Stockholders' Equity

9 Months Ended

Sep. 30, 2023

Equity [Abstract]

Stockholders' Equity

Stockholders' EquityUnder the Company's Third Amended and Restated Certificate of Incorporation, there are 300,000,000 shares of authorized Common Stock and 5,000,000 shares of authorized Preferred Stock. Holders of Common Stock are entitled to one vote for each share. The shares of Preferred Stock shall be issued with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.

Treasury Stock

In May 2022, the Company’s board of directors authorized a share repurchase program for up to $200.0 million of the Company’s Common Stock through December 31, 2023 (the "Share Repurchase Program"). The timing and actual number of shares to be repurchased will depend upon market conditions and other factors. Shares of the Company’s Common Stock may be purchased from time to time on the open market, through privately negotiated transactions or otherwise. Purchases of the Company’s Common Stock may be started or stopped at any time without prior notice depending on market conditions and other factors. During the nine months ended September 30, 2023 and 2022, the Company purchased 631,953 and 750,835 shares of the Company’s Common Stock for $9.2 million and $14.0 million, respectively, under the Share Repurchase Program, which is reflected in Treasury Stock in the accompanying consolidated statements of stockholders’ equity. As of September 30, 2023, there was $176.8 million remaining that may be used to purchase shares under the Share Repurchase Program.

Warrants

As of September 30, 2023, the Company had 3,871,557 warrants outstanding, which have an expiration date of November 20, 2024. Each warrant is exercisable into one share of Common Stock at a price of $11.50 per share. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for the issuance of Common Stock at a price below its exercise price. There were no warrants exercised during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, 184,870 warrants were exercised in cashless transactions resulting in the issuance of 87,553 shares of Common Stock.

The Company classifies its warrants as a liability in its consolidated balance sheets because of certain terms included in the corresponding warrant agreement. The estimated fair value of the warrants is recorded as a liability, with such fair value reclassified to stockholders’ equity upon the exercise of such warrants. Prior to exercise, the change in the estimated fair value of such warrants each period is recognized as a non-cash charge or gain in the Company’s consolidated statements of operations.

A reconciliation of the changes in the warrant liability during the nine months ended September 30, 2023 and 2022 was as follows (in thousands):

Estimated fair value of warrant liability at December 31, 2022	$	38,503
Change in estimated fair value of the warrant liability	(31,886)
Estimated fair value of warrant liability at September 30, 2023	$	6,617
Estimated fair value of warrant liability at December 31, 2021	$	57,764
Change in estimated fair value of the warrant liability	(17,145)
Reclassification of warrant liability to equity for exercised warrants	(2,103)
Estimated fair value of warrant liability at September 30, 2022	$	38,516

Equity-based Compensation

In connection with the Company’s 2019 Stock Incentive Plan (the "2019 Plan"), the Company provides equity-based compensation to attract and retain employees while also aligning employees’ interest with the interests of its stockholders. The 2019 Plan permits the grant of various equity-based awards to selected employees and non-employee directors. At September 30, 2023, the 2019 Plan permits the grant of up to 10,000,000 shares of Common Stock, subject to certain adjustments and limitations. At September 30, 2023, 1,166,968 shares of the Company’s Common Stock were available for issuance under the 2019 Plan.

Stock Options

There were no stock options granted during the nine months ended September 30, 2023 and 2022. The following table provides the activity regarding the Company’s outstanding stock options during the nine months ended September 30, 2023 that were granted in connection with the 2019 Plan (in thousands, except per share data):

	Number of Options	Weighted-Average Grant Date Fair Value per Share		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term
Outstanding, December 31, 2022	2,219	$	3.75	$	19.36
Activity - none	—
Outstanding, September 30, 2023	2,219	$	3.75	$	19.36	5.3 Years

The following table provides the activity for all outstanding stock options during the nine months ended September 30, 2023 (in thousands, except per share data):

	Number of Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term
Outstanding, December 31, 2022	4,962	$	12.19
Exercised	(1,542)	$	6.25
Outstanding, September 30, 2023	3,420	$	14.86	5.1 Years

During the nine months ended September 30, 2023, 200,000 stock options were exercised resulting in $0.5 million of cash proceeds received by the Company and the issuance of 200,000 shares of the Company’s Common Stock. During the nine months ended September 30, 2023, 1,341,770 stock options were exercised on a cashless basis resulting in the issuance of 228,466 shares of the Company's Common Stock. During the nine months ended September 30, 2022, 194,002 stock options were exercised resulting in $1.4 million of cash proceeds received by the Company and the issuance of 194,002 shares of the Company’s Common Stock. Also, during the nine months ended September 30, 2022, 315,349 stock options were exercised on a cashless basis resulting in the issuance of 131,741 shares of the Company’s Common Stock.

Restricted Stock

During the nine months ended September 30, 2023, the Company granted 286,002 shares of restricted stock to various employees which vest ratably over the three-year period following the vesting commencement date (which is generally the grant date), subject to the employees’ continuous employment through the applicable vesting date. The grant-date fair value of these awards was $3.4 million. During the nine months ended September 30, 2023, the Company granted 139,190 shares of restricted stock to its non-employee directors, which vest approximately one year following the grant date. The grant-date fair value of these awards was $1.4 million. During the nine months ended September 30, 2023, the Company granted 30,841 shares of restricted stock to its interim CEO, which vest on the two-month anniversary following the grant date. The grant-date fair value of these awards was $0.3 million.

During the nine months ended September 30, 2023, the Company granted 327,000 restricted stock units to senior executive management of the Company. These awards vest ratably over the three-year period following the vesting commencement date (February 1, 2023), subject to the employees’ continuous employment through the applicable vesting date. The grant-date fair value of these awards was $4.9 million. In addition, during the nine months ended September 30, 2023, the Company granted 327,000 shares of performance-vested restricted stock units ("Performance RSUs") to senior executive management of the Company which will vest on the third anniversary of the vesting commencement date (February 1, 2023) subject to the achievement of specified goals relative to the Company’s three-year relative total shareholder return

("Relative TSR") performance versus the Company’s defined peer group (the "Peer Group"), which is considered a market condition, and is also subject to the employees’ continuous employment through the vesting date. The grant-date fair value of these awards, using a Monte-Carlo simulation analysis, was $6.6 million, which will be recognized as equity-based compensation expense from the date of grant through the third anniversary of the vesting commencement date, regardless of whether or the extent to which the awards ultimately vest. The payout of shares on the vesting date are as follows based on the Company’s Relative TSR versus the Peer Group (for performance between the stated goals noted below, straight-line interpolation will be applied):

•Less than 25th Percentile – No payout

•Greater than or equal to 25th Percentile – 50% of Performance RSUs

•Equal to 50th Percentile – 100% of Performance RSUs

•Greater than or equal to 75th Percentile – 200% of Performance RSUs

Activity related to the Company’s non-vested restricted stock grants for the nine months ended September 30, 2023 is presented below (in thousands, except per share data):

	Number of Shares of Restricted Stock	Weighted-Average Grant Date Fair Value per Share
Non-vested balance, December 31, 2022	2,261	$	23.90
Granted	1,110	$	14.96
Vested	(808)	$	21.31
Forfeited	(424)	$	26.04
Non-vested balance, September 30, 2023	2,139	$	19.68

Equity-Based Compensation Expense

The Company recognized equity-based compensation expense of $4.5 million during the three months ended September 30, 2023, of which $3.5 million and $1.0 million is included in general and administrative expenses and cost of net revenue, respectively, in the accompanying consolidated statements of operations. The Company recognized equity-based compensation expense of $5.6 million during the three months ended September 30, 2022, of which $4.0 million and $1.6 million is included in general and administrative expenses and cost of net revenue, respectively, in the accompanying consolidated statements of operations. The Company recognized equity-based compensation expense of $17.3 million during the nine months ended September 30, 2023, of which $15.8 million and $1.5 million is included in general and administrative expenses and cost of net revenue, respectively, in the accompanying consolidated statements of operations. The Company recognized equity-based compensation expense of $16.8 million during the nine months ended September 30, 2022, of which $11.5 million and $5.3 million is included in general and administrative expenses and cost of net revenue, respectively, in the accompanying consolidated statements of operations. At September 30, 2023, there was $25.2 million of unrecognized compensation expense related to equity-based compensation awards, which is expected to be recognized over a weighted-average period of 1.8 years.

As previously disclosed, by mutual agreement with the Company, effective June 30, 2023, Stephen Griggs resigned as Chief Executive Officer and did not stand for reelection as a member of the Company's board of directors at the Company's annual shareholder meeting. In connection with Mr. Griggs’ separation, the Company accelerated the vesting of 78,130 unvested stock options and 143,739 unvested shares of restricted stock which were subject to time-based vesting conditions only. In addition, the Company modified the vesting conditions for 159,555 shares of Performance RSU's to allow for vesting based on the achievement of the applicable Relative TSR, but no longer requires continuous employment through the applicable vesting date. In connection with the accelerated vesting and modification, the Company recognized $4.0 million of equity-based compensation expense, which is included in general and administrative expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2023.