Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

We have three stock plans: our 2017 Omnibus Incentive Plan (“OIP”), our 2008 Equity Incentive Plan (the “2008 Plan”) and our 2003 Equity Incentive Plan (the “2003 Plan”) (collectively, the “Plans”). The OIP is the only remaining stock plan actively granting new stock options or units.  The purpose of these stock plans was, and the OIP is, to grant incentive stock options to employees and non-qualified stock options, RSUs, PSOs, PSUs and other stock-based incentive awards to officers, directors, employees and consultants. The Plans are administered by our Board of Directors (the “Board”) or its delegates. The number, type, exercise price, and vesting terms of awards are determined by the Board or its delegates in accordance with the terms of the Plans. The stock options granted expire on a date specified by the Board but generally not more than ten years from the grant date. Stock option grants to employees generally vest over four years while RSUs generally vest after three years.

2017 Omnibus Incentive Plan

On May 11, 2017, our stockholders approved the OIP, which replaced the 2008 Plan, with 3,000,000 shares reserved for issuance. Stock options, RSUs, PSUs and PSOs have been granted under the OIP. Under the terms of the OIP, any cancellation, forfeiture or expiry of equity awards granted under the 2008 Plan roll into the availability under the OIP. There were 1,952,041 shares available for grant under the OIP as of December 31, 2019.

2008 Equity Incentive Plan

Our 2008 Plan became effective on March 18, 2008 and replaced our 2003 Plan. Under the terms of the 2008 Plan, all available shares in the 2003 Plan share reserve automatically rolled into the 2008 Plan. Any cancellations or forfeitures of granted stock options under the 2003 Plan also automatically rolled into the 2008 Plan. There are no shares available to grant under the 2008 Plan subsequent to the approval of the OIP.

Stock option and PSO activity is summarized for the years ended December 31, 2019, 2018 and 2017 as follows:

Stock Options	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2016	3,568,434		$	7.82
Granted	543,881		31.12
Forfeited	(154,510	)	16.22
Exercised	(383,366	)	9.91
Outstanding as of December 31, 2017	3,574,439		$	10.78
Granted	387,306		43.82
Forfeited	(114,769	)	30.64
Exercised	(1,185,694	)	8.08
Outstanding as of December 31, 2018	2,661,282		$	15.94
Granted	367,142		63.27
Forfeited	(71,534	)	31.61
Exercised	(265,831	)	8.94
Outstanding as of December 31, 2019	2,691,059		$	22.67	5.7	$	72,621
Exercisable as of December 31, 2019	1,852,025		$	10.92	4.4	$	66,165
Expected to vest as of December 31, 2019	761,428		$	48.62	8.5	$	5,858

Performance Stock Options	Number of PSOs		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2016	200,000		$	19.89
Granted	—		—
Forfeited	—		—
Exercised	(50,000	)	18.33
Outstanding as of December 31, 2017	150,000		$	20.41
Granted	—		—
Forfeited	—		—
Exercised	(15,000	)	18.33
Outstanding as of December 31, 2018	135,000		$	20.64
Granted	—		—
Forfeited	—		—
Exercised	(105,000	)	20.41
Outstanding as of December 31, 2019	30,000		$	21.45	7.0	$	746
Exercisable as of December 31, 2019	30,000		$	21.45	7.0	$	746

The PSOs met their performance criteria, vested, and were priced as follows:

Performance Achievement Date	Number of Shares	Weighted Average Exercise Price
October 4, 2016	100,000	$18.33
January 13, 2017	100,000	$21.45

A summary of total outstanding stock options and PSOs as of December 31, 2019 is as follows:

	Stock Options & PSOs Outstanding				Stock Options & PSOs Exercisable
Range of Exercise Prices	Number of Stock Options & PSOs Outstanding	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number of Stock Options & PSOs Exercisable	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price
$2.22 - $10.00	1,248,361	3.4	$	5.23	1,246,486	3.4	$	5.22
$10.01 - $25.00	529,091	6.1	16.26		439,160	5.9	15.25
$25.01 - $40.00	519,798	8.1	34.46		167,129	7.8	33.93
$40.01 - $70.00	136,000	9.2	53.79		11,250	8.7	58.99
$70.01 - $76.01	287,809	9.1	73.99		18,000	8.9	73.62
$2.22 - $76.01	2,721,059	5.7	$	22.66	1,882,025	4.5	$	11.08

The table below summarizes certain additional information with respect to our stock options:

	Year Ended December 31,
(in thousands, except per option amounts)	2019		2018		2017
Aggregate intrinsic value of stock options exercised during the year	$	19,062	$	49,188	$	7,562
Cash received from the exercise of stock options	4,519		9,855		4,714
Weighted average grant date fair value per option	$	36.52	$	25.96	$	18.05

The total compensation cost of options granted but not yet vested at December 31, 2019 was $19.8 million, which is expected to be recognized over a weighted average period of approximately three years.

The weighted average of the assumptions used to determine the fair value of stock options at the date of grant is as follows:

	Year Ended December 31,
	2019		2018		2017
Expected volatility	54.9	%	55.2	%	59.2	%
Expected term (in years)	7.2		7.4		7.3
Risk-free interest rate	2.30	%	2.78	%	2.08	%
Expected dividends	0.0	%	0.0	%	0.0	%

RSU and PSU activity is summarized for the years ended December 31, 2019, 2018 and 2017 as follows:

	Restricted Stock Units				Performance Stock Units
	Number of RSUs		Weighted Average Grant Date Fair Value		Number of PSUs		Weighted Average Grant Date Fair Value
Units outstanding as of December 31, 2016	592,349		$	9.86	132,992		$	8.68
Granted	117,614		25.98		—		—
Forfeited	(48,974	)	13.57		(132,992	)	8.68
Vested	(193,860	)	9.31		—		—
Units outstanding as of December 31, 2017	467,129		$	13.76	—		$	—
Granted	128,860		35.14		88,345		37.79
Forfeited	(12,466	)	22.88		(1,236	)	37.79
Vested	(224,840	)	12.02		—		—
Units outstanding as of December 31, 2018	358,683		$	22.22	87,109		$	37.79
Granted	109,998		59.16		34,088		86.29
Forfeited	(24,965	)	33.24		(31,177	)	40.95
Vested	(173,664	)	13.73		—		—
Units outstanding as of December 31, 2019	270,052		$	41.70	90,020		$	55.06

Consistent with 2018, during 2019, we granted awards to certain participants in the form of PSUs. These PSUs will vest at the end of a three-year performance period only if specific financial performance metrics are met, and the vested shares will then be modified based on relative total shareholder return. The 34,088 2019 PSUs were granted at “target” levels; however, for share pool purposes, we have reserved an additional 34,088 shares in the event that the combined financial performance and market conditions achieve maximum levels. For the 2018 and 2019 PSUs combined, we have 90,020 shares reserved as of December 31, 2019 in the event that actual results exceed “target” levels. For the year ended months ended December 31, 2019, stock-based compensation expense related to these PSUs was recognized in accordance with ASC 718 for both employees and non-employees, as amended by the adoption of ASU 2018-07. As of December 31, 2019, none of the PSUs granted in 2018 or 2019 have vested.

In addition, a summary of total outstanding RSUs and PSUs as of December 31, 2019 is as follows:

Range of Grant Date Fair Value	RSUs Outstanding	PSUs Outstanding*
$24.65 - $31.50	83,827	—
$31.51 - $44.16	108,508	57,963
$44.17 - $76.01	77,717	—
$76.02 - $86.29	—	32,057
$24.65 - $86.29	270,052	90,020

^* See “Note 2. Summary of Significant Accounting Policies; q) Stock-Based Compensation” for discussion regarding the fair value of our PSUs.

Additional information about our RSUs and PSUs is summarized as follows:

	Year Ended December 31,
(in thousands)	2019		2018		2017
Aggregate market value of RSUs vested during the year	$	12,833	$	7,940	$	4,768

The total compensation cost of RSUs and PSUs granted but not yet vested, inclusive of the PSUs for which vesting has been deemed probable at December 31, 2019, was $7.8 million, which is expected to be recognized over a weighted average period of approximately two years. Additionally, there were 588,359 RSUs vested but not released at December 31, 2019.

Employee Stock Purchase Plan

In May 2017, the stockholders approved the BioTelemetry, Inc. 2017 Employee Stock Purchase Plan (“2017 ESPP”), with 500,000 shares reserved for issuance, which replaced the 2008 Employee Stock Purchase Plan. Substantially all of our employees are eligible to participate in the 2017 ESPP. Under the 2017 ESPP, each participant may purchase option value of our shares, through payroll deductions, not to exceed $25,000 of grant date fair value in a calendar year. The purchase price per share is equal to the lower of 85% of the closing market price on the first day of the offering period, or 85% of the closing market price on the day of purchase. Proceeds received from the issuance of shares are credited to stockholders’ equity in the period that the shares are issued. Purchases under the 2017 ESPP are made in March and September. In 2019, an aggregate of 98,425 shares were purchased in accordance with the 2017 ESPP. Net proceeds from the issuance of shares of common stock under the 2017 ESPP for the year ended December 31, 2019 were $3.1 million. At December 31, 2019, 232,671 shares remain available for purchase under the 2017 ESPP.

Our aggregate stock-based compensation expense is summarized as follows:

	Year Ended December 31,
(in thousands)	2019		2018		2017
Stock options	$	7,307	$	4,550	$	3,183
Performance stock options	—		—		1,534
Restricted stock units	3,719		3,052		2,273
Performance stock units	867		589		—
Employee stock purchase plan	1,483		1,070		690
Total stock-based compensation expense	$	13,376	$	9,261	$	7,680

For the years ended December 31, 2019, 2018 and 2017, we recognized $5.0 million, $11.6 million and $1.5 million, respectively, of tax benefit from stock options exercised during the period as a component of our (provision for)/benefit from income taxes.