Stock-based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

11. Stock-based Compensation

2017 Stock Incentive Plan

The Company’s 2017 Stock Incentive Plan (the “2017 Plan”) provides for the Company to sell or issue common stock or restricted common stock, or to grant qualified incentive stock options, nonqualified stock options, SARs, performance-based restricted stock units (“PSUs”), RSUs or other stock-based awards to the Company’s employees, officers, directors, advisors and outside consultants. The total number of shares authorized for issuance under the 2017 Plan was 19,608 shares as of June 30, 2022, of which 6,127 shares remained available for future grant.

Stock Options

A summary of stock option activity for the six months ended June 30, 2022 is as follows:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)
Outstanding at January 1, 2022		5,919		$	8.82		4.36	$	4,205
Granted		1,516			3.89
Exercised		(130	)		1.95
Forfeited		(195	)		7.98
Outstanding at June 30, 2022		7,110		$	7.92		4.80	$	851
Options exercisable at June 30, 2022		5,474		$	9.04		3.35	$	544
Vested or expected to vest at June 30, 2022		7,001		$	7.98		4.70	$	834

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model using the following assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Risk-free interest rate	3.0%–3.2%	1.0%	1.7%–3.2%	1.0%
Expected term (in years)	5.6–6.3	6.1	5.6–6.3	6.1
Expected volatility	40.5%–41.5%	38.2%	38.5%–41.5%	38.2%
Expected dividend yield	0.0%	0.0%	0.0%	0.0%

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2022 and 2021 was $1.62 and $3.42 per share, respectively. Cash proceeds received upon the exercise of options were $254 and $1,187 during the six months ended June 30, 2022 and 2021, respectively. The intrinsic value of stock options exercised during the six months ended June 30, 2022 and 2021 was $299 and $2,496, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Restricted Stock Units

A summary of RSU activity for the six months ended June 30, 2022 is as follows:


	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Fair Value
Unvested balance at January 1, 2022		4,309		$	6.34
Granted		2,252			3.66
Vested		(1,097	)		6.65	$	4,989
Forfeited		(356	)		6.35
Unvested balance at June 30, 2022		5,108		$	5.09

The Company withheld 355 and 744 shares of common stock in settlement of employee tax withholding obligations due upon the vesting of RSUs and PSUs during the six months ended June 30, 2022 and 2021, respectively.

Performance-Based Stock Units

During the six months ended June 30, 2022 and 2021, the Company granted PSUs to certain employees that vest over a three-year period based on the achievement of performance goals and continued performance of services. The performance goals for all PSUs granted during the six months ended June 30, 2021 and a portion of PSUs granted during the six months ended June 30, 2022 consist solely of market-based vesting conditions, determined by the Company’s level of achievement of pre-established parameters relating to the performance of the Company’s stock price as set by the Board of Directors. Vesting for these market-based PSUs may occur at any time during the three-year period. The remainder of PSUs granted during the six months ended June 30, 2022 consist of performance-based vesting conditions determined by the Company's achievement of performance targets with respect to a certain customer agreement. Vesting for these performance-based PSUs may occur in varying percentages on January 1, 2023, 2024, and 2025.

A summary of PSU activity for the six months ended June 30, 2022 is as follows:


	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Fair Value
Unvested balance at January 1, 2022		442		$	7.89
Granted		846			2.79
Vested		—			—	$	—
Forfeited		(26	)		7.89
Unvested balance at June 30, 2022		1,262		$	4.47

Compensation expense is based on the estimated value of the awards on the grant date, and is recognized over the period from the grant date through the expected vest dates of each vesting condition, both of which were estimated based on a Monte Carlo simulation model applying the following key assumptions:


	Three months ended June 30,		Six months ended June 30,
	2022	2021	2022	2021
Risk-free interest rate	2.8%	*	2.8%	0.2%
Volatility	79.1%	*	79.1%	78.6%
Dividend yield	0.0%	*	0.0%	0.0%
Cost of equity	13.2%	*	13.2%	12.0%

* No PSUs were granted during the three months ended June 30, 2021.

Stock Appreciation Rights

Over time, the Company has granted SARs that allow the holder the right, upon exercise, to receive in cash the amount of the difference between the fair value of the Company’s common stock at the date of exercise and the price of the underlying common stock at the date of grant of each SAR. The SARs vested over a four-year period from the date of grant and expire ten years from the date of grant.

A summary of SAR activity for the six months ended June 30, 2022 is as follows:


	Number of Shares			Weighted- Average Exercise Price
Outstanding at January 1, 2022		200		$	7.28
Granted		—			—
Exercised		(90	)		1.69
Forfeited		—			—
Outstanding at June 30, 2022		110		$	11.86

The fair value of the SAR liability as of December 31, 2021 was $358 (see Note 7), and was included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. There was no SAR liability as of June

30, 2022 as the exercise price of all outstanding SARs exceeded the fair value of the Company's common stock as of June 30, 2022.

Stock-Based Compensation Expense

Stock-based compensation expense related to stock options, RSUs, SARs and PSUs for the three and six months ended June 30, 2022 and 2021 was classified in the condensed consolidated statements of operations and comprehensive (loss) income as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of revenue	$	26	$	33	$	61	$	66
Research and development expenses		694		543		1,289		1,414
Selling, general and administrative expenses		2,159		3,518		4,157		6,067
Total stock-based compensation	$	2,879	$	4,094	$	5,507	$	7,547

The Company recognized stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 in the condensed consolidated balance sheet as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Change in fair value of SAR Liability	$	(56	)	$	(59	)	$	(159	)	$	289
Recognized as additional paid-in capital		2,935			4,153			5,666			7,258
Total stock-based compensation	$	2,879		$	4,094		$	5,507		$	7,547

As of June 30, 2022, there was $27,852 of unrecognized compensation cost related to outstanding stock options, RSUs, SARs and PSUs, which is expected to be recognized over a weighted-average period of 2.54 years.