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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Share-based compensation | Note 11. Share-based compensation 2019 Share incentive plan In June 2019, the Company’s Board of Directors adopted, and its shareholders approved, the 2019 Share Incentive Plan (“2019 Plan”). The 2019 Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted share awards (“RSAs”), restricted share units (“RSUs”), other share-based awards and performance awards. The number of shares that were reserved for issuance under the 2019 Plan was 3,400,000, in addition to the 240,037 RSAs and RSUs the Company granted in substitution for unvested Class B Units or phantom units in Vector Cambium Holdings (Cayman), L.P. (“VCH L.P.”) in connection with the Company’s initial public offering (“IPO”) based on a price of $12.00 per share (“Recapitalization Awards”). The share reserve under the 2019 Plan will be automatically increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and continue until, and including, the fiscal year ending December 31, 2029. The number of shares added annually will be equal to the lowest of 1,320,000 shares, 5% of the number of the Company’s shares outstanding on the first day of such fiscal year, or an amount determined by the Board of Directors. On March 24, 2020, the Company registered 1,283,649 additional shares that may be issued under the 2019 Plan. The Company’s employees, officers, directors, consultants, and advisors are eligible to receive awards under the 2019 Plan. Incentive share options, however, may only be granted to its employees. Participants in the 2019 Plan will also consist of persons to whom Recapitalization Awards were granted. The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the nine-month period ended September 30, 2020 (unaudited):
|  | Number of shares |
Available for grant at December 31, 2019 |  |  | 426,022 |
Added to 2019 Share Incentive Plan |  |  | 1,283,649 |
RSUs granted |  |  | (506,500 | )
Options granted |  |  | (560,000 | )
Shares withheld in settlement of taxes |  |  | 10,341 |
Forfeitures |  |  | 160,250 |
Available for grant at September 30, 2020 |  |  | 813,762 |
Share-based compensation The following table shows total share-based compensation expense for the three-month and nine-month periods ended September 30, 2019 and 2020 (unaudited and in thousands):
|  | Three Months Ended September 30 |  |  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2020 |  |  | 2019 |  |  | 2020 |
Cost of revenues |  | $ | 14 |  |  | $ | 16 |  |  | $ | 196 |  |  | $ | 51 |
Research and development |  |  | 199 |  |  |  | 396 |  |  |  | 5,062 |  |  |  | 1,186 |
Sales and marketing |  |  | 374 |  |  |  | 251 |  |  |  | 3,981 |  |  |  | 726 |
General and administrative |  |  | 241 |  |  |  | 291 |  |  |  | 7,667 |  |  |  | 742 |
Total share-based compensation expense |  | $ | 828 |  |  | $ | 954 |  |  | $ | 16,906 |  |  | $ | 2,705 |
For the three-month period ended September 30, 2019 and 2020, the Company recorded corresponding tax benefits of $0.1 million and $0.2 million, respectively, and for the nine-month period ended September 30, 2019 and 2020, the Company recorded corresponding tax benefits of $0.5 million and $0.5 million, respectively. The Company began recognizing share-based compensation expense during the three-month period ended June 30, 2019, the period in which the Company completed its Recapitalization and IPO. As a result, the Company recorded a one-time expense of $15.4 million of share-based compensation expense during the three-month period ended June 30, 2019 related to the Recapitalization Awards. As of September 30, 2020, the Company estimates the pre-tax unrecognized compensation expense of $13.4 million related to all unvested share-based awards, including share options, restricted share units and restricted share awards will be recognized through the second quarter of 2029. The Company expects to satisfy the exercise of share options and future distributions of shares for restricted share units and restricted share awards by issuing new ordinary shares which have been reserved under the 2019 Plan. The Company utilized a forfeiture rate of 5% during the nine-month period ended September 30, 2020 for estimating the forfeitures of share options and restricted share units granted. Share options The following is a summary of option activity for the Company’s share incentive plans for the nine-month period ended September 30, 2020 (unaudited):
|  | Options |  |  | Weighted average exercise price |  |  | Weighted Average remaining contractual term (years) |  |  | Aggregate intrinsic value |
Outstanding at December 31, 2019 |  |  | 2,920,500 |  |  | $ | 10.40 |  |  |  | 9.6 |  |  | $ | 1,932,000 |
Options granted |  |  | 560,000 |  |  | $ | 15.65 |  |  |  | — |  |  | $ | — |
Options exercised |  |  | (13,594 | ) |  | $ | 12.00 |  |  |  | — |  |  | $ | — |
Options forfeited |  |  | (160,250 | ) |  | $ | 10.76 |  |  |  | — |  |  | $ | — |
Outstanding at September 30, 2020 |  |  | 3,306,656 |  |  | $ | 11.26 |  |  |  | 9.1 |  |  | $ | 18,548,215 |
Options exercisable at September 30, 2020 |  |  | 696,461 |  |  | $ | 11.97 |  |  |  | 8.7 |  |  | $ | 3,416,065 |
Options vested and expected to vest at September 30, 2020 |  |  | 3,119,588 |  |  | $ | 11.24 |  |  |  | 9.1 |  |  | $ | 17,576,131 |
Share options typically have a contractual term of ten years from grant date. At September 30, 2020, the aggregate intrinsic value of options exercisable under the Company’s share incentive plans was $3.4 million. The Company had 13,594 options exercised during the nine-month period ended September 30, 2020. At September 30, 2020, there was $11.2 million in unrecognized pre-tax share-based compensation expense, net of estimated forfeitures, related to unvested share option awards. The unrecognized share-based compensation expense is expected to be recognized through the third quarter of 2024. The fair value of options granted are estimated on the date of grant using the Black-Scholes option pricing model. The fair value of share options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of share options is estimated using the following weighted-average assumptions (unaudited):
|  | For the nine months ended September 30, |
|  | 2019 |  |  | 2020 |
Expected dividend yield |  |  | — |  |  |  | — |
Risk-free interest rate |  |  | 1.82 | % |  |  | 0.39 | %
Weighted-average expected volatility |  |  | 40.8 | % |  |  | 50.0 | %
Expected term (in years) |  |  | 6.0 |  |  |  | 6.5 |
Weighted average grant-date fair value per share of options granted |  | $ | 5.00 |  |  | $ | 7.56 |
Restricted shares The following is a summary of restricted shares activity for the Company’s share incentive plans for the nine-month period ended September 30, 2020 (unaudited):
|  | Units |  |  | Weighted average grant date fair value |
RSU and RSA balance at December 31, 2019 |  |  | 257,119 |  |  | $ | 12.00 |
RSUs and RSAs granted |  |  | 506,500 |  |  | $ | 4.56 |
RSUs and RSAs vested |  |  | (18,055 | ) |  | $ | 12.00 |
RSUs and RSAs forfeited |  |  | (5,078 | ) |  | $ | 12.00 |
RSU and RSA balance at September 30, 2020 |  |  | 740,486 |  |  | $ | 6.91 |
RSUs and RSAs expected to vest at September 30, 2020 |  |  | 740,486 |  |  | $ | 6.91 |
During the nine-month period ended September 30, 2020, 506,500 RSUs were granted under the Company’s 2019 Share Incentive Plan and 18,055 RSUs vested. The Company withheld 3,889 of those shares to pay the employees’ portion of the minimum payroll withholding taxes. As of September 30, 2020, there was $2.2 million in unrecognized pre-tax compensation expense, net of estimated forfeitures, related to unvested share awards. The unrecognized compensation expense is expected to be recognized through the second quarter of 2029. Employee share purchase plan In June 2019, the Company’s Board of Directors adopted, and its shareholders approved, the Employee Share Purchase Plan (“ESPP”). The ESPP was effective on June 25, 2019; however, no offering period or purchase period under the ESPP has begun as of September 30, 2020 and will only begin when determined by the Company’s Board of Directors. During 2019, a total of 550,000 shares were made available under the ESPP. Per the ESPP, the number of shares that will be available for sale also includes an annual increase on the first day of each fiscal year beginning in 2020, equal to the lesser of: 275,000 shares; 1% of the outstanding shares as of the last day of the immediately preceding fiscal year, or such other amount as the administrator may determine. The purchase price of the shares will be 85% of the lower of the fair market value of our shares on the first trading day of each offering period or on the purchase date. On March 24, 2020, the Company registered 256,730 additional shares for the year ending December 31, 2020 that may be issued under the ESPP.

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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