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Note 8 - Stock-based Compensation | 3 Months Ended
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Mar. 31, 2022
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | 8. Share-based compensation Service vesting-based stock options The following is a summary of service vesting-based stock option activity for the three months ended March 31, 2022, and the status of service vesting-based stock options outstanding as of March 31, 2022:
|  | Three Months Ended March 31, 2022 |
|  | Shares |  |  | Wtd. Avg. Exercise Price |
Outstanding as of beginning of year |  |  | 624,531 |  |  | $ | 2.13 |
Exercised |  |  | (129,933 | ) |  |  | 1.98 |
Outstanding as of March 31, 2022 |  |  | 494,598 |  |  | $ | 2.17 |
Stock options exercisable as of March 31, 2022 |  |  | 494,598 |  |  | $ | 2.17 |
We recognized stock compensation expense related to service-based options of zero and $9,000 during the three months ended March 31, 2022 and 2021. As of March 31, 2022, there was $10.2 million of aggregate intrinsic value of outstanding and exercisable service vesting-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2022. This amount will change based on the fair market value of the Company’s stock. Intrinsic value of service vesting-based awards exercised during the three months ended March 31, 2022 and 2021 was $3.6 million and $3.3 million, respectively. There were no service based-vesting options granted during the three months ended March 31, 2022 and 2021. The weighted average remaining contractual life of service vesting-based options outstanding and exercisable as of March 31, 2022 is 3.5 years. There were no unrecognized compensation costs for service vesting-based stock options as of March 31, 2022. Performance-based stock options No stock compensation expense was recognized during the three months ended March 31, 2022 and 2021 related to performance-based options. The intrinsic value of performance-based awards exercised during the three months ended March 31, 2022 and 2021 was none and $2.9 million, respectively. There were no stock options granted to employees and non-employee directors in the three months ended March 31, 2022 and 2021. Restricted stock Service vesting-based restricted stock The following is a summary of service vesting-based restricted stock activity for the three months ended March 31, 2022, and the status of unvested service vesting-based restricted stock outstanding as of March 31, 2022:
|  | Three Months Ended |
|  | March 31, 2022 |
|  | Shares |  |  | Wtd. Avg. Grant Date Fair Value |
Outstanding as of beginning of year |  |  | 1,212,783 |  |  | $ | 37.48 |
Granted |  |  | 301,011 |  |  |  | 26.38 |
Vested |  |  | (165,366 | ) |  |  | 37.48 |
Forfeited |  |  | (14,642 | ) |  |  | 44.37 |
Non-vested as of March 31, 2022 |  |  | 1,333,786 |  |  | $ | 34.90 |
The aggregate fair value of the service vesting-based awards granted during the three months ended March 31, 2022 and 2021 was $7.9 million and $2.2 million, respectively. The aggregate fair value of the service vesting-based awards that vested during the three months ended March 31, 2022 and 2021 was $5.0 million and $2.6 million, respectively. We recognized stock compensation expense of $4.8 million and $1.4 million related to service vesting-based awards during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $41.4 million in unrecognized compensation costs related to service vesting-based awards. We expect to recognize those costs over 2.9 years. Market-based restricted stock The following is a summary of market-based restricted stock activity under our stock option plan for the three months ended March 31, 2022 and the status of market-based restricted stock outstanding as of March 31, 2022:
|  | Three Months Ended March 31, 2022 |
|  | Shares |  |  | Wtd. Avg. Grant Date Fair Value |
Outstanding as of beginning of year |  |  | 139,756 |  |  | $ | 19.86 |
Granted |  |  | 349,568 |  |  |  | 22.66 |
Vested |  |  | (218,280 | ) |  |  | 10.95 |
Non-vested as of March 31, 2022 |  |  | 271,044 |  |  | $ | 30.64 |
On March 25, 2020, the Company granted 109,140 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on Total Shareholder Return (“TSR”). The TSR market condition measures the Company’s performance against a peer group. On February 24, 2022, the Company’s Compensation Committee determined the TSR attainment was 200% of the targeted shares and 218,280 shares were granted and immediately vested to the executives of the Company based on our total shareholder return during the period beginning on January 1, 2020 through December 31, 2021 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined at the grant date using a Monte Carlo simulation with the following assumptions: a historical volatility of 78%, 0% dividend yield and a risk-free interest rate of 0.3%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $1.2 million was expensed on a straight-line basis over the grant date to the vesting date of December 31, 2021. On February 8, 2021, the Company granted 30,616 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2021 through December 31, 2022 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 68%, 0% dividend yield and a risk-free interest rate of 0.1%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest rate is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $1.3 million is being expensed on a straight-line basis over the grant date to the vesting date of December 31, 2022. On February 24, 2022, the Company granted 240,428 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2022 through December 31, 2023 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 63%, 0% dividend yield and a risk-free interest rate of 1.5%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest rate is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $6.7 million is being expensed on a straight-line basis over the grant date to the vesting date of December 31, 2023. We recognized stock compensation expense of $605,000 and $285,000 related to market-based restricted stock awards for the three months ended March 31, 2022 and 2021. As of March 31, 2022, there was $7.0 million in unrecognized non-cash compensation costs related to market-based restricted stock awards expected to vest. We expect to recognize those costs over 1.6 years. The aggregate fair value of the market-based awards granted during the three months ended March 31, 2022 and 2021 was $6.7 million and $1.6 million, respectively. The aggregate fair value of the market-based awards that vested during the three months ended March 31, 2022 and 2021 was $5.0 million and $10.2 million, respectively. Total stock compensation expense We recorded total stock compensation expense for the three months ended March 31, 2022 and 2021, as follows:
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Research and development costs |  | $ | 677 |  |  | $ | 183 |
Sales and marketing costs |  |  | 705 |  |  |  | 184 |
General and administrative costs |  |  | 3,010 |  |  |  | 979 |
Cost of revenue |  |  | 1,007 |  |  |  | 159 |
Total |  | $ | 5,399 |  |  | $ | 1,505 |

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