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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-based Compensation | Stock-Based Compensation In 2011, our board of directors adopted the Health Catalyst, Inc. 2011 Stock Incentive Plan (2011 Plan), which provided for the direct award, sale of shares, and granting of RSUs and options for our common stock to our directors, team members, or consultants. In connection with our IPO, our board of directors adopted the 2019 Stock Option and Incentive Plan (2019 Plan). The 2019 Plan provides flexibility to our compensation committee to use various equity-based incentive awards as compensation tools to motivate our workforce, including the grant of incentive and nonstatutory stock options, restricted and unrestricted stock, RSUs, and stock appreciation rights to our directors, team members, or consultants. We have initially reserved 2,756,607 shares of our common stock (2,500,000 under the 2019 Plan and 256,607 shares under the 2011 Plan that were available immediately prior to the IPO registration date). The 2019 Plan provides that the number of shares reserved available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2020, by 5% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee. As of January 1, 2021, there were an additional 2,185,461 shares reserved for issuance under the 2019 Plan. As of March 31, 2021 and December 31, 2020, there were 15,294,920 and 13,109,459 shares authorized for grant, respectively, and 3,086,399 and 2,481,818 shares available for grant, respectively, under the 2019 Plan and 2011 Plan (collectively the Stock Incentive Plan). All options were granted with an exercise price determined by the board of directors that was equal to the estimated fair value of our common stock at the date of grant, based on the information known on the date of grant. Subject to certain exceptions defined in the Stock Incentive Plan related to an employee’s termination, options generally expire on the tenth anniversary of the applicable grant date. The fair value of options, which vest in accordance with service schedules, is estimated on the date of grant using the Black-Scholes option pricing model. The measurement date for non-employee awards is the date of grant. The compensation expense for non-employees is recognized, without changes in the fair value of the award, in the same period and in the same manner as though we had paid cash for the services, which is typically the vesting period of the respective award. The following two tables summarize our total stock-based compensation expense by award type and where the stock-based compensation expense was recorded in our consolidated statements of operations (in thousands):
| Three Months Ended March 31,
| 2021 |  | 2020
| (unaudited)
Options | $ | 1,394 |  |  | $ | 2,542 |
Restricted stock units | 8,002 |  |  | 5,117 |
Performance-based restricted stock units | 1,329 |  |  | — |
Employee stock purchase plan | 417 |  |  | 492 |
Restricted shares | 2,368 |  |  | 590 |
Total stock-based compensation | $ | 13,510 |  |  | $ | 8,741 |
| Three Months Ended March 31,
| 2021 |  | 2020
| (unaudited)
Cost of revenue | $ | 1,809 |  |  | $ | 992 |
Sales and marketing | 4,818 |  |  | 3,182 |
Research and development | 2,257 |  |  | 1,882 |
General and administrative | 4,626 |  |  | 2,685 |
Total stock-based compensation | $ | 13,510 |  |  | $ | 8,741 |
Stock Options There were no stock options granted during the three months ended March 31, 2021 or 2020. A summary of the share option activity under the 2019 Plan for the three months ended March 31, 2021, is as follows:
| Time-Based Option Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life in Years |  | Aggregate Intrinsic Value
| (unaudited)
Outstanding at January 1, 2021 | 3,892,936 |  |  | $ | 11.58 |  |  |  |  |
Options exercised | (537,889) |  |  | 12.05 |  |  |  |  |
Options cancelled/forfeited | (11,000) |  |  | 11.50 |  |  |  |  |
Outstanding at March 31, 2021 | 3,344,047 |  |  | $ | 11.50 |  |  | 6.8 |  | $ | 117,946,252 |
Vested and expected to vest as of March 31, 2021 | 3,344,047 |  |  | $ | 11.50 |  |  | 6.8 |  | $ | 117,946,252 |
Vested and exercisable as of March 31, 2021 | 1,715,358 |  |  | $ | 10.49 |  |  | 6.0 |  | $ | 62,231,385 |
The aggregate intrinsic value of stock options exercised was $18.7 million for the three months ended March 31, 2021. The total grant-date fair value of stock options vested during the three months ended March 31, 2021 was $1.8 million. As of March 31, 2021, approximately $6.3 million of unrecognized compensation expense related to our stock options is expected to be recognized over a remaining weighted-average period of 1.4 years. Restricted Stock Units (RSUs) The service-based condition for RSUs is generally satisfied over four years with a 25% cliff vesting period of one year and ratable quarterly vesting thereafter. The following table sets forth the outstanding RSUs and related activity for the three months ended March 31, 2021:
| Restricted Stock Units |  | Weighted Average Grant Date Fair Value
| (unaudited)
Unvested and outstanding at January 1, 2021 | 1,839,998 |  |  | $ | 34.17 |
RSUs granted | 1,329,687 |  |  | 49.77 |
RSUs vested | 186,329 |  |  | 33.70 |
RSUs forfeited | (45,666) |  |  | 35.50 |
Unvested and outstanding at March 31, 2021 | 2,937,690 |  |  | $ | 41.24 |
As of March 31, 2021, we had $114.1 million of unrecognized stock-based compensation expense related to outstanding RSUs expected to be recognized over a remaining weighted-average period of 3.2 years. Performance-Based Restricted Stock Units (PRSUs) During the three months ended March 31, 2021, we granted PRSUs to all employees that included both service conditions and performance conditions related to company-wide goals. These PRSUs will vest to the extent the applicable performance conditions are achieved for the year ended December 31, 2021, and if the individual employee continues to provide services to us through the vesting date of March 1, 2022. The number of PRSUs that will ultimately vest from the 2021 PRSU grants can range from 0% to 100% of the original amount granted depending on our performance during 2021 against the pre-established targets. We also granted additional executive PRSUs based on the same performance conditions described above, but with an extended four-year service condition whereby one quarter of such shares will vest on March 1, 2022, and the remainder in quarterly installments thereafter. The following table sets forth the outstanding PRSUs, including executive PRSUs, and related activity for the three months ended March 31, 2021:
| Performance-based Restricted Stock Units |  | Weighted Average Grant Date Fair Value
| (unaudited)
Unvested and outstanding at January 1, 2021 | — |  |  | $ | — |
PRSUs granted | 313,322 |  |  | 49.77 |
PRSUs forfeited | (5,463) |  |  | 49.77 |
Unvested and outstanding at March 31, 2021 | 307,859 |  |  | $ | 49.77 |
As of March 31, 2021, we had $10.3 million of unrecognized stock-based compensation expense related to outstanding PRSUs expected to be recognized over a remaining weighted-average period of 1.0 year. Employee Stock Purchase Plan In connection with our IPO in July 2019, our board of directors adopted the ESPP and a total of 750,000 shares of common stock were initially reserved for issuance under the ESPP. The number of shares of common stock available for issuance under the ESPP will be increased on the first day of each calendar year beginning January 1, 2020 and each year thereafter until the ESPP terminates. The number of shares of common stock reserved and available for issuance under the ESPP shall be cumulatively increased by the least of (i) 750,000 shares, (ii) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (iii) such lesser number of shares of common stock as determined by the ESPP Administrator. As of January 1, 2021, the number of shares of common stock available for issuance under the ESPP increased by 437,092 shares. The ESPP generally provides for six-month offering periods, the exception being the first offering period. The offering periods generally start on the first trading day after June 30 and December 31 of each year. The ESPP permits participants to elect to purchase shares of common stock through fixed percentage contributions from eligible compensation during each offering period, not to exceed 15% of the eligible compensation a participant receives during an offering period or accrue at a rate which exceeds $25,000 of the fair value of the stock (determined on the option grant date(s)) for each calendar year. A participant may purchase the lowest of (a) a number of shares of common stock determined by dividing such participant’s accumulated payroll deductions on the exercise date by the option price, (b) 2,500 shares; or (c) such other lesser maximum number of shares as shall have been established by the Administrator in advance of the offering period. Amounts deducted and accumulated by the participant will be used to purchase shares of common stock at the end of each offering period. The purchase price of the shares will be 85% of the lower of the fair value of common stock on the first trading day of each offering period or on the purchase date, except for the first offering period, for which the purchase price will be 85% of the lower of (i) the IPO price or (ii) the fair value of common stock on the purchase date. Participants may end their participation at any time during an offering period and will be paid their accumulated contributions that have not been used to purchase shares of common stock. Participation ends automatically upon termination of employment. The fair value of the purchase right for the ESPP option component is estimated on the date of grant using the Black-Scholes model with the following assumptions for the three months ended March 31, 2021 and 2020:
| Three Months Ended March 31,
| 2021 |  | 2020
| (unaudited)
Expected volatility | 40.4% |  | 54.9%
Expected term (in months) | 6 |  | 6
Risk-free interest rate | 0.1% |  | 1.6%
Expected dividends | — |  | —
As of March 31, 2021, a total of 72,892 shares were issuable to employees based on ESPP contribution elections and unrecognized ESPP compensation cost was $0.4 million, which is expected to be recognized over the remaining portion of the current offering period during the three months ending June 30, 2021. As of March 31, 2021, 1,245,652 shares are available for future issuance under the ESPP. Restricted Shares As part of the Able Health acquisition that closed on February 21, 2020, 179,392 shares of our common stock were issued pursuant to the terms of the acquisition agreement and are a stock-based compensation arrangement subject to a restriction agreement. The vesting of those shares were subject to one year of continuous service by the applicable team members and vested fully during the three months ended March 31, 2021 on the one-year anniversary of the acquisition closing date. As part of the Vitalware acquisition that closed on September 1, 2020, 203,997 shares of our common stock were issued pursuant to the terms of the acquisition agreement and are a stock-based compensation arrangement subject to a restriction agreement. 75% of these restricted shares will vest on a monthly basis over a term of approximately one year with the remaining 25% vesting on the one-year anniversary of the acquisition closing date. As of March 31, 2021, 89,250 of these restricted shares had vested. As of March 31, 2021, we had $2.8 million of unrecognized stock-based compensation expense related to outstanding restricted shares expected to be recognized over a weighted-average period of 0.4 years.

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