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STOCK-BASED COMPENSATION PLANS

9 Months Ended

Sep. 30, 2024

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

(15) STOCK-BASED COMPENSATION PLANS

The 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 which provides for the award of stock options, stock appreciation rights, restricted stock awards ("RSAs"), performance-based stock awards, 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 market conditions surrounding the PSUs granted were not met by the expiration date of September 1, 2024 and therefore the associated shares have been cancelled.

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 nine months ended September 30, 2024 was as follows:


				Weighted
				Average
				Grant Date
		Shares		Fair Value
Unvested balance at January 1, 2024		7,091,368		$	3.18
Granted		1,423,228		$	3.22
Vested		(3,444,670)		$	3.47
Forfeited		(326,985)		$	3.18
Unvested balance at September 30, 2024		4,742,941		$	2.99

The total grant date fair value of shares of restricted stock underlying RSUs that vested during the nine months ended September 30, 2024 was $11.9 million.

Performance-Based Stock Units

The activity related to the Company’s PSUs for the nine months ended September 30, 2024 was as follows:


				Weighted
				Average
				Grant Date
		Shares		Fair Value
Unvested balance at January 1, 2024		6,297,931		$	2.07
Granted		1,338,985		$	4.32
Vested		(288,672)		$	3.14
Forfeited		(4,035,835)		$	1.33
Unvested balance at September 30, 2024		3,312,409		$	3.79

The total grant date fair value of shares of restricted stock underlying PSUs that vested during the nine months ended September 30, 2024 was $0.9 million.

Stock-Based Compensation

The condensed consolidated statements of operations include stock-based compensation for the three and nine months ended September 30, 2024 and 2023 as follows (in thousands):


		Three months ended						Nine months ended
		September 30,			September 30,			September 30,			September 30,
		2024			2023			2024			2023
Product cost of revenue		$	64		$	121		$	234		$	385
Service cost of revenue			291			536			1,037			1,597
Research and development			745			1,259			2,429			3,821
Sales and marketing			1,108			1,402			3,219			5,673
General and administrative			1,837			1,632			5,142			5,438
		$	4,045		$	4,950		$	12,061		$	16,914

At September 30, 2024, there was $15.1 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 one year.