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Stockholders' Equity

9 Months Ended

Sep. 30, 2023

Stockholders' Equity

Stockholders' Equity

Note 11. Stockholders' Equity

Stock-Based Compensation

Our 2016 Equity Incentive Plan (the “2016 Plan”) authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors. There were up to 4,800,000 shares of our common stock initially reserved for issuance pursuant to the 2016 Plan. The 2016 Plan provides that the number of shares reserved and available for issuance under the 2016 Plan will automatically increase annually on January 1 of each calendar year, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the lesser of: (a) 5% of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares; provided, however, that our Board of Directors may determine that any annual increase be a lesser number. In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expired, cancelled, settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Our Board of Directors exercised its prerogative to forego the automatic increase on each of January 1, 2023 and 2022. As of September 30, 2023, 5,773,265 shares were available for future grant pursuant to the 2016 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms.

We recorded stock-based compensation expense of $1.8 million and $2.6 million for the three months ended September 30, 2023 and 2022, respectively, and $5.6 million and $7.7 million for the nine months ended September 30, 2023 and 2022, respectively. This expense was allocated as follows:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(In thousands)		2023			2022			2023			2022
Cost of revenue		$	116		$	67		$	340		$	281
Sales and marketing expenses			634			1,101			2,196			3,352
Research and development expenses			5			54			98			175
Reimbursement, general and administrative expenses			1,011			1,338			2,963			3,873
Total stock-based compensation expense		$	1,766		$	2,560		$	5,597		$	7,681

Stock Options

Stock options issued to participants other than non-employees typically vest over three or four years and typically have a contractual term of seven or ten years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $0.2 million and $0.6 million for the three months ended September 30, 2023 and 2022, respectively, and $0.8 million and $2.0 million for the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023, there was approximately $0.4 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 0.9 years.

Our stock option activity for the nine months ended September 30, 2023, was as follows:


				Weighted-			Weighted-
				Average			Average		Aggregate
		Options		Exercise Price			Remaining		Intrinsic
(In thousands except options and per share data)		Outstanding		Per Share ⁽¹⁾			Contractual Life		Value ⁽²⁾
Balance at December 31, 2022		615,307		$	43.25		4.7 years		$	164
Exercised		(4,432)		$	3.04				$	96
Forfeited		(24,498)		$	47.68
Cancelled/Expired		(114,932)		$	50.57
Balance at September 30, 2023		471,445		$	41.62		4.0 years		$	216

Options exercisable at September 30, 2023		400,484		$	43.45		3.8 years		$	76

(1)	The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant.

(2)

The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise. The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Options exercisable of 402,979 as of September 30, 2022, had a weighted-average exercise price of $44.18 per share.

Time-Based Restricted Stock Units

We have granted time-based restricted stock units to certain participants under the 2016 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2016 Plan vest over one to three years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $1.2 million and $1.5 million for the three months ended September 30, 2023 and 2022, respectively, and $3.8 million and $4.5 million for the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023, there was approximately $7.6 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.6 years.

Our time-based restricted stock unit activity for the nine months ended September 30, 2023, was as follows:


				Weighted-
				Average Grant			Aggregate
		Units		Date Fair Value			Intrinsic
(In thousands except unit and per unit data)		Outstanding		Per Unit			Value ⁽¹⁾
Balance at December 31, 2022		590,542		$	19.42		$	6,779
Granted		378,498		$	15.82
Vested		(236,284)		$	19.96
Cancelled		(114,060)		$	20.81
Balance at September 30, 2023		618,696		$	16.75		$	8,693

(1)	The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

Performance-Based Restricted Stock Units

We have granted performance-based restricted stock units (“PSUs”) to certain participants under the 2016 Plan. These PSUs have both performance-based and time-based vesting features. The PSUs granted in 2021 were earned based on the extent to which performance goals based on revenue and adjusted EBITDA were achieved in 2022. The PSUs granted in 2022 will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in 2023. The number of PSUs earned will depend on the level at which the performance targets are achieved and can range from 50% of target if the minimum performance threshold is achieved and up to 150% of target if maximum performance is achieved.

The PSUs granted in 2023 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in each of 2023 and 2024 (ranging from 25% to 175% of target), and one-third will be earned if and to the extent performance goals to be established are achieved in 2025. All earned and vested PSUs will be settled in shares of common stock.

Stock-based compensation expense recognized for PSUs was $0.3 million for each of the three months ended September 30, 2023 and 2022, and $0.6 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023, there was approximately $1.7 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.1 years.

Our PSU activity for the nine months ended September 30, 2023, was as follows:


				Weighted-
				Average Grant			Aggregate
		PSUs		Date Fair Value			Intrinsic
(In thousands except unit and per unit data)		Outstanding		Per Unit			Value ⁽¹⁾
Balance at December 31, 2022		155,618		$	25.05		$	1,786
Granted		123,575		$	15.28
Vested		(13,842)		$	42.70
Cancelled		(67,119)		$	21.50
Balance at September 30, 2023		198,232		$	18.93		$	2,785

(1)	The aggregate intrinsic value of PSUs outstanding was based on our closing stock price on the last trading day of the period.

Employee Stock Purchase Plan

Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016, and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The ESPP is available to all of our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. The ESPP provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year.

A total of 1,600,000 shares of common stock was initially reserved for issuance under the ESPP. This share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (a) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine. Our Board of Directors exercised its prerogative to forego the automatic increase on each of January 1, 2023 and 2022. As of September 30, 2023, 1,438,335 shares were available for future issuance under the ESPP. We recognized stock-based compensation expense associated with the ESPP of $0.1 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, and $0.4 million and $0.7 million for the nine months ended September 30, 2023 and 2022, respectively.