Stock-based compensation

Stock plans

The Company grants stock-based awards under its 2016 Equity Incentive Award Plan (the “2016 Plan”), which replaced its 2014 Equity Incentive Plan (the “2014 Plan”) and became effective immediately prior to the effectiveness of the Company’s registration statement on Form S-1 in September 2016. No grants have made under the 2014 Plan since the Company’s initial public offering and no further awards will be granted thereunder. Any awards outstanding under the 2014 Plan that are forfeited or lapse unexercised will be added to the shares reserved and available for grant under the 2016 Plan. The 2016 Plan permits the grant of incentive stock options, non-statutory stock options, restricted stock and other stock- or cash-based awards to employees, officers, directors, advisors and consultants. The 2016 Plan allows for option grants of the Company’s common stock based on service, performance and market conditions.

As of March 31, 2020, a total of 13,457,391 shares have been authorized for issuance under the 2016 Plan, and 7,643,774 remain available for grant. As of March 31, 2020, there were 1,471,032 options and awards outstanding under the 2014 Plan that, if forfeited, would increase the number of shares authorized for grant under the 2016 Plan.

Service-based vesting stock options

The following table summarizes the activity for options that vest solely based upon the satisfaction of a service condition as follows:



	Options outstanding		Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands) ⁽¹⁾
Balance as of December 31, 2018	2,746,670		$	12.91
Granted	115,100		7.95
Canceled or forfeited	(286,191	)	16.98
Balance as of March 31, 2019	2,575,579		12.24		6.9	$	6,958
Granted	202,560		14.18
Exercised	(334,572	)	4.08
Canceled or forfeited	(444,014	)	15.07
Balance as of March 31, 2020	1,999,553		$	13.17	6.8	$	3,773

Exercisable, March 31, 2020	1,291,647		$	12.06	6.1	$	3,469


(1)	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company's closing stock price of $9.84, as reported on the New York Stock Exchange on March 31, 2020.

Additional information relating to service-based options is as follows (in thousands, except per share data):



	Year ended March 31,		Three months ended March 31, (transition period)		Year ended December 31,
	2020		2019		2018		2017
Stock-based compensation expense	$	2,308	$	590	$	3,219	$	2,435
Intrinsic value of options exercised	3,580		—		2,890		12,841
Weighted-average grant date fair value of options granted (per share)	$	5.55	$	3.12	$	6.81	$	9.51

As of March 31, 2020, there was $3.3 million of total unrecognized compensation cost related to service-based stock options, which is expected to be recognized over the remaining weighted-average vesting period of 2.2 years.

The fair value of service-based stock options granted were calculated using the following weighted-average assumptions:



	Year ended March 31,		Three months ended March 31, (transition period)		Year ended December 31,
	2020		2019		2018		2017
Expected term (in years)	6.5		6.3		6.3		6.2
Expected volatility	35.57	%	35.13	%	32.02	%	32.42	%
Risk-free interest rate	2.07	%	2.55	%	2.68	%	2.14	%
Expected dividend yield	—	%	—	%	—	%	—	%

The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the fair value of the underlying common stock, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment. The assumptions used in the Black-Scholes option-pricing model to calculate the fair value of stock options were:

Fair value of common stock

Prior to the initial public offering, the fair value of shares of common stock underlying stock options was the responsibility of, and determined by, the Company’s board of directors, with input from management. There was no public market for the Company’s common stock and the board of directors determined the fair value of common stock at the time of grant of the option by considering a number of objective and subjective factors including independent third-party valuations of the Company’s common stock, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, among other factors. After the initial public offering, the fair value of shares of common stock underlying stock options is based on the closing stock price as quoted on the NYSE on the date of grant.

Expected term

The expected term of the options represents the period of time that the options are expected to be outstanding. Options granted have a maximum contractual life of 10 years. Prior to the initial public offering, the Company estimated the expected term of the option based on the estimated timing of potential liquidity events. For grants upon or after the initial public offering, the Company estimated the expected term based upon the simplified method described in Staff Accounting Bulletin No. 107, as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded.

Expected volatility

As the Company does not have sufficient trading history for its common stock, the expected stock price volatility for the common stock was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public companies within the same industry, which are of similar size, complexity and stage of development. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of its own share price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be used in the calculation.

Risk-free interest rate

The risk-free interest rate was based on the U.S. Treasury rate, with maturities similar to the expected term of the options.

Expected dividend yield

The Company does not anticipate paying any dividends in the foreseeable future. As such, the Company uses an expected dividend yield of zero.

Performance-based and market-based vesting stock options

The following table summarizes the activity for options that vest based upon the satisfaction of performance or market conditions as follows:



	Options outstanding		Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands) ⁽¹⁾
Balance as of December 31, 2018	1,482,782		$	8.94
Exercised	(62,450	)	1.84
Canceled or forfeited	(96,900	)	26.84
Balance as of March 31, 2019	1,323,432		7.96		6.0	$	8,646
Exercised	(53,100	)	2.40
Canceled or forfeited	(17,400	)	26.84
Balance as of March 31, 2020	1,252,932		$	7.97	5.0	$	7,487

Exercisable, March 31, 2020	952,932		$	1.98	4.4	$	7,487

(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company's closing stock price of $9.84, as reported on the New York Stock Exchange on March 31, 2020.

As of March 31, 2020, there was no further unrecognized compensation cost related to performance-based and market-based vesting stock options.

Additional information relating to options that vest based upon the satisfaction of performance or market conditions is as follows (in thousands, except per share data):



	Year ended March 31,		Three months ended March 31, (transition period)		Year ended December 31,
	2020		2019		2018		2017
Stock-based compensation expense	$	—	$	—	$	1,168	$	3,489
Intrinsic value of options exercised	609		419		8,669		42,874
Weighted-average grant date fair value of options granted (per share)	$	—	$	—	$	—	$	10.65

Prior to the initial public offering, the Company granted options that vested based upon the achievement of both a performance and market condition. The performance condition was based on the occurrence of a liquidity event and was satisfied in connection with the initial public offering in September 2016. The market condition was based upon the achievement of a minimum rate of return from the liquidity event and was satisfied in March 2017. Accordingly, all such outstanding options vested in March 2017.

In February 2017, the Company granted options that vest based upon the achievement of specified stock prices. The fair values and derived service periods were determined using a Monte Carlo simulation model. If the awards vest prior to the end of the derived service period, the remaining unamortized compensation cost will be recognized in the period of vesting.

Restricted stock

The following table summarizes the activities for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) as follows:



	Shares of restricted stock outstanding		Weighted-average grant date fair value
Balance as of December 31, 2018	2,036,124		$	20.01
Granted ⁽¹⁾	1,464,710		7.64
Vested	(396,514	)	21.79
Canceled or forfeited	(317,922	)	20.06
Balance as of March 31, 2019	2,786,398		13.26
Granted	673,461		14.26
Vested	(762,818	)	15.97
Canceled or forfeited	(385,273	)	12.66
Balance as of March 31, 2020	2,311,768		$	12.86

⁽¹⁾ Includes restricted stock awards granted in the period ending March 31, 2019 that vest based upon the achievement of a specified stock price and satisfaction of a service condition. The fair values and derived service periods were determined using a Monte Carlo simulation model.

As of March 31, 2020, there were 1,128,789 unvested shares subject to RSAs outstanding. Additional information relating to RSAs and RSUs is as follows (in thousands):



	Year ended March 31,		Three months ended March 31, (transition period)		Year ended December 31,
	2020		2019		2018		2017
Stock-based compensation expense	$	13,181	$	3,093	$	12,434	$	7,550
Intrinsic value of RSUs released	$	12,448	$	3,387	$	6,280	$	3,398

As of March 31, 2020, there was $25.0 million of total unrecognized compensation cost related to unvested RSAs and RSUs, which is expected to be recognized over the remaining weighted-average vesting period of 2.4 years.