Note 13 - Stock-based Compensation

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

13. Stock-Based Compensation

The Company maintains the 2021 Equity Incentive Plan (the “2021 Plan”). As of September 30, 2023, 22,975,201 shares remained for future issuance under the 2021 Plan. To date, the Company has issued only stock options and restricted stock units to employees, directors and consultants. 

The Company records stock-based compensation in cost of revenue, sales and marketing, general and administrative and research and development. Stock-based compensation was included in the following line items:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)
Cost of revenue	$	806	$	667	$	2,292	$	1,948
Sales and marketing		2,358		2,847		7,267		8,705
General and administrative		5,264		5,060		14,551		14,825
Research and development		857		1,035		2,865		2,809
Total stock-based compensation	$	9,285	$	9,609	$	26,975	$	28,287

Stock Options

The compensation costs for stock option awards are accounted for in accordance with ASC 718. Stock options vest over a four-year service period and expire on the tenth anniversary of the date of award. 

On  March 13, 2023, the Company granted 1,125,374 options under the 2021 Plan. The Company estimated the grant date fair value of these stock options using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	March 13,
	2023
Expected life (in years)		6.11
Expected volatility		59.19	%
Risk-free rate		3.63	%
Dividend yield		—

To estimate the expected life of stock options, the Company considered the vesting term, contractual expiration period, and market conditions. Expected volatility is based on historical volatility of a group of peer entities. Dividend yields are based upon historical dividend yields. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life. Based on these inputs, the grant-date fair value was determined to be $2.8 million.

As of September 30, 2023, there was $18.6 million in unrecognized compensation costs related to all unvested options.

As of  September 30, 2023, the Company had 27,981,601 options outstanding and 20,951,139 options exercisable with intrinsic values of $86.7 million and $75.7 million, respectively. During the nine months ended September 30, 2023, 2,063,783 options were exercised, with a total intrinsic value of $7.3 million.

Restricted Stock Units

6,606,932 restricted stock units (“RSUs”) were granted under the 2021 Plan during the nine months ended September 30, 2023, with a weighted-average grant date fair-value of $4.30 per RSU. The compensation costs for RSUs are accounted for in accordance with ASC 718. RSUs vest over a four-year service period from the grant date. The RSUs are measured at the fair market value of the underlying stock at the grant date. As of September 30, 2023, there was $59.2 million in unrecognized compensation costs specific to the unvested RSUs under the 2021 Plan.

Company Earn-Out RSUs

The compensation costs for Company Earn-Out RSUs are accounted for in accordance with ASC 718. In order to capture the market conditions associated with the Company Earn-Out RSUs, the Company applied an approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the Sponsor Earn-Out RSUs’ contractual life based on the appropriate probability distributions. The fair value was determined by taking the average of the fair values under each Monte Carlo simulation trial. Under this approach, the grant-date fair value of the Company Earn-Out RSUs on July 1, 2021, was determined to be $2.5 million. The stock options underlying the Earn-Out RSUs vest over a four-year period and expire on the tenth anniversary of the date of award. If the contingent milestones of the Earn-Out RSUs are not met by July 1, 2028, the holders of the underlying stock options will not receive the Earn-Out RSUs.