Stock-based Compensation

3 Months Ended

May 31, 2022

Stock-based Compensation

Equity-based Compensation

(9)  Stock-based Compensation

The following table summarizes the amount of stock-based compensation included in the consolidated statements of operations:

	Three months ended May 31,
	2022		2021
Cost of revenue, excluding depreciation and amortization	$	1,128	$	328
Product and technology		7,490		1,822
Sales and marketing		3,989		1,373
General and administrative		6,782		4,152
Total stock-based compensation	$	19,389	$	7,675

(a) Stock Options

In July 2020, the Company adopted the 2020 Equity Incentive Plan (the Incentive Plan), which authorized the Company to grant up to 4,300,000 shares of common stock to eligible employees, directors, and consultants to the Company in the form of stock options, restricted stock units, and other various equity awards, including any shares subject to stock options or other awards granted under the Company’s prior stock option plan that expire or terminate for any reason (other than being exercised in full) or are cancelled in accordance with the terms of the prior stock option plan. The Incentive Plan also includes an annual evergreen increase, and the amount, terms of grants, and exercisability provisions are determined by the board of directors. The term of an award may be up to 10 years and options generally vest over four years, with one quarter of an award vesting one year after grant and the remainder vesting on a monthly basis over three years. As of May 31, 2022, there was a total of 9,211,901 shares of common stock authorized for issuance under the Incentive Plan, of which 5,778,556 were available for future grants.

The following is a summary of stock option activity under the Incentive Plan:

		Weighted		Weighted
		average		remaining		Aggregate
		exercise		contractual life		intrinsic
	Stock Options	price		in years		value
Balance, February 28, 2022	8,045,792	$	11.24
Granted	87,008		14.05
Exercised	(45,755)		7.28
Forfeited	(91,644)		19.84
Balance, May 31, 2022	7,995,401	$	11.20	5.8	years	$	7,983,093

For the three months ended May 31, 2022 and 2021, the Company recognized $2,692 and $2,114 in compensation expense related to stock options, respectively. As of May 31, 2022, approximately $22,162 of unrecognized compensation expense related to our stock options is expected to be recognized over a weighted average period of 2.1 years. The aggregate intrinsic value of stock options exercised was $349 and $8,774 for the three months ended May 31, 2022 and 2021, respectively.    

(b)PlushCare Stock Options

In connection with the acquisition of PlushCare, the Company assumed all stock options that were awarded under the PlushCare Plan and that were outstanding as of the closing of the acquisition.  These options were converted into options to purchase the Company’s common stock at a ratio determined in the purchase agreement. The Company has no intent to grant any further options under the PlushCare Plan beyond the options granted and outstanding as of the Company's acquisition of PlushCare.  The following is a summary of stock option activity under the PlushCare Plan:

		Weighted		Weighted
		average		remaining		Aggregate
		exercise		contractual life		intrinsic
	Stock Options	price		in years		value
Balance, February 28, 2022	267,721
Exercised	(24,678)	$	1.06
Forfeited	—	$	—
Balance, May 31, 2022	243,043	$	1.71	7.5	years	$	1,144,746

There were 48,556 stock options outstanding as of the acquisition date that were exercised prior to being vested. These options are excluded from the table above and vest on a pro rata basis monthly through May 2023. A total of 6,309 options vested during the three months ended May 31, 2022. For the three months ended May 31, 2022, the Company recognized $1,244 in compensation expense related to PlushCare stock options. As of May 31, 2022, approximately $6,086 of unrecognized compensation expense related to PlushCare stock options is expected to be recognized over a weighted average period of 1.7 years. The aggregate intrinsic value of stock options exercised was $260,688 for the three months ended May 31, 2022.

(c)  Restricted Stock Units

The Company issued 622,873 time-based restricted stock units during the three months ended May 31, 2022. These time-based restricted stock units are generally subject to a four-year vesting period, with one quarter of an award vesting one year after the vesting commencement date and the remainder vesting ratably on a monthly basis over the subsequent three years. The following is a summary of activity for the three months ended May 31, 2022:

	Restricted Stock Units
Balance, February 28, 2022	2,226,057
Granted	622,873
Vested	(158,268)
Forfeited	(111,415)
Balance, May 31, 2022	2,579,247

For the three months ended May 31, 2022 and 2021, the Company recognized $6,632 and $1,630, respectively, in restricted stock unit compensation expense with $75,958 remaining total unrecognized compensation costs related to these awards as of May 31, 2022. The total unrecognized costs are expected to be recognized over a weighted-average term of 3.1 years. The weighted average grant date fair value of restricted stock units granted during the three months ended May 31, 2022 was $14.10.

In connection with the PlushCare acquisition, the agreement provides for the issuance of time-based restricted stock units for 64,694 shares of common stock to existing PlushCare shareholders, upon the achievement of the contingent consideration revenue milestones. These restricted stock units have not yet been issued and are not included in the table

above. For the three months ended May 31, 2022, the Company recognized $183 in restricted stock unit compensation expense related to these restricted stock units.

Also, during the quarter ended May 31, 2022, the Company recorded $1,312 in stock-based compensation expense related to the approved issuance of restricted stock units in lieu of cash for a portion of the Company’s 2023 bonus plan payout.

(d)  Employee Stock Purchase Plan

In July 2020, the Board of Directors adopted the Company’s 2020 Employee Stock Purchase Plan (the ESPP), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering (IPO). The total shares of common stock initially reserved under the ESPP was limited to 1,100,000 shares. On March 1, 2022, there was an automatic annual increase, which increased the total available common shares to 2,327,976.

Under the ESPP, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the compensation committee. Eligible employees may purchase the Company’s common stock at 85% of the lower of the fair market value of the Company’s common stock on the first day of the offering period or on the last day of the offering period. Eligible employees may contribute up to 15% of their eligible compensation. Under the ESPP, a participant may not accrue rights to purchase more than $25,000 worth of the Company’s common stock for each calendar year in which such right is outstanding.

Employees who elect to participate in the ESPP commence payroll withholdings that accumulate through the end of the respective period. In accordance with the guidance in ASC 718-50 – Compensation – Stock Compensation, the ability to purchase shares of the Company’s common stock for 85% of the lower of the price on the first day of the offering period or the last day of the offering period (i.e. the purchase date) represents an option and, therefore, the ESPP is a compensatory plan under this guidance. Accordingly, share-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black Scholes option-pricing model and is recognized over the withholding period. The Company recognized share-based compensation expense of $411 and $391 during the three months ended May 31, 2022 and 2021, respectively, related to the ESPP.

During the three months ended May 31, 2022 and 2021, employees who elected to participate in the ESPP purchased a total of 343,310 and 50,516 shares of common stock, respectively, resulting in cash proceeds to the Company of $1,787 and $1,948, respectively. ESPP employee payroll contributions accrued as of May 31, 2022 and February 28, 2022 totaled $874 and $1,511, respectively, and are included within accrued compensation in the consolidated balance sheet. Cash withheld via employee payroll deductions is presented in financing activities as proceeds from stock purchases under employee stock purchase plan on the consolidated statement of cash flows.

(e)  Other

In connection with the acquisition of 2nd.MD (Note 4), several 2nd.MD individuals entered into agreements with the Company whereby these individuals are eligible to receive an aggregate of 608,332 shares that required continued employment with the Company. These shares are excluded from the above restricted stock units table. Included in the 608,332 shares are 281,531 shares that were also contingent upon the achievement of the contingent consideration milestones. These shares are considered compensatory in the post business combination periods due to the additional service requirement for these individuals. These shares vested 50% on the first anniversary of the acquisition date and will vest 50% on the second anniversary of acquisition date. As a result of the achievement of certain revenue milestones (the contingent consideration milestones), a total of 256,418 of the eligible 281,531 shares will be issued to such shareholders, subject to the service requirements.  As of May 31, 2022, there were 241,614 unvested shares outstanding with a grant date fair value of $46.56 per share, with vesting subject to future service periods. The Company recognized stock-based compensation expense of $3,358 during the three months ended May 31, 2022, including $3,139 of accelerated expense

related to certain separation and transition agreements entered into during fiscal 2022. The unamortized compensation expense of $657 will be recognized over a weighted average remaining period of 0.7 years.

In connection with the acquisition of PlushCare (Note 4), certain PlushCare individuals entered into agreements with the Company whereby these individuals are eligible to receive an aggregate of 806,161 shares that require continued employment with the Company. These shares are excluded from the above restricted stock units table. These shares are considered compensatory in the post business combination periods due to the additional service requirement for these individuals. One third of these shares will vest on the first anniversary of the acquisition date, one third will vest on the second anniversary of acquisition date, and one third will vest on the third anniversary of the acquisition date. As of May 31, 2022, there were 806,161 unvested shares outstanding with a grant date fair value of $52.52 per share. The Company recognized stock-based compensation expense of $3,557 during the three months ended May 31, 2022. The unamortized compensation expense of $28,574 will be recognized over a weighted average remaining period of 2.2 years.