Note 5 - Stock-based Compensation

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

5. Stock-Based Compensation

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include restricted stock awards, restricted stock units, and performance restricted stock units.

Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.

Determining Fair Value

Restricted Stock Awards

The fair value of restricted stock awards (“RSA”) that vest upon meeting a service condition is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants and one to three years for director grants.

Restricted Stock Units

The fair value of restricted stock unit (“RSU”) awards that vest upon meeting a service condition is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants.

Performance Restricted Stock Units

The fair value of performance restricted stock unit (“PRSU”) awards that vest upon meeting a service condition and a performance condition, such as the Company exceeding a future annual recurring revenue target, is determined based on the fair market value of the Company's common stock on the date of the grant, adjusted for probability of achievement of the performance criteria as of each reporting date (measurement date), and is recognized on a straight-line basis over the service period of the award, which is generally three years for employee grants. The probability of achievement is subject to judgment, and could change from period to period, impacting the amount of expense to be recognized. 

The fair value of performance restricted stock units awards that vest upon meeting a service condition and a market condition, such as the Company exceeding shareholder returns as compared to an index of peer companies, is determined on the date of grant (measurement date) using the Monte Carlo valuation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally three years for employee grants.

The following inputs are used in the Monte Carlo valuation model to estimate the fair value:

Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the term of the award.

Monte Carlo valuation inputs:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024			2023
Stock price	$	—	$	—	$	36.64		$	22.37
Expected volatility		—		—		66.3	%		74.7	%
Risk-free interest rate		—		—		4.3	%		4.3	%

Stock-Based Compensation

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Stock-based compensation:
Cost of revenue	$	154	$	310	$	563	$	866
Sales and marketing		688		606		2,198		1,930
Research, development and engineering		648		658		1,911		2,269
General and administrative		1,212		1,118		3,267		3,081
Stock-based compensation expense		2,702		2,692		7,939		8,146
Capitalized to software and patent costs		5		15		25		42
Total stock-based compensation	$	2,707	$	2,707	$	7,964	$	8,188

The following table sets forth total unrecognized compensation costs related to non-vested stock-based awards granted under the Company’s stock incentive plan:

	September 30,		December 31,
	2024		2023
Total unrecognized compensation costs	$	16,026	$	15,370

Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.

The Company expects to recognize the total unrecognized compensation costs as of September 30, 2024, for all non-vested stock-based awards over weighted average periods through  September 30, 2028, as follows:

	RSAs		RSUs		PRSUs
Weighted average period (in years)		0.84		1.39		1.57

As of September 30, 2024, under the Company’s stock incentive plan, an additional1,282 shares remained available for future grants. The Company issues new shares upon the grant of RSAs and vesting of RSU and PRSU awards.

Restricted Stock Awards Activity

The following table presents the unvested RSA activity:

				Weighted
				Average
	Number of			Grant Date
Three Months Ended September 30, 2024:	Shares			Fair Value
Unvested balance at June 30, 2024		62		$	32.55
Granted		—		$	—
Vested		(11	)	$	31.14
Forfeited		(6	)	$	27.56
Unvested balance at September 30, 2024		45		$	37.31

				Weighted
				Average
	Number of			Grant Date
Nine Months Ended September 30, 2024:	Shares			Fair Value
Unvested balance at December 31, 2023		105		$	29.89
Granted		24		$	30.19
Vested		(77	)	$	28.05
Forfeited		(7	)	$	27.57
Unvested balance at September 30, 2024		45		$	37.31

The fair value of RSAs vested is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Fair value of RSAs vested	$	308	$	613	$	2,069	$	2,071

Restricted Stock Units Activity

The following table presents the unvested RSU award activity:

				Weighted
				Average
	Number of			Grant Date
Three Months Ended September 30, 2024:	Shares			Fair Value
Unvested balance at June 30, 2024		507		$	28.05
Granted		10		$	26.55
Vested		(52	)	$	27.40
Forfeited		(24	)	$	26.90
Unvested balance at September 30, 2024		441		$	28.16

				Weighted
				Average
	Number of			Grant Date
Nine Months Ended September 30, 2024:	Shares			Fair Value
Unvested balance at December 31, 2023		442		$	23.77
Granted		206		$	36.17
Vested		(148	)	$	26.66
Forfeited		(59	)	$	26.91
Unvested balance at September 30, 2024		441		$	28.16

The fair value of RSU awards vested is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Fair value of RSU awards vested	$	1,356	$	1,486	$	4,403	$	3,313

Performance Restricted Stock Units Activity

The following table presents the unvested PRSU award activity:

				Weighted
				Average
	Number of			Grant Date
Three Months Ended September 30, 2024:	Shares			Fair Value
Unvested balance at June 30, 2024		220		$	32.09
Granted		—		$	—
Vested		—		$	—
Forfeited		(5	)	$	32.40
Unvested balance at September 30, 2024		215		$	32.08

				Weighted
				Average
	Number of			Grant Date
Nine Months Ended September 30, 2024:	Shares			Fair Value
Unvested balance at December 31, 2023		192		$	29.01
Change in units based on performance expectations		30		$	22.37
Granted		73		$	36.77
Vested		(60	)	$	22.37
Forfeited		(20	)	$	34.17
Unvested balance at September 30, 2024		215		$	32.08

The fair value of PRSU awards vested is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Fair value of PRSU awards vested	$	—	$	—	$	2,370	$	54