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Note 10 - Common Stock and Stock-based Compensation Plans | 9 Months Ended
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Sep. 30, 2022
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
NOTE 10: | COMMON STOCK AND STOCK-BASED COMPENSATION PLANS
The Company grants a mix of stock options, stock appreciation rights (“SARs”) capped with a ceiling and restricted stock units (“RSUs”) to employees and non‑employee directors of the Company and its subsidiaries under the Company’s equity plans and provides the right to purchase common stock pursuant to the Company’s 2002 employee stock purchase plan to employees of the Company and its subsidiaries. The SAR unit confers the holder the right to stock appreciation over a preset price of the Company’s common stock during a specified period of time. When the unit is exercised, the appreciation amount is paid through the issuance of shares of the Company’s common stock. The ceiling limits the maximum income for each SAR unit. SARs are considered an equity instrument as it is a net share settled award capped with a ceiling (400% for all SAR grants made in years prior to 2016, when the Company ceased to grant SAR units). The options and SARs granted under the Company’s stock incentive plans have been granted at the fair market value of the Company’s common stock on the grant date. Options and SARs granted to employees under stock incentive plans vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years. Options granted to non‑employee directors vest 25% of the shares underlying the option on each anniversary of the option grant. A summary of the Company’s stock option and SAR activities and related information for the nine months ended September 30, 2022, are as follows:
|  | Number of options and SAR units (1) |  |  | Weighted average exercise price |  |  | Weighted average remaining contractual term |  |  | Aggregate intrinsic value |
Outstanding as of December 31, 2021 |  |  | 126,000 |  |  | $ | 20.06 |  |  |  | 2.6 |  |  | $ | 2,921 |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Exercised |  |  | (17,000 | ) |  |  | 18.08 |  |  |  |  |  |  |  |  |
Forfeited or expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Outstanding as of September 30, 2022 (2) |  |  | 109,000 |  |  | $ | 20.37 |  |  |  | 2.2 |  |  | $ | 664 |
Exercisable as of September 30, 2022 (3) |  |  | 109,000 |  |  | $ | 20.37 |  |  |  | 2.2 |  |  | $ | 664 |
| (1) | The SAR units are convertible for a maximum number of shares of the Company’s common stock equal to 75% of the SAR units subject to the grant.
| (2) | Due to the ceiling imposed on the SAR grants, the outstanding amount equals a maximum of 108,250 shares of the Company’s common stock issuable upon exercise.
| (3) | Due to the ceiling imposed on the SAR grants, the exercisable amount equals a maximum of 108,250 shares of the Company’s common stock issuable upon exercise.
As of September 30, 2022, there were no unrecognized compensation expenses related to unvested stock options and SARs. An RSU award is an agreement to issue shares of the Company’s common stock at the time the award or a portion thereof vests. RSUs granted to employees generally vest in three equal annual installments starting on the first anniversary of the grant date. Until the end of 2017, RSUs granted to non-employee directors would generally vest in full on the first anniversary of the grant date. Starting in 2018, RSUs granted to non-employee directors would generally vest in two equal annual installments starting on the first anniversary of the grant date. On February 14, 2022, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company granted 9,935, 5,961, 7,451 and 5,961 time-based RSUs, effective as of February 17, 2022, to each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, pursuant to the Company’s Amended and Restated 2011 Stock Incentive Plan (the “2011 Plan”). The RSU grants vest 33.4% on February 17, 2023, 33.3% on February 17, 2024 and 33.3% on February 17, 2025. Also, on February 14, 2022, the Committee granted 14,903, 3,974, 4,969 and 3,974 performance-based stock units (“PSUs”), effective as of February 17, 2022, to each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, pursuant to 2011 Plan (collectively, the “Short-Term Executive PSUs”). The performance goals for the Short-Term Executive PSUs with specified weighting are as follows:
Weighting | Goals
50% | Vesting of the full 50% of the PSUs occurs if the Company achieves the 2022 license, NRE and related revenue target approved by the Board (the “2022 License Revenue Target”). The vesting threshold is achievement of 90% of 2022 License Revenue Target. If the Company’s actual result exceeds 90% of the 2022 License Revenue Target, every 1% increase of the 2022 License Revenue Target, up to 110%, would result in an increase of 2% of the eligible PSUs.
50% | Vesting of the full 50% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2022 is greater than the S&P500 index. The vesting threshold is if the return on the Company’s stock for 2022 is at least 90% of the S&P500 index. If the return on the Company’s stock, in comparison to the S&P500, is above 90% but less than 99% of the S&P500 index, 91% to 99% of the eligible PSUs would be subject to vesting. If the return on the Company’s stock exceeds 100% of the S&P500 index, every 1% increase in comparison to the S&P500 index, up to 110%, would result in an increase of 2% of the eligible PSUs.
Additionally, PSUs representing an additional 20%, meaning an additional 2,981, 795, 994 and 795, would be eligible for vesting for each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, if the performance goals set forth above are exceeded. Subject to achievement of the thresholds the above performance goals for 2022 and continuing employment, the Short-Term Executive PSUs vest 33.4% on February 17, 2023, 33.3% on February 17, 2024, and 33.3% on February 17, 2025. A summary of the Company’s RSU and PSU activities and related information for the nine months ended September 30, 2022, are as follows:
|  | Number of RSUs and PSUs |  |  | Weighted Average Grant-Date Fair Value |
Unvested as of December 31, 2021 |  |  | 688,073 |  |  | $ | 41.18 |
Granted |  |  | 564,443 |  |  |  | 35.23 |
Vested |  |  | (302,425 | ) |  |  | 37.03 |
Forfeited or expired |  |  | (92,343 | ) |  |  | 44.23 |
Unvested as of September 30, 2022 (unaudited) |  |  | 857,748 |  |  | $ | 38.52 |
As of September 30, 2022, there was $25,658 of unrecognized compensation expense related to unvested RSUs and PSUs. This amount is expected to be recognized over a weighted-average period of 1.6 years. The following table shows the total equity-based compensation expense included in the interim condensed consolidated statements of income (loss):
|  | Nine months ended September 30, |  |  | Three months ended September 30, |
|  | 2022 (unaudited) |  |  | 2021 (unaudited) |  |  | 2022 (unaudited) |  |  | 2021 (unaudited) |
Cost of revenue |  | $ | 1,076 |  |  | $ | 509 |  |  | $ | 393 |  |  | $ | 247 |
Research and development, net |  |  | 6,181 |  |  |  | 5,435 |  |  |  | 2,180 |  |  |  | 2,007 |
Sales and marketing |  |  | 1,065 |  |  |  | 1,185 |  |  |  | 392 |  |  |  | 400 |
General and administrative |  |  | 2,061 |  |  |  | 2,378 |  |  |  | 726 |  |  |  | 749 |
Total equity-based compensation expense |  | $ | 10,383 |  |  | $ | 9,507 |  |  | $ | 3,691 |  |  | $ | 3,403 |
The fair value for rights to purchase shares of common stock under the Company’s employee stock purchase plan was estimated on the date of grant using the following assumptions:
|  | Nine months ended September 30 |  |  | Three months ended September 30 |
|  | 2022 (unaudited) |  |  | 2021 (unaudited) |  |  | 2022 (unaudited) |  |  | 2021 (unaudited) |
Expected dividend yield |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Expected volatility |  |  | 38% | - | 50 | % |  |  | 39% | - | 60 | % |  |  | 40% | - | 50 | % |  |  | 39% | - | 60 | %
Risk-free interest rate |  |  | 0.5% | - | 3.0 | % |  |  | 0.1% | - | 1.7 | % |  |  | 0.8% | - | 3.0 | % |  |  | 0.1% | - | 1.3 | %
Contractual term of up to (months) |  |  |  |  | 00 |  |  |  |  |  | 24 |  |  |  |  |  | 24 |  |  |  |  |  | 24 |

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