs, stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance units and performance shares. During the three months ended March 31, 2022, 1,956 thousand shares were added to the 2012 Plan pursuant to an automatic annual increase provision in the plan. As of March 31, 2022, 9,981 thousand shares were available for grant under the 2012 Plan.

2021 Employee Stock Purchase Plan

On June 9, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”). A total of 600 thousand shares were authorized for issuance to eligible participating employees upon adoption of the ESPP. The ESPP provides for consecutive 6-month offering periods beginning on or about August 16 and February 16 of each year. Eligible employees who elect to participate can contribute from 1% to 15% of their eligible compensation through payroll withholding. During any offering period, contribution rates cannot be changed. However, eligible employees may withdraw from the current offering period. Any contributions made prior to each purchase date in the case of withdrawal or termination of employment will be refunded. On each purchase date, eligible participating employees will purchase the shares at a price per share equal to 85% of the lesser of (i) the fair market value of the Company's stock on the first trading day of the offering period or (ii) the fair market value of the Company's stock on the purchase date (i.e., the last trading day of the offering period).

During the three months ended March 31, 2022, 22.5 thousand shares were issued in connection with the purchase of common stock by participating employees. As of March 31, 2022, 577.5 thousand shares were available for future purchases.

Stock-based Compensation

The following table shows a summary of the stock-based compensation expense included in the condensed consolidated statements of operations:

		*Three Months Ended*
		*March 31,*
		*2022*				*2021*
		(in thousands)
Cost of revenues		$	1,080			$	875
Research and development			3,287				2,215
Sales and marketing			2,031				1,628
General and administrative			5,347				33,484
Total stock-based compensation		$	11,745			$	38,202

As of March 31, 2022, the Company had unrecognized stock-based compensation expenses of $17.7 million, $67.2 million, $4.2 million, and $0.7 million related to options, RSUs, performance-based RSUs, and ESPP purchase rights, respectively, which are expected to be recognized over weighted-average periods of 2.8 years, 2.7 years, 1.9 years, and 0.4 years, respectively.

Performance-based Restricted Stock Units ("PSUs") and Performance-based Stock Options

On October 28, 2021, the compensation committee of the Company's board of directors (Compensation Committee) granted to certain executive officers of the Company equity awards consisting of RSUs and an aggregate number of 73 thousand PSUs, which represents the target number of PSUs allocated to awards that are divided into three equal tranches, with each tranche covering one-year performance period for the calendar years 2022, 2023, and 2024, respectively. The actual number of PSUs eligible to vest each year range from 0% to 200% of the annual target number, depending on the level of achievement of performance metrics related to revenue growth and adjusted EBITDA margin corresponding to that year, which are established by the Compensation Committee before the commencement of each year. The vesting and release of the first and second tranche is capped at 100% of the target number at the end of the first and second year, respectively, with cumulative achievement over 100%, if any, to be vested and released at the end of the third year, together with the vesting of the third tranche. If any of the executive officers is terminated (a) by reason of death or disability or (b) by the Company for reasons other than cause or good reason within 12 months following a change in control, any unvested PSUs eligible to vest pursuant to cumulative achievements over 100% for past tranches along with any target number of unvested PSUs for any remaining tranches will vest immediately. Since the performance metrics for the second and third tranches of these PSUs have not been established as of March 31, 2022, the grant date has not been determined and no expenses have been recognized for the respective tranches.

On April 27, 2021, the Compensation Committee granted to the Company’s President and Chief Executive Officer an equity award consisting of RSUs and a target number of 9,671 PSUs. The PSUs are scheduled to vest at the end of the three-year performance period from January 2021 through December 2023. The actual number of PSUs eligible to vest range from 0% to 200% of the target number, depending on the level of achievement of performance metrics related to revenue growth and free cash flow per share growth during the performance period. If the Company's President and Chief Executive Officer is terminated (a) by reason of death or disability or (b) by the Company for reasons other than cause or good reason within 12 months following a change in control, then 100% of any unvested portions of the award will vest, with any vesting in connection with terminations due to change in control conditioned upon the effectiveness of a release of claims in favor of the Company.

The Company recognized $0.8 million of stock-based compensation expenses related to all PSUs during the three months ended March 31, 2022.

On March 19, 2021, the Company’s former chief executive officer, Philippe Courtot ("Mr. Courtot"), resigned from the Company due to health issues. The Compensation Committee determined that Mr. Courtot’s termination of employment was on account of disability. In accordance with the equity award agreements of Mr. Courtot's then outstanding awards, all eligible outstanding RSUs, PSUs and performance-based stock options held by Mr. Courtot became immediately vested as of the date of his termination of employment. As a result, the Company recognized $27.3 million of stock-based compensation expense due to the accelerated vesting in the condensed consolidated statements of operations during the three months ended March 31, 2021.

Stock Option Activity

A summary of the Company’s stock option activity is as follows:

						*Weighted*				*Weighted Average*
		*Outstanding*				*Average*				*Remaining*				*Aggregate*
		*Options*				*Exercise Price*				*Contractual Life*				*Intrinsic Value*
			(in thousands)								(Years)				(in thousands)
Balance as of December 31, 2021			1,838			$	66.05				6.0			$	130,791
Granted			133			$	129.01
Exercised			(66	)		$	38.79
Canceled			(44	)		$	111.66
Balance as of March 31, 2022			1,861			$	70.46				6.0			$	133,922
Vested and expected to vest - March 31, 2022			1,676			$	65.63				5.7			$	128,682
Exercisable - March 31, 2022			1,163			$	45.89				4.3			$	112,258

Restricted Stock Unit Activity

A summary of the Company’s RSU activity is as follows:

							*Weighted Average*
							*Grant Date*
		*Outstanding*					*Fair Value*
		*RSUs*					*Per Share*
		(in thousands)
Balance as of December 31, 2021			917		(1)		$	104.78
Granted			47				$	129.01
Vested			(70	)			$	97.24
Canceled			(43	)			$	108.92
Balance as of March 31, 2022			851		(1)		$	106.12
Outstanding and expected to vest - March 31, 2022			758				$	105.23

(1) Includes 34 thousand PSUs granted to certain executive officers in 2021.

Share Repurchase Program

The Company's share repurchase program was authorized by the board of directors as follows:

Announcement Date		Authorized Dollar Value
		(in millions)
February 12, 2018		$	100.0
October 30, 2018			100.0
October 30, 2019			100.0
May 7, 2020			100.0
February 10, 2021			100.0
November 3, 2021			200.0
Total as of March 31, 2022		$	700.0

Shares may be repurchased from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act of 1934, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act. All share repurchases have been made using cash resources. Repurchased shares are retired and reclassified as authorized and unissued shares of common stock. On retirement of the repurchased shares, common stock is reduced by an amount equal to the number of shares being retired multiplied by the par value. The excess amount that is retired over its par value is first allocated as a reduction to additional paid-in capital based on the initial public offering price of the stock, with the remaining excess to retained earnings.

During the three months ended March 31, 2022 and 2021, the Company repurchased 368 thousand shares and 269 thousand shares of its common stock for approximately $46.6 million and $31.0 million, respectively. As of March 31, 2022, approximately $225.2 million remained available for share repurchases pursuant to the Company's share repurchase program.

On May 4, 2022, the Company announced that its board of directors authorized an additional $200.0 million to the original share repurchase program authorization, increasing the total amount of authorized repurchase to $900.0 million.