STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION PLANSThe Company grants stock-based compensation to employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries under its Amended and Restated 2019 Incentive Award Plan (the "2019 Plan") which provides for the award of stock options, stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), performance-based stock awards ("PSAs"), restricted stock units ("RSUs"), performance-based stock units ("PSUs") and other

stock- or cash-based awards.

Executive Equity Arrangements

Inducement Awards

In connection with his appointment as President and Chief Executive Officer of Ribbon on March 16, 2020, the Company awarded Bruce McClelland sign-on equity grants, comprised of RSUs and a PSU grant with both market and service conditions (the "Inducement PSUs").

Performance-Based Stock Grants

In addition to granting RSAs and RSUs to its executives and certain of its employees, the Company also grants PSUs to certain of its executives and certain other employees. Vesting periods for RSAs, RSUs, and PSUs granted range from one to three years. PSUs granted consist of 60% that have both performance and service conditions (the "Performance PSUs") and 40% that have both market and service conditions (the "Market PSUs"). Each Performance PSU is comprised of three consecutive fiscal year performance periods beginning in the year of grant, with one-third of the Performance PSUs attributable to each fiscal year performance period. The Market PSUs have one three-year performance period, beginning January 1 in the year of grant and ending on December 31, three years thereafter. The number of shares of common stock underlying the PSUs that can be earned will not exceed 200% of the Performance or Market PSUs. Shares subject to PSUs that fail to be earned will be forfeited.

Restricted Stock Units

The activity related to the Company's RSUs for the three months ended March 31, 2023 was as follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested balance at January 1, 2023	7,649,747	$	3.96
Granted	853,981	$	3.37

Vested	(1,020,277)	$	5.02
Forfeited	(399,136)	$	4.05
Unvested balance at March 31, 2023	7,084,315	$	3.74

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the three months ended March 31, 2023 was $5.1 million.

Performance-Based Stock Units

The activity related to the Company's PSUs for the three months ended March 31, 2023 was as follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested balance at January 1, 2023	6,653,503	$	2.52
Granted	27,153	$	4.27
Vested	(381,071)	$	5.40
Forfeited	(1,667,550)	$	3.93
Unvested balance at March 31, 2023	4,632,035	$	1.66

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the three months ended March 31, 2023 was $2.1 million.

Stock-Based Compensation

The condensed consolidated statements of operations include stock-based compensation for the three months ended March 31, 2023 and 2022 as follows (in thousands):


	Three months ended
	March 31, 2023		March 31, 2022
Product cost of revenue	$	149	$	99
Service cost of revenue	535		481
Research and development	1,262		1,206
Sales and marketing	2,129		1,371
General and administrative	1,773		1,098
	$	5,848	$	4,255

At March 31, 2023, there was $19.7 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested RSUs and PSUs. This expense is expected to be recognized over a weighted average period of approximately two years.