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Stockholders' Equity, Stock Plans and Stock-based Compensation Expense
 12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]  
Stockholders' Equity, Stock Plans and Stock-based Compensation Expense STOCKHOLDERS’ EQUITY, STOCK PLANS AND STOCK-BASED COMPENSATION EXPENSE
As of December 31, 2021, the Company had one class of issued common stock with a par value of $0.001. Authorized capital stock consists of 55,000,000 shares comprised of two classes: (i) 50,000,000 shares of Common Stock, of which 17,995,344 shares are issued and outstanding as of December 31, 2021, and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”), of which no shares are issued and outstanding.
Issuances of Common Stock
On April 21, 2020, the Company issued and sold an aggregate of 2,742,750 shares of the Company’s common stock, par value $0.001 per share at a price to the public of $10.50 per share. The shares include the full exercise of the underwriter’s option to purchase an additional 357,750 shares of common stock. The Company received net proceeds from the offering of approximately $26.5 million, after deducting underwriting discounts, commissions and offering expenses of $2.3 million.
As of December 31, 2021, the Company had the following stock-based employee compensation plans:
2004 Equity Incentive Plan
In 1998, the Company adopted the 1998 Stock Plan, or 1998 Plan, under which 4,650,000 shares of the Company’s common stock were reserved for issuance to employees, directors and consultants.
On January 12, 2004, the Board of Directors (“the Board”) adopted the 2004 Equity Incentive Plan. A total of 1,750,000 shares of common stock were originally reserved for issuance pursuant to the 2004 Equity Incentive Plan. In addition, the shares reserved for issuance under the 2004 Equity Incentive Plan included shares reserved but un-issued under the 1998 Plan and shares returned to the 1998 Plan as the result of termination of options or the repurchase of shares. In 2012 the stockholders approved a “fungible share” provision whereby each full-value award issued under the 2004 Equity Incentive Plan results in a requirement to subtract 2.12 shares from the shares reserved under the Plan.
2019 Equity Incentive Plan
At the Company’s Annual Meeting of Stockholders on June 14, 2019, the Company’s stockholders approved the 2019 Equity Incentive Plan, which is an amendment and restatement of the 2004 Equity Incentive Plan. The 2004 Equity Incentive Plan was amended to: (i) increase the number of shares available for future grant by 700,000 (in addition to the 9,701,192 shares provided under the 2004 Equity Incentive Plan; (ii) extend the term of the 2004 Equity Incentive Plan to the date of the Annual Meeting of the Company’s stockholders in 2029; (iii) amend the 2004 Equity Incentive Plan to eliminate the requirement for awards granted on or after June 14, 2019 that any shares subject to awards with an exercise price less than fair market value on the date of such grant will be counted against the Plan as 2.12 shares for each full value share awarded in accordance with the 2004 Equity Incentive Plan; (iv) amend the 2004 Equity Incentive Plan to remove the requirement that any shares subject to awards with an exercise price less than fair market value on the date of such grant will be counted against the Plan as 2.12 shares for each full value share awarded; (v) amend the 2004 Equity Incentive Plan to remove certain provisions relating to the “performance based compensation” exception under Section 162(m) of the Internal Revenue Code of 1986, as amended; (vi) include a minimum one-year vesting period with respect to awards granted under the 2004 Equity Incentive Plan.
On June 11, 2019, the Board also approved, amended and restated the Company’s Stock Ownership Guidelines adopted on July 28, 2017 in their entirety, to require all officers (as defined by Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) to hold at least 50% of any shares received pursuant to stock options, stock appreciation rights, vested restricted stock awards (“RSAs”), restricted stock units (“RSUs”), or performance stock units (“PSUs”) (net of taxes) for a minimum of one year following vesting and delivery.
On June 11, 2019, the Board also adopted a clawback policy to permit recovery of certain compensation paid to Named Executive Officers (as defined in Item 402 of Regulation S-K) of the Company if the Compensation Committee of the Board determines that a Named Executive Officer (i) has violated law, the Company’s Code of Business Conduct and Ethics, or any significant ethics or compliance policies, and (ii) such conduct results in material financial or reputational harm, or results in a need for a restatement of the Company’s consolidated financial statements. The Amended and Restated Plan provides for the grant of incentive stock options, non-statutory stock options, RSAs, RSUs, stock appreciation rights, PSUs, and other stock or cash awards.
In June 2020, stockholders approved an amendment and restatement of the 2019 Equity Incentive Plan (the “Prior Plan”) as the Amended and Restated 2019 Equity Incentive Plan (the “Restated Plan”) and approved an additional 600,000 shares, available for future grants. The Restated Plan provides for the grant of incentive stock options, non-statutory stock options, RSAs, RSUs, stock appreciation rights, PSUs, and other stock or cash awards.
The Company’s non-employee directors are granted $60,000 of RSUs annually on the date of the Company’s Annual Meeting of stockholders. These RSUs cliff-vest on the one-year anniversary of the grant date. In the years ended December 31, 2021, 2020 and 2019, the Company issued 41,301, 35,735 and 42,236 RSUs, respectively, to its non-employee directors.
In the years ended December 31, 2021, 2020 and 2019, the Company’s Board of Directors granted 219,686, 405,248 and 475,166 RSUs, respectively, to its executive officers, directors and certain members of the Company’s management related to annual grants and new hire grants. The annual grant RSUs vest quarterly on each of the first four anniversaries of the vest date and the new hire RSUs vest one quarter on the first anniversary and monthly thereafter for 36 months. The Company measured the fair market values of the underlying stock on the dates of grant and recognizes the stock-based compensation expense over the vesting period. On the vesting date, the Company issues common stock, net of stock withheld to settle the recipient’s minimum statutory tax liability. In addition to the 2020 annual RSU grants, on April 1, 2020, the Company issued RSUs to settle bonuses owed to management under the 2019 Management Bonus Program. In the past, the Company has paid these bonuses with cash. However, due to the economic conditions resulting from COVID-19, fully vested shares were issued in lieu of cash. The Company issued 209,981 shares related to this bonus payment to management and recognized $2.6 million in stock-based compensation expense. The Company also recorded an equivalent reduction in bonus expense as a result of the settlement of the bonus in shares.
In the years ended December 31, 2021, 2020 and 2019 the Company’s Board of Directors granted its executive officers and certain senior management employees 178,222, 76,157, and 319,275 PSUs, respectively, related to its annual grants. The 2019 and 2020 grants vested on the first anniversary subject to the achievement of pre-established performance goals. The 2021 grant quantity vested one half on the first anniversary subject to the achievement of pre-established performance goals and the remaining half vested on the second anniversary subject to the recipient’s continued service. In addition to the 2021 annual PSU grants, in July 2021, the Company granted 265,002 PSUs to certain employees. This grant consists of four separate vesting tranches that will vest from April 2023 through June 2024 upon the achievement of operational milestones associated with each tranche and continued service.
In July 2019, the Board awarded its new CEO, David H. Mowry, 67,897 PSUs, which are scheduled to vest over four years from 2019 through 2022. These PSUs are subject to certain performance-based criteria related to achieving financial metrics in the Board approved annual budgets.
In August 2020, the Board awarded its new CFO, Rohan Seth, 60,000 stock options, which vests over five years, and 22,423 PSUs, which vests over 2.5 years and is subject to performance-based criteria relating to the achievement of certain department and financial goals.
On January 12, 2004, the Board of Directors adopted the 2004 Employee Stock Purchase Plan. Under the 2004 Employee Stock Purchase Plan, or 2004 ESPP, eligible employees are permitted to purchase common stock at a discount through payroll deductions. The 2004 ESPP offering and purchase periods are for six months. The 2004 ESPP has an evergreen provision based on which shares of common stock eligible for purchase are increased on the first day of each fiscal year by an amount equal to the lesser of:
•600,000 shares;
•2.0% of the outstanding shares of common stock on such date; or
•an amount as determined by the Board of Directors.
The price of the common stock purchased is the lower of 85% of the fair market value of the common stock at the beginning or end of the six-month offering period. In the years ended December 31, 2021, 2020, and 2019, under the 2004 ESPP, the Company issued 59,635, 56,751, and 82,810 shares, respectively. At December 31, 2021, 645,319 shares remained available for future issuance.
Option and Award Activity
Activity under the 2004 Plan and 2019 Equity Incentive Plan is summarized as follows:
Options Outstanding
Shares
Available
For Grant		Number of
Shares		Weighted-
Average
Exercise
Price		Weighted-Average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic
Value
(in millions ) (1)
Balances as of December 31, 20181,141,305 507,705 $20.52 3.52$2.00 
Additional shares reserved(2)
700,000 
Options exercised— (160,798)$10.03 
Options cancelled (expired or forfeited)51,208 (51,208)$24.61 
Stock awards granted(1,538,128)— — 
Stock awards cancelled (expired or forfeited)407,320 — — 
Balances as of December 31, 2019761,705 295,699 $25.52 3.19$3.04 
Additional shares reserved(2)
600,000 
Options granted(71,088)71,088 $14.85 
Options exercised— (73,227)$12.91 
Options cancelled (expired or forfeited)76,553 (76,553)$36.65 
Stock awards granted(804,949)— — 
Stock awards cancelled (expired or forfeited)522,949 — — 
Balances as of December 31, 20201,085,170 217,007 $22.35 3.75$1.47 
Additional shares reserved(2)
450,000 
Options granted(172,139)172,139 $30.71 
Options exercised— (71,798)$22.02 
Options cancelled (expired or forfeited)30,173 (30,173)$37.14 
Stock awards granted(744,949)— — 
Stock awards cancelled (expired or forfeited)299,092 — — 
Balances as of December 31, 2021947,347 287,175 $25.89 4.92$4.46 
Exercisable as of December 31, 202183,855 $24.14 2.86$1.47 
Vested and expected to vest as of December 31, 2021287,175 $25.89 4.92$4.46 
(1)Based on the closing stock price of $41.32 of the Company’s stock on December 31, 2021, $24.11 on December 31, 2020, $35.81 on December 31, 2019 and $17.02 on December 31, 2018.
(2)Approved by the board of directors and stockholders in 2021, 2020 and 2019.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value and is the aggregate difference between the Company’s closing stock price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options. The aggregate intrinsic amount changes based on the fair market value of the Company’s common stock. Total intrinsic value of options exercised in 2021, 2020 and 2019 was $1.3 million, $0.4 million, and $1.0 million, respectively. The options outstanding and exercisable at December 31, 2021 were in the following exercise price ranges:
Exercise Prices
Number OutstandingContractual Life
(in years)		Number
Exercisable
$10.79 —$14.04 25,480 1.9725,480 
$14.1060,000 3.5916,000 
$15.322,396 0.562,396 
$18.551,000 2.071,000 
$18.9311,088 8.833,234 
$25.706,000 2.596,000 
$29.2893,844 6.32— 
$32.8757,622 6.12— 
$39.3025,000 2.8325,000 
$47.404,745 2.964,745 
$10.79 —$47.40 287,175 4.9283,855 
Stock Awards (RSU and PSU) Activity Table
Information with respect to RSUs and PSUs activity is as follows (in thousands):
Number of
Shares		Weighted-Average
Grant-
Date Fair
Value
Aggregate
Fair Value(1)
(in thousands)
Aggregate
Intrinsic Value(2)
(in thousands)
Outstanding at December 31, 2018474,291 $38.44 $8,072 
Granted963,814 $18.68 
Vested(3)
(172,281)$33.66 $6,169 
(4)
Forfeited(161,022)$37.91 
Outstanding at December 31, 20191,104,802 $22.10 $37,442 
Granted667,694 $20.66 
Vested(3)
(684,491)$17.82 $12,036 
(5)
Forfeited(308,248)$23.24 
Outstanding at December 31, 2020779,757 $23.96 $18,800 
Granted744,949 $40.16 
Vested(3)
(254,946)$22.94 $8,287 
(6)
Forfeited(236,856)$27.33 
Outstanding at December 31, 20211,032,904 $35.00 $42,680 
(1)Represents the value of the Company’s stock on the date that the restricted stock units and performance stock units vest.
(2)Based on the closing stock price of the Company’s stock of $41.32 on December 31, 2021, $24.11 on December 31, 2020, $35.81 on December 31, 2019, and $17.02 on December 31, 2018.
(3)The number of restricted stock units vested includes shares that the Company withheld on behalf of the employees to satisfy the statutory tax withholding requirements.
(4)On the grant date, the fair value for these vested awards was $5.9 million.
(5)On the grant date, the fair value for these vested awards was $12.2 million.
(6)On the grant date, the fair value for these vested awards was $5.8 million.
Stock-Based Compensation
Stock-based compensation expense for the years ended December 31, 2021, 2020 and 2019 was as follows (in thousands):
Year Ended December 31,
202120202019
Stock options$782 $370 $622 
RSUs5,305 8,849 4,786 
PSUs6,591 666 3,948 
ESPP494 224 476 
Total stock-based compensation expense$13,172 $10,109 $9,832 
Total stock-based compensation expense recognized during the year ended December 31, 2021, 2020 and 2019 was recorded in the Consolidated Statement of Operations as follows (in thousands):
Year Ended December 31,
202120202019
Cost of revenue$1,408 $1,665 $1,572 
Sales and marketing3,160 3,385 4,510 
Research and development2,784 1,669 1,536 
General and administrative5,820 3,390 2,214 
Total stock-based compensation expense$13,172 $10,109 $9,832 
Valuation Assumptions and Fair Value of Stock Options and ESPP Grants
The Company uses the Black-Scholes option pricing model to estimate the fair value of options granted under its equity incentive plans and rights to acquire stock granted under its employee stock purchase plan. The weighted average estimated fair values of the employee stock options and rights granted under the employee stock purchase plan and the weighted average assumptions used to calculate the grant date fair values, are as follows:
Stock OptionsStock Purchase Plan (ESPP)
202120202019202120202019
Expected term (in years)(1)
3.974.843.650.500.500.50
Risk-free interest rate(2)
0.48 %0.15 %1.64 %0.14 %0.11 %2.49 %
Volatility(3)
66 %63 %54 %36 %76 %70 %
Dividend yield(4)
— %— %— %— %— %— %
Weighted average estimated fair value at grant date$15.09 $7.63 $14.83 $9.64 $6.13 $9.60 
(1)The expected term represents the period during which the Company’s stock-based awards are expected to be outstanding. The estimated term is based on historical experience of similar awards, giving consideration to the contractual terms of the awards, vesting requirements and expectation of future employee behavior, including post-vesting terminations. The expected term of groups of employees that have similar historical exercise patterns has been considered separately for valuation purposes.
(2)The risk-free interest rate is based on U.S. Treasury debt securities with maturities close to the expected term of the option or ESPP participation right as of the date of grant.
(3)Estimated volatility is based on historical volatility. The Company estimates volatility based on the Company’s historical volatility of its stock price. 
(4)The Company has not paid dividends since its inception.