Stockholders' Equity

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Stockholders' Equity

Note 6. Stockholders’ Equity

At-The-Market offering

On May 4, 2022, the Company entered into a Sales Agreement ("Sales Agreement"), with Stifel, Nicolaus & Company, Incorporated ("Stifel"), under which the Company may offer and sell from time to time at its sole discretion, up to an aggregate of 800,000 shares of its common stock, par value $0.0001 per share, through Stifel as its sales agent. The Company intends to use the net proceeds from the shares of common stock offered and sold to primarily replenish funds expended to satisfy anticipated tax withholding and remittance obligations related to the net settlement upon vesting of restricted stock unit awards (“RSU”) granted to employees under the equity incentive plans. The Company has filed a prospectus supplement pursuant to the Sales Agreement for the offer and sale of up to an aggregate of 800,000 shares of its common stock. Subject to the terms and conditions of the Sales Agreement, Stifel will sell the common stock from time to time, based upon instructions from the Company. The Company agreed to pay Stifel a commission of up to 3% of the gross sales proceeds of any common stock sold through Stifel under the Sales Agreement.

During the three months ended March 31, 2023, the Company sold 100,000 shares of its common stock through Stifel, Nicolaus & Company, Incorporated ("Stifel") under a Sales Agreement at a weighted average price of $131.19 per share resulting in net proceeds to the Company of $12.7 million, after deducting underwriting discounts and commissions of $0.3 million and deferred offering costs of $0.1 million.

Equity Incentive Plans

The following table summarizes the RSU, performance based restricted stock unit awards ("PRSU"), and multi-year performance restricted stock units ("MYPSU") activity for the three months ended March 31, 2023:

	RSU			Grant Date		PRSU			Grant Date		MYPSU		Grant Date
	Number			Fair		Number			Fair		Number		Fair
	of			Value		of			Value		of		Value
	Shares			per share		Shares			per share		Shares		per share
Unvested at December 31, 2022		1,717,994		$	73.6		58,954		$	261.4		311,872	$	88.6
Granted		368,363			123.1		122,466			145.5		—		—
Vested		(234,633	)		56.6		—			—		—		—
Forfeited		(27,792	)		67.4		(58,954	)		261.4		—		—
Unvested at March 31, 2023		1,823,932		$	82.8		122,466		$	145.5		311,872	$	88.6

On August 4, 2020, the Compensation Committee of the Company adopted and approved the Executive Bonus and Retention Plan (the “Bonus and Retention Plan”). In August 2022, the Compensation Committee approved target bonus amounts and performance goals for the second half of the fiscal year 2022 (the “2022 Goals”). In February 2023, the Compensation Committee approved target bonus amounts for the fiscal year 2023 (the "2023 Goals"). The 2022 Goals and the 2023 Goals are based on the achievement of revenue and Non-GAAP operating profit, as well as individual performance goals. The awards for the actual payouts are granted in the quarter following the end of the performance period. The target bonuses were granted based on a fixed dollar amount to be settled in RSUs on the vesting date and hence the awards have been classified as liability-based awards until settled. Such expense is included in the non-cash adjustment within stock-based compensation expense on the condensed consolidated cash flow statements. The liability of $0.1 million for 2023 Goals was recorded as accrued expenses and other current liabilities in the condensed consolidated balance sheet as of March 31, 2023. Actual payouts for 2022 Goals ranged from 44% to 89% of target, based on performance.

In February 2023 and March 2023, the Compensation Committee of the Company approved PRSUs for the year 2023 with performance goals based on the achievement of revenue over a one year performance period (the “PRSU 2023 Goals”) and achievement of relative total stockholder return with a two year performance period (the "2023 TSR PRSU Goals"). The grant-date fair value of each 2023 TSR PRSU Goals was determined using Monte Carlo simulation model. The assumptions used in the Monte Carlo simulation included expected volatility of 84.0% and 83.8%, risk free rate of 4.67% and 4.05%, no expected dividend yield and expected term of 1.9 years and 1.8 years for the awards issued in February 2023 and March 2023 respectively. The Company recognizes the expense related to the PRSU 2023 Goals and 2023 TSR PRSU Goals on a graded-vesting method over the requisite performance period. These grants are included in the PRSU awards granted in the table above.

In April 2022, the Company approved a bonus plan for certain employees. The target bonuses are granted based on a fixed dollar amount to be settled in RSUs in the quarter following the end of the performance period. Due to the fixed dollar amount targets, the awards have been classified as liability-based awards until settled. Once settled, these awards are reflected as RSU granted in the above table. Such expense is included in the non-cash adjustment within stock-based compensation expense on the condensed consolidated cash flow statements. The liability of $0.8 million was recorded as accrued expenses and other current liabilities in the condensed consolidated balance sheet as of March 31, 2023.

In February 2022, the Compensation Committee of the Company approved and granted to certain of the Company’s executive officers MYPSUs with vesting based on achievement of stock price targets, which are measured based on the 60-trading day average per share closing price of the Company’s common stock on the Nasdaq Global Market during the performance periods of up to six years from the date of grant, subject to the continued service of the grantee through the vest date. The grant-date fair value of each MYPSU was determined using Monte Carlo simulation model. The assumptions used in the Monte Carlo simulation included expected volatility of 44.4%, risk free rate of 1.83%, no expected dividend yield, expected term of six years and possible future stock prices over the performance period based on historical stock and market prices. The Company recognizes the expense related to the MYPSUs on a graded-vesting method over the requisite service period.

In December 2021, the Compensation Committee of the Company approved PRSUs with performance goals for the year 2022 (the “PRSU 2022 Goals”). The PRSU 2022 Goals were based on the achievement of a revenue goal. These grants were not earned and were cancelled in February 2023.

Stock-Based Compensation

The following table presents the detail of stock-based compensation expense amounts included in the condensed consolidated statement of operations for each of the periods presented:

	Three Months Ended March 31,
	2023		2022
	(in thousands)
Equity based awards
Cost of revenue	$	628	$	638
Research and development		7,505		5,374
Selling, general and administrative		9,480		7,736
	$	17,613	$	13,748
Liability based awards - to be settled in equity
Cost of revenue	$	11	$	19
Research and development		526		220
Selling, general and administrative		386		293
	$	923	$	532
Total stock-based compensation - equity and liability based	$	18,536	$	14,280
Stock-based compensation expense recorded to additional paid-in capital
Equity based awards	$	17,613	$	13,748
Liability based awards - settled in equity		1,523		1,489
Total stock-based compensation expense recorded to additional paid-in capital	$	19,136	$	15,237

The following table presents the unrecognized compensation costs and related weighted average period of recognition as of March 31, 2023:

	As of
	March 31, 2023
	Unrecognized Compensation Costs (in millions)		Weighted Average Period of Recognition (in years)
RSUs	$	141.3		2.2
PRSUs	$	13.7		1.6
MYPSUs	$	16.9		1.5
Liability-based awards	$	2.0		0.6