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Note 5 - Stock-based Compensation

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

5. Stock-Based Compensation

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include restricted stock awards, restricted stock units, and performance restricted stock units.

Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.

Determining Fair Value

Restricted Stock Awards

The fair value of restricted stock awards (“RSA”) that vest upon meeting a service condition is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants and one to three years for director grants.

Restricted Stock Units

The fair value of restricted stock unit (“RSU”) awards that vest upon meeting a service condition is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants.

Performance Stock Units

The fair value of performance restricted stock unit (“PRSU”) awards that vest upon meeting a service condition and a performance condition, such as the Company exceeding a future annual recurring revenue target, is determined based on the fair market value of the Company's common stock on the date of the grant, adjusted for probability of achievement of the performance criteria as of each reporting date (measurement date), and is recognized on a straight-line basis over the service period of the award, which is generally three years for employee grants. The probability of achievement is subject to judgment, and could change from period to period, impacting the amount of expense to be recognized.

The fair value of performance restricted stock units awards that vest upon meeting a service condition and a market condition, such as the Company exceeding shareholder returns as compared to an index of peer companies, is determined on the date of grant (measurement date) using the Monte Carlo valuation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally three years for employee grants.

The following inputs are used in the Monte Carlo valuation model to estimate the fair value:

Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the term of the award.

Monte Carlo valuation inputs:

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Stock price		$	25.39			$	—			$	36.64			$	22.37
Expected volatility			66.3	%			—				66.3	%			74.7	%
Risk-free interest rate			4.3	%			—				4.3	%			4.3	%

Stock-Based Compensation

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Stock-based compensation:
Cost of revenue		$	156			$	318			$	409			$	556
Sales and marketing			798				563				1,510				1,324
Research, development and engineering			645				675				1,263				1,611
General and administrative			807				1,022				2,055				1,963
Stock-based compensation expense			2,406				2,578				5,237				5,454
Capitalized to software and patent costs			3				14				20				27
Total stock-based compensation		$	2,409			$	2,592			$	5,257			$	5,481

The following table sets forth total unrecognized compensation costs related to non-vested stock-based awards granted under the Company’s stock incentive plan:

		*June 30,*				*December 31,*
		*2024*				*2023*
Total unrecognized compensation costs		$	20,197			$	15,370

Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.

The Company expects to recognize the total unrecognized compensation costs as of June 30, 2024, for all non-vested stock-based awards over weighted average periods through June 30, 2028, as follows:

		RSAs				RSUs				PRSUs
Weighted average period (in years)			0.93				1.48				1.81

As of June 30, 2024, under the Company’s stock incentive plan, an additional1,242 shares remained available for future grants. Of this total, 256 shares require re-registration with the SEC. The Company issues new shares upon exercises of grants of RSAs and vesting of RSU and PRSU awards.

Restricted Stock Awards Activity

The following table presents the unvested RSA activity:

						*Weighted*
						*Average*
		*Number of*				*Grant Date*
Three Months Ended June 30, 2024:		*Shares*				*Fair Value*
Unvested balance at March 31, 2024			96			$	29.76
Granted			18			$	28.13
Vested			(52	)		$	24.55
Forfeited			—			$	—
Unvested balance at June 30, 2024			62			$	32.55

						*Weighted*
						*Average*
		*Number of*				*Grant Date*
Six Months Ended June 30, 2024:		*Shares*				*Fair Value*
Unvested balance at December 31, 2023			105			$	29.89
Granted			24			$	30.19
Vested			(66	)		$	27.53
Forfeited			(1	)		$	27.61
Unvested balance at June 30, 2024			62			$	32.55

The fair value of RSAs vested is as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Fair value of RSAs vested		$	1,211			$	439			$	1,761			$	1,458

Restricted Stock Units Activity

The following table presents the unvested RSU award activity:

						*Weighted*
						*Average*
		*Number of*				*Grant Date*
Three Months Ended June 30, 2024:		*Shares*				*Fair Value*
Unvested balance at March 31, 2024			538			$	28.20
Granted			42			$	26.35
Vested			(52	)		$	27.38
Forfeited			(21	)		$	29.99
Unvested balance at June 30, 2024			507			$	28.05

						*Weighted*
						*Average*
		*Number of*				*Grant Date*
Six Months Ended June 30, 2024:		*Shares*				*Fair Value*
Unvested balance at December 31, 2023			442			$	23.77
Granted			196			$	36.63
Vested			(96	)		$	26.26
Forfeited			(35	)		$	26.92
Unvested balance at June 30, 2024			507			$	28.05

The fair value of RSU awards vested is as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Fair value of RSU awards vested		$	1,318			$	1,203			$	3,047			$	1,827

Performance Stock Units Activity

The following table presents the unvested PRSU award activity:

						*Weighted*
						*Average*
		*Number of*				*Grant Date*
Three Months Ended June 30, 2024:		*Shares*				*Fair Value*
Unvested balance at March 31, 2024			221			$	32.70
Granted			14			$	25.19
Vested			—			$	—
Forfeited			(15	)		$	34.75
Unvested balance at June 30, 2024			220			$	32.09

						*Weighted*
						*Average*
		*Number of*				*Grant Date*
Six Months Ended June 30, 2024:		*Shares*				*Fair Value*
Unvested balance at December 31, 2023			192			$	29.01
Change in units based on performance expectations			30			$	22.37
Granted			73			$	36.77
Vested			(60	)		$	22.37
Forfeited			(15	)		$	34.75
Unvested balance at June 30, 2024			220			$	32.09

The fair value of PRSU awards vested is as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Fair value of PRSU awards vested		$	—			$	—			$	2,370			$	54