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Stockholders' Equity

12 Months Ended

Dec. 31, 2023

Stockholders' Equity

Stockholders' Equity

Note 13. Stockholders' Equity

We completed an initial public offering of our common stock on August 2, 2016, in which we sold 4,120,000 shares of our common stock at a public offering price of $10.00 per share. Immediately prior to the completion of the initial public offering, all then-outstanding shares of our Series A and Series B preferred stock were converted into 5,924,453 shares of our common stock. Our Series A preferred stock converted to common stock at a ratio of 1-for-1.03 and our Series B preferred stock converted to common stock at a ratio of 1-for-1. In addition, immediately prior to the completion of the initial public offering, we issued 2,354,323 additional shares of our common stock that our Series A and Series B preferred stockholders were entitled to receive in connection with the conversion of the preferred stock, and we issued 956,842 shares of our common stock to pay accrued dividends on our Series B preferred stock. We also paid $8.2 million in cumulative accrued dividends to our Series A convertible preferred stockholders in connection with the initial public offering, including $0.1 million of dividends paid to the holders of the common restricted shares. On February 27, 2023, we closed on a public offering of 2,875,000 shares of our common stock at a public offering price of $13.00 per share. We received net proceeds from this offering of $34.6 million after deducting underwriting discounts, commissions, and offering expenses.

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, expire, are cancelled, are settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Pursuant to the automatic increase feature of the 2016 Plan, 1,180,019 shares were added as available for issuance thereunder on January 1, 2024. Our Board of Directors exercised its prerogative to forego the automatic increase on each of January 1, 2023 and 2022. As of December 31, 2023, 5,809,744 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 total stock-based compensation expense of $7.5 million, $9.6 million and $10.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. This expense was allocated as follows:


	Year Ended
	December 31,
(In thousands)	2023			2022			2021
Cost of revenue	$	420		$	367		$	433
Sales and marketing expenses		2,985			4,060			4,069
Research and development expenses		133			226			314
Reimbursement, general and administrative expenses		4,009			4,947			5,357
Total stock-based compensation expense	$	7,547		$	9,600		$	10,173

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 our Consolidated Statements of Operations for stock options was $0.9 million, $2.5 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. The total grant date fair value of options vested during the year was $1.9 million, $3.3 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2023, there was approximately $0.2 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.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Annually, we make predictive assumptions regarding future stock price volatility, dividend yield, expected term and forfeiture rate. The dividend yield assumption is based on expected annual dividend yield on the grant date. To date, no dividend on common stock has been paid by us. Expected volatility for grants issued in and prior to the first fiscal quarter of 2021 was estimated using the average historical volatility of public companies of similar size and industry over a similar period as the expected term assumption used for our options. Beginning in the second fiscal quarter of 2021, we had sufficient historical data to transition to utilizing our average historical volatility over a similar period as the expected term assumption used for our options as the expected volatility. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

The following table sets forth the estimated fair values of our stock options granted in each of the years indicated, and the assumptions on which the fair values were determined:


		2022		2021
Expected term		4.5 years		4.5 years
Expected volatility		59.2%		45.0 - 52.3%
Risk-free interest rate		4.3%		0.6 - 1.1%
Expected dividend yield		0%		0%
Fair value on the date of grant		$ 8.11		$ 13.04 - $ 22.90

Our stock option activity for the three years ended December 31, 2023, 2022 and 2021, 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, 2020		1,039,709		$	36.43		5.6 years		$	13,381
Granted		188,748		$	49.33
Exercised		(175,516)		$	22.65				$	4,901
Forfeited		(92,773)		$	49.77
Cancelled/Expired		(44,944)		$	57.78
Balance at December 31, 2021		915,224		$	39.33		5.0 years		$	2,068
Granted		47,280		$	6.17
Exercised		(90,878)		$	1.68				$	916
Forfeited		(92,981)		$	36.28
Cancelled/Expired		(163,338)		$	37.65
Balance at December 31, 2022		615,307		$	43.25		4.7 years		$	164
Exercised		(4,625)		$	2.97				$	98
Forfeited		(25,045)		$	47.54
Cancelled/Expired		(155,677)		$	50.72
Balance at December 31, 2023		429,960		$	40.74		3.8 years		$	223

Options exercisable at December 31, 2023		386,457		$	41.53		3.7 years		$	125

(1)	The exercise price of each option granted during the periods 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 435,363 at December 31, 2022, and 517,316 at December 31, 2021 had weighted average exercise prices of $43.83 and $32.60, respectively.

The following summarizes additional information about our stock options:


		Year Ended
		December 31,
Number of:		2023			2022
Non-vested options, beginning of the year			179,944			397,908
Non-vested options, end of the year			43,503			179,944
Vested options, end of the year			386,457			435,363


		Year Ended
		December 31,
Weighted-average grant date fair value of:		2023			2022
Non-vested options, beginning of the year		$	16.24		$	18.02
Non-vested options, end of the year			13.57			16.24
Vested options, end of the year			16.51			17.53
Forfeited options, during the year			18.36			14.73

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 our Consolidated Statements of Operations for time-based restricted stock units was $5.1 million, $5.8 million and $4.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there was approximately $6.3 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 1.7 years.

Our time-based restricted stock unit activity for the years ended December 31, 2023, 2022 and 2021 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, 2020		211,469		$	48.29		$	9,503
Granted		189,762		$	40.31
Vested		(106,521)		$	47.43
Cancelled		(35,563)		$	51.76
Balance at December 31, 2021		259,147		$	42.32		$	4,932
Granted		539,525		$	15.03
Vested		(123,528)		$	43.20
Cancelled		(84,602)		$	26.91
Balance at December 31, 2022		590,542		$	19.42		$	6,779
Granted		398,698		$	15.52
Vested		(270,651)		$	20.18
Cancelled		(129,447)		$	19.79
Balance at December 31, 2023		589,142		$	16.35		$	8,425

(1)	The aggregate intrinsic value of time-based 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 2020 were earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2021. The PSUs granted in 2021 were earned if and to the extent 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 under these grants will depend on the level at which the performance targets are achieved and can range from 50% of target if threshold performance is achieved and up to 150% of target if maximum performance is achieved. One-third of the earned PSUs will vest on the date the Compensation and Organization Committee certifies the number of PSUs earned, and the remaining two-thirds of the earned PSUs will vest on the first anniversary of that certification date. All earned and vested PSUs will be settled in shares of common stock. 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 included in our Consolidated Statements of Operations for PSUs was $0.9 million, $0.5 million and $0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The stock-based compensation expense for the year ended December 31, 2023 reflects an expense of $0.5 million related to the PSUs granted in 2023 and an expense of $0.4 million related to the PSUs granted in 2022. The stock-based compensation expense for the year ended December 31, 2022 reflects an expense of $0.6 million related to the PSUs granted in 2022. As of December 31, 2023, there was approximately $1.3 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 1.9 years.

Our performance-based restricted stock unit activity at the estimated payout of 100% of target for the years ended December 31, 2023, 2022 and 2021, 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, 2020		79,303		$	47.83		$	3,564
Granted		39,419		$	51.82
Vested		(34,159)		$	33.98
Cancelled		(30,246)		$	64.39
Balance at December 31, 2021		54,317		$	50.22		$	1,034
Granted		131,710		$	18.54
Vested		(4,407)		$	12.31
Cancelled		(26,002)		$	42.53
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 December 31, 2023		198,232		$	18.93		$	2,785

(1)	The aggregate intrinsic value of performance-based restricted stock units 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. Pursuant to the automatic increase feature of the ESPP, 236,003 shares were added as available for issuance thereunder on January 1, 2024. Our Board of Directors exercised its prerogative to forego the automatic increase on each of January 1, 2023 and 2022. As of December 31, 2023, 1,369,868 shares were available for future issuance under the ESPP. We recognized $0.6 million, $0.8 million and $0.8 million in stock-based compensation expense related to the ESPP for the years ended December 31, 2023, 2022 and 2021, respectively.