Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Stock-Based Compensation

Stock-Based Compensation

13.     Stock-Based Compensation

In September 2016, the Company adopted the 2016 Equity Compensation Plan (“2016 Plan”). During the term of the 2016 Plan, the share reserve will automatically increase on the first trading day in January of each calendar year by an amount equal to the lesser of 5% of the total number of outstanding shares of common stock on the last trading day in December of the prior calendar year or such other number set by the Company’s Board of Directors (the “Board”). In accordance with the terms of the 2016 Plan, the share reserve increased by 1,283,321 shares on February 25, 2022. As of June 30, 2022, 1,817,777 shares were available for future grants under the 2016 Plan.

The following stock-based compensation information disclosed below include results of both continuing and discontinued operations.

Restricted Common Stock and Restricted Stock Units

The Company issues restricted stock awards and restricted stock units pursuant to the 2016 Plan to employees and non-employee directors. Restricted stock awards and restricted stock units generally vest over a one- to four-year period and the unvested portion of these awards is forfeited if the employee or non-employee director leaves the Company before the vesting period is completed. The grant-date fair value of restricted stock awards and restricted stock units is determined using the Company’s closing stock price at grant date.

The following table summarizes the aggregate restricted stock award activity, inclusive of performance based restricted stock awards, and restricted stock unit activity under the 2016 Plan for the six months ended June 30, 2022.:

		Weighted
		average
	Number	grant-date
	of shares	fair value
Outstanding at December 31, 2021	2,196,566	$	40.19
Granted	768,351		5.32
Vested	(456,774)		44.01
Forfeited	(169,424)		36.67
Outstanding at June 30, 2022	2,338,719	$	28.24

The table above includes 14,222 restricted stock units which have vested but as of June 30, 2022, have not been issued.

For the three months ended June 30, 2022 and 2021, an aggregate of $5,681 and $10,124 of expense, respectively, was recognized related to restricted stock awards and restricted stock units, excluding performance-based restricted stock awards described below.

For the six months ended June 30, 2022 and 2021, an aggregate of $13,068 and $16,399 of expense, respectively, was recognized related to restricted stock awards and restricted stock units, excluding performance-based restricted stock awards as described below. As of June 30, 2022, there was unrecognized compensation expense of $44,394 related to unvested restricted stock awards and unvested restricted stock units, excluding performance-based restricted stock awards described below, under the 2016 Plan, which is expected to be recognized over a weighted average period of 2.4 years.

Performance-Based Equity Awards

On May 4, 2020, pursuant to the 2016 Plan, the Board approved grants totaling 10,686 shares of restricted stock to an employee. The grants were recorded using a grant-date fair value of $56.14 per share which was based on the Company’s closing stock price on the grant date. The grants were subject to certain performance conditions for the two-year period ended March 2, 2022, which were not achieved. As a result, the grants expired, and no expense was recognized during the six months ended June 30, 2022.

On October 29, 2020, pursuant to the 2016 Plan, the Board approved grants totaling 26,400 shares of restricted stock to certain employees, of which 1,400 expired on April 30, 2021 and 12,500 expired on December 31, 2021. The remaining 12,500 shares fully vested subject to the achievement of certain milestones on December 31, 2021. The awards had a grant-date fair value of $35.95 per share based on the Company’s closing stock price on the grant date. Stock-based compensation costs associated with these grants were recognized over the service period based upon the Company’s assessment of the probability that the performance conditions would be achieved. The Company recognized $148 and $362 of stock-based compensation expense related to these grants for the three and six months ended June 30, 2021, respectively.

On April 27, 2021, pursuant to the 2016 Plan, the Board approved awards of performance stock units to certain employees. Each award reflects a target number of shares (“Target Shares”) that may be issued to the award recipient. As of June 30, 2022, the number of Target Shares was 86,175 shares. The awards are earned upon the Company’s achievement of certain revenue performance targets during the three-year performance period ending December 31, 2023. Depending on the results achieved during the performance period, the actual number of shares that a grant recipient may receive at the end of the performance period may range from 0% to 200% of the Target Shares granted. The performance stock unit awards have a grant-date fair value of $44.13 per share based on the Company’s closing stock price on the grant date. Stock-based compensation costs associated with these grants are recognized over the performance period based upon the Company’s assessment of the probability that the performance targets will be achieved. The Company did not recognize any stock-based compensation expense related to the performance stock units, resulting in no stock-based compensation expense for the three and six months ended June 30, 2022, as the achievement of the underlying performance targets was considered unlikely. During the six months ended June 30, 2022, 6,550 performance stock units expired. As of June 30, 2022, the maximum number of achievable performance stock units was 172,350 and the maximum unrecognized compensation expense was $7,606.

Other Stock Awards

During the first quarter of 2021, the Board approved the grant of stock awards to certain non-employee directors and to a consultant pursuant to the 2016 Plan. The awards provided for the issuance of 1,416 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $40.85 per share. For the six months ended June 30, 2021, the Company recorded $58 of expense related to these stock awards.

During the first quarter of 2022, the Board approved grants of stock awards to certain non-employee directors and employees pursuant to the 2016 Plan. The awards provided for the issuance of 16,471 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $5.57 per share. For the six months ended June 30, 2022, the Company recorded $92 of expense related to these stock awards.

During the second quarter of 2022, the Board approved grants of stock awards to certain non-employee directors pursuant to the 2016 Plan. The awards provided for the issuance of 12,262 shares of the Company’s common stock, which immediately vested on the grant date. These grants had a weighted average grant-date fair value of $3.64 per share. For the three months ended June 30, 2022, the Company recorded $45 of expense related to these stock awards.

Stock Options

The Company recorded $966 and $1,861 of stock-based compensation expense related to employee and non-employee director stock options for the three months ended June 30, 2022 and 2021, respectively. The Company recorded $2,096 and $3,916 of stock-based compensation expense related to employee and non-employee stock options for the six months ended June 30, 2022 and 2021, respectively. The Company records forfeitures as they occur.

No grants for employee and non-employee stock options were made during the six months ended June 30, 2022. The table below sets forth the weighted average assumptions for employee grants during the six months ended June 30, 2021:

	Six Months Ended
Valuation assumptions:	June 30, 2021
Expected volatility	58.57	%
Expected term (years)	5.48
Risk-free interest rate	0.50	%
Dividend yield	—

The weighted average grant date fair value of employee options granted during the six months ended June 30, 2021 was $28.26 per share.

The following table summarizes stock option activity under the 2016 Plan for the six months ended June 30, 2022:

				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number	exercise		contractual	intrinsic
	of shares	price		term	value
Outstanding at December 31, 2021	1,604,226	$	29.90
Exercised	(12,573)		5.01
Forfeited	(143,116)		46.27
Outstanding at June 30, 2022	1,448,537	$	28.49	4.9	$	-
Options vested and expected to vest at June 30, 2022	1,448,537	$	28.49	4.9	$	-
Exercisable at June 30, 2022	1,379,541	$	27.16	4.8	$	-

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the Company’s closing stock price or estimated fair value on the last trading day of the fiscal quarter for those stock options that had exercise prices lower than the fair value of the Company's common stock. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised during the six months ended June 30, 2022 and 2021 was $2 and $10,601, respectively.

As of June 30, 2022, there was $2,057 of total unrecognized compensation cost related to nonvested stock options granted under the 2016 Plan, which is expected to be recognized over a weighted average period of 0.6 years.

Cash received from option exercises for the six months ended June 30, 2022 and 2021 was $60 and $3,082, respectively.

The Company recorded total stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 in the following expense categories of its consolidated statements of operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Cost of revenue - product	$	223	$	337	$	447	$	596
Cost of revenue - service		570		898		1,471		1,748
Research and development		761		2,069		2,280		3,272
Sales and marketing		50		345		308		1,042
General and administrative		3,488		6,178		8,289		10,541
Discontinued operations		1,600		2,522		2,506		3,752
Total stock-based compensation expense	$	6,692	$	12,349	$	15,301	$	20,951

Employee Stock Purchase Plan

In February 2021, the Board, subject to stockholder approval, adopted the Tabula Rasa HealthCare, Inc. Employee Stock Purchase Plan (the “ESPP”), which allows eligible employees to purchase common shares of Company stock through payroll deductions at a 15% discount off the lower of (i) the fair market value per share of common stock on the start date of the applicable offering period or (ii) the fair market value per share of common stock on the purchase date. The ESPP was approved by the Company’s stockholders at the 2021 annual meeting of stockholders in June 2021. The number of shares of common stock reserved for issuance under the ESPP will initially be 480,097 shares, subject to adjustment as provided in the ESPP, all of which remained available as of June 30, 2022.