Note 10 - Stockholders' Equity

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Equity [Text Block]

10. Stockholders’ Equity

Authorized Shares

Our certificate of incorporation, as amended and restated from time to time, authorizes the issuance of up to 37,000,000 shares of common stock and up to 3,000,000 shares of undesignated preferred stock.

Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of the preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Currently, we have no shares of preferred stock outstanding.

Equity Offering

On July 16, 2021, we closed an offering of 1,000,000 shares of our common stock, $0.01 par value per share, at a price to the public of $54.50 per share, less underwriting discounts. The net proceeds, after deducting the underwriting discounts and other offering expenses, were approximately $51.0 million. We used a portion of the proceeds from the offering to repay our outstanding debt. At the time of the offering we intended to use the remaining proceeds for general corporate purposes, including working capital needs and capital expenditures, dividend payments, deferred payments related to prior acquisitions, and the funding of future acquisitions.

On August 4, 2021, the underwriters purchased an additional 150,000 shares pursuant to an option granted to them in connection with the offering described above. The net proceeds to the Company, after deducting underwriting discounts and other offering expenses, were approximately $7.6 million. At the time of the offering, we intended to use the proceeds for general corporate purposes.

Stock Award Plans

In May 2006 we approved a 2006 Stock Option and Incentive Plan (as subsequently amended, the 2006 Plan), which became effective upon our initial public offering. The 2006 Plan allows for the granting of an aggregate 5,500,000 shares of incentive stock options, non-qualified stock options, stock appreciation rights, RSUs, PSUs, unrestricted stock awards, and deferred stock awards to our officers, employees, directors, and consultants. Incentive stock options are required to be issued at not less than fair market value at the date of the grant and generally vest over four or five years. The term of the options is determined by our Board of Directors but in no event will exceed ten years from date of grant. In connection with the adoption of the 2006 Plan, no further option grants were permitted under any previous stock option plans and any expirations, cancellations, or terminations under the previous plans are available for issuance under the 2006 Plan. We may satisfy awards upon exercise of stock options, RSUs or PSUs with either newly issued shares or treasury shares. The total number of shares currently authorized for the 2006 Plan is 7,118,003 shares, of which 273,588 remain available for grant as of December 31, 2023.

We have computed the fair value of employee stock options granted each year using the following weighted average assumptions:

	2023			2022			2021
Dividend yield		1.02	%		1.06	%		0.91	%
Volatility		43.0	%		44.6	%		46.0	%
Risk-free interest rate		4.3	%		3.9	%		1.1	%
Weighted average expected option term (in years)		4.5			4.5			4.6
Weighted average fair value per share of options granted	$	20.75		$	18.10		$	17.64

A summary of option activity as of December 31, 2023 and for the three years then ended is presented below:

				Weighted		Weighted Average		Aggregate
	Number			Average		Remaining		Intrinsic
	of Shares			Exercise Price		Contractual Term		Value
						(in years)		(in thousands)
Balance outstanding at December 31, 2020		931,840		$	28.22		4.49	$	11,442
Granted		151,161		$	48.60
Exercised		(217,121	)	$	20.95			$	6,975
Canceled / Expired		(19,126	)	$	23.18
Balance outstanding at December 31, 2021		846,754		$	33.83		4.50	$	13,888
Granted		159,275		$	47.21
Exercised		(133,963	)	$	25.80			$	3,021
Canceled / Expired		(12,091	)	$	35.53
Balance outstanding at December 31, 2022		859,975		$	37.53		4.35	$	7,878
Granted		148,115		$	54.71
Exercised		(207,643	)	$	29.72			$	5,914
Canceled / Expired		(19,323	)	$	41.55
Balance outstanding at December 31, 2023		781,124		$	42.78		4.42	$	10,924
Exercisable at:
December 31, 2021		301,692		$	27.40		3.30	$	6,886
December 31, 2022		369,593		$	32.16		3.17	$	5,223
December 31, 2023		356,519		$	36.83		3.21	$	7,107
Expected to vest at:
December 31, 2021		545,062		$	37.38		5.16
December 31, 2022		490,382		$	41.59		5.23
December 31, 2023		424,605		$	47.78		5.43

Cash received from stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $6.2 million, $3.5 million and $4.5 million, respectively.

Restricted Stock Units and Performance-based Restricted Stock Units

The fair value of restricted stock unit awards with time-based vesting is based on the intrinsic value of the awards at the date of grant.

We also issue restricted stock unit awards with vesting based on performance conditions. Performance-based restricted stock units awarded vest based on our achievement of operating income relative to our target operating income. For restricted stock unit awards that include vesting based on performance conditions, the fair values are based on the intrinsic values of the awards at the date of grant.

A summary of our restricted stock unit activity as of December 31, 2023 and for the three years then ended is presented below:

				Weighted
				Average
	Number			Grant Date
	of Shares			Fair Value
Balance outstanding at December 31, 2020		147,015		$	30.24
Granted		48,298		$	48.65
Vested		(51,414	)	$	26.32
Canceled		(10,068	)	$	30.70
Balance outstanding at December 31, 2021		133,831		$	38.26
Granted		51,031		$	47.11
Vested		(45,489	)	$	35.75
Canceled		(6,229	)	$	40.79
Balance outstanding at December 31, 2022		133,144		$	42.38
Granted		48,225		$	54.68
Vested		(49,400	)	$	39.31
Canceled		(5,975	)	$	42.89
Balance outstanding at December 31, 2023		125,994		$	48.20

The number of RSUs vested includes the shares that we withheld on behalf of employees to satisfy minimum statutory tax withholding requirements. The fair values of the RSUs that vested during 2023, 2022 and 2021 were $2.7 million, $2.1 million, and $2.5 million, respectively.

We repurchase shares of our common stock in order to cover any minimum tax withholding liability associated with RSU vestings. A summary of our repurchases is as follows:

	2023		2022		2021
Shares of common stock repurchased for net settlement of equity awards		15,917		13,690		16,333
Average per share repurchase price	$	53.59	$	46.90	$	49.10
Aggregate purchase price (in thousands)	$	853	$	642	$	802

A summary of our performance-based restricted stock unit activity as of December 31, 2023 and for the three years then ended is presented below:

				Weighted
				Average
	Number			Grant Date
	of Shares			Fair Value
Balance outstanding at December 31, 2020		-		$	-
Granted		31,181		$	48.60
Vested		-		$	-
Canceled		-		$	-
Balance outstanding at December 31, 2021		31,181		$	48.60
Granted		28,830		$	47.13
Vested		-		$	-
Canceled		(31,538	)	$	48.53
Balance outstanding at December 31, 2022		28,473		$	47.19
Granted		26,883		$	54.65
Vested		-		$	-
Canceled		(1,192	)	$	47.19
Balance outstanding at December 31, 2023		54,164		$	50.85

Stock-based Compensation

The components of stock-based compensation expense included in the consolidated statements of operations are as follows:

	2023		2022		2021
			(in thousands)
Stock option awards	$	2,705	$	2,487	$	2,199
Restricted stock units		1,951		1,654		1,247
Performance-based restricted stock units		663		32		33
Total stock-based compensation	$	5,319	$	4,173	$	3,479

Stock-based compensation is included in our statements of operations as follows:

	2023		2022		2021
			(in thousands)
Cost of sales	$	686	$	494	$	407
Sales and marketing		966		771		527
General and administrative		3,143		2,500		2,185
Research and development		524		408		360
Total stock-based compensation	$	5,319	$	4,173	$	3,479

We expect to record the unamortized portion of share-based compensation expense of $15.1 million for existing stock options, RSUs and PSUs outstanding as of December 31, 2023, over a weighted-average period of 2.0 years.

Stock Repurchase Plans

On February 21, 2024, our Board of Directors authorized the repurchase of up to $50.0 million of the Company’s common stock through transactions on the open market, in privately negotiated purchases or otherwise until February 21, 2025. The repurchase program may be suspended or discontinued at any time. To date we have not made any repurchases under this program.

Dividends

In February 2011, our Board of Directors approved a policy for the payment of quarterly cash dividends on our common stock. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors on a quarterly basis. The dividend activity for the periods presented is as follows:

Record Date	Payment Date	Per Share Amount		Dividend Payment
				(in thousands)
Fiscal Year 2023
March 9, 2023	March 23, 2023	$	0.140	$	3,099
May 17, 2023	June 1, 2023	$	0.140	$	3,116
August 17, 2023	August 31, 2023	$	0.140	$	3,117
November 16, 2023	November 30, 2023	$	0.140	$	3,117
Fiscal Year 2022
March 8, 2022	March 24, 2022	$	0.125	$	2,743
May 17, 2022	June 2, 2022	$	0.125	$	2,745
August 25, 2022	September 8, 2022	$	0.125	$	2,750
November 17, 2022	December 1, 2022	$	0.125	$	2,750

On February 21, 2024, our Board of Directors approved a quarterly cash dividend on our common stock of $0.160 per share payable on March 28, 2024, to stockholders of record at the close of business on March 14, 2024, which will total approximately $3.6 million.