Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Equity Incentive Plans

In connection with the 2017 Merger, the Company assumed ApolloMed’s 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which 500,000 shares of the Company’s common stock were reserved for issuance thereunder. The Company issues new shares to satisfy stock option and warrant exercises under the 2013 Plan. As of December 31, 2022, there were no shares available for future grants under the 2013 Plan.

In connection with the 2017 Merger, the Company assumed ApolloMed’s 2015 Equity Incentive Plan (the “2015 Plan”), pursuant to which 1,500,000 shares of the Company’s common stock were reserved for issuance thereunder. In addition, shares that are subject to outstanding grants under the Company’s 2013 Plan, but that ordinarily would have been restored to such

plans reserve due to award forfeitures and terminations, were rolled into and become available for awards under the 2015 Plan. The 2015 Plan provides for awards, including incentive stock options, non-qualified options, restricted common stock, and stock appreciation rights. The 2015 Plan was approved by ApolloMed’s stockholders at ApolloMed’s 2016 annual meeting of stockholders that was held in September 2016. As of December 31, 2022, 2021, and 2020, there were approximately 1.1 million, 1.7 million and 0.1 million shares available for future grants under the 2015 Plan, respectively.

The following table summarizes the stock-based compensation expense recognized under all of the Company’s stock plans in 2022, 2021, and 2020, and associated with the issuance of restricted shares of common stock and vesting of stock options that are included in general and administrative expenses in the accompanying consolidated statements of income recognized (in thousands):


	Years ended December 31,
		2022		2021		2020
Stock options		$	3,792	$	2,480	$	1,763
Restricted stock awards		12,309		4,265		1,620

Total share-based compensation expense		$	16,101	$	6,745	$	3,383

Unrecognized compensation expense related to total share-based payments outstanding as of December 31, 2022 was $24.8 million and is expected to be recognized over a weighted-average period of 2.3 years.

Options

The Company’s outstanding stock options consisted of the following:


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)

Options outstanding at January 1, 2022	813,965	$	22.74	3.20	$	41.6
Options granted	87,488	51.21		—	—
Options exercised	(41,603)	17.81		—	1.0
Options canceled, forfeited or expired	—	—		—	—
Options outstanding at December 31, 2022	859,850	$	25.88	2.19	$	10.3

Options exercisable at December 31, 2022	734,027	$	17.32	1.69	$	10.0

During the years ended December 31, 2022 and 2021, stock options were exercised for 41,603 and 40,000 shares, respectively, of the Company’s common stock, which resulted in proceeds of approximately $0.7 million and $0.2 million, respectively. The exercise prices ranged from $15.35 to $23.24 per share for the exercises during the year ended December 31, 2022 and $5.20 per share for the exercises during the year ended December 31, 2021. During the year ended December 31, 2022, no stock options were exercised pursuant the cashless exercise provision. The total intrinsic value of stock options exercised was $1.0 million, $2.8 million, and $1.8 million during the years ended December 31, 2022, 2021, and 2020, respectively. The intrinsic value of stock options is defined as the difference between the Company’s stock price on the exercise date and the grant date exercise price.

During the year ended December 31, 2022, the Company granted 0.1 million stock options to certain ApolloMed employees and board members with exercise price ranging from $41.59-$53.01. The weighted-average grant-date fair value of options granted during the years ended December 31, 2022, 2021, and 2020, was $22.32, $32.63, and $9.89, respectively. The options granted during the year ended December 31, 2022 were recognized at fair value, as determined using the Black-Scholes option pricing model as follows:


December 31, 2022
Expected term						1.50 years - 2.25 years
Expected volatility						71.47% - 82.05%
Risk-free interest rate						1.02% - 2.47%
Market value of common stock						$17.47-$23.42

Restricted Stock Awards

The Company’s unvested restricted stock award activity for the year ended December 31, 2022 consisted of the following:


	Restricted Stock Awards		Performance Based Restricted Stock Awards
	Number of Shares	Weighted Average Grant-Date Fair Value	Number of Shares		Weighted Average Grant-Date Fair Value
Unvested as of January 1, 2022	541,507	$37.84	$	—	$0.00
Granted	253,429	41.07	327,552		42.12
Vested	(244,475)	35.28	(29,289)		50.69
Forfeited	(10,829)	33.42	(8,628)		45.80

Unvested as of December 31, 2022	539,632	$72.58	289,635		$41.14

The Company grants restricted stock awards to employees and executives, which are earned based on service conditions. The awards will vest over a period of five months to four years in accordance with the terms of those plans. The grant date fair value of the restricted stock awards is that day’s closing market price of the Company’s common stock. During the year ended December 31, 2022, the Company granted restricted stock awards for employees totaling 580,981 shares, including 327,552 shares of restricted stock with performance conditions, with a weighted-average grant-date fair value of $41.66. Shares of restricted stock with performance conditions are recognized to the extent the performance conditions are probable of being achieved. The weighted-average grant-date fair value of restricted stock awards granted during the years ended December 31, 2021, and 2020 was $50.73 and $17.56, respectively. The total fair value of restricted stock awards, as of their respective vesting dates during the years ended December 31, 2022, 2021, and 2020, were $10.8 million, $1.1 million, and $1.4 million, respectively.

Warrants

Common stock warrants, to purchase 1,111,111 shares of ApolloMed common stock, issued to NMM in connection with the Series A Preferred Stock investment in ApolloMed were subject to exercise through March 30, 2021, for $9.00 per share, subject to adjustment in the event of stock dividends and stock splits. As part of the 2017 Merger between NMM and ApolloMed, such warrants were distributed to former NMM shareholders on a pro rata basis utilizing the percentage of shares of NMM held by each shareholder prior to the 2017 Merger date.

Common stock warrants, to purchase 555,555 shares of ApolloMed common stock, issued to NMM in connection with the Series B Preferred Stock investment in ApolloMed were subject to exercise through March 30, 2021, for $10.00 per share, subject to adjustment in the event of stock dividends and stock splits. As part of the 2017 Merger between NMM and ApolloMed, such warrants were distributed to former NMM shareholders on a pro-rata basis utilizing the percentage of shares of NMM held by each shareholder prior to the 2017 Merger date.

Common stock warrants, to purchase 850,000 shares, for $11.00 per share, and 900,000 shares, for $10.00 per share, of ApolloMed common stock, issued to former NMM shareholders on a pro-rata basis in connection with the Merger, may be exercised at any time after issuance and through December 8, 2022, subject to adjustment in the event of stock dividends and stock splits.

The Company’s warrants activity consisted of the following:


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)







Warrants outstanding at January 1, 2022	1,001,740	$	10.49	0.94	63.1
Warrants granted	—	—		—	—
Warrants exercised	(947,174)	10.49		—	21.1
Warrants forfeited	(54,566)	10.49		—	—

Warrants outstanding at December 31, 2022	—	$	—	—	$	—

During the years ended December 31, 2022 and 2021, common stock warrants were exercised for 0.9 million and 0.9 million shares of the Company’s common stock, respectively, which resulted in proceeds of approximately $9.0 million and $8.8 million, respectively. Of the 0.9 million warrants exercised during the year ended December 31, 2022, 0.1 million of the common stock warrants were exercised by APC and are treated as treasury shares (see Note 12 — “Mezzanine and Stockholders’ Equity”). The exercise price ranged from $10.00 to $11.00 and $9.00 to $11.00 per share during years ended December 31, 2022 and 2021, respectively.