STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2024

STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

15. STOCK INCENTIVE PLAN AND STOCK-BASED COMPENSATION

2020 Stock Incentive Plan

In August 2020, the Company adopted, and its stockholders approved, the 2020 Incentive Award Plan (the “2020 Plan”), in order to facilitate the grant of cash and equity incentives to directors, employees (including the Company’s named executive officers) and consultants of the Company and its subsidiaries. The 2020 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards.

Stock options and stock appreciation rights under the 2020 Plan have a 10-year contractual term and vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of control (as defined in the applicable plan). RSUs vest over the vesting period specified in the applicable award agreement, at achievement of a performance requirement, or upon change of control (as defined in the applicable plan). As of June 30, 2024, there were 7,654,586 shares of common stock available for issuance under the 2020 Plan. The number of shares that may be issued under the 2020 Plan automatically increases on January 1 of each year in an amount equal to the lesser of (i) 4.0% of the shares of the Company’s common stock outstanding on December 31 of the preceding year or (ii) an amount determined by the Company’s board of directors.

2017 Stock Incentive Plan

In August 2017, the Company adopted an equity incentive plan (the “2017 Plan”). Under the 2017 Plan, directors, officers, employees, consultants, and advisors of the Company can be paid incentive compensation measured by the value of the Company’s shares of common stock through grants of stock options, stock appreciation rights (“SARs”), or restricted stock. Following the adoption of the 2020 Plan, no further grants have been, or will be, made under the 2017 Plan. However, the 2017 Plan will continue to govern the terms and conditions of outstanding awards granted under it.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2024:

				Weighted-
		Weighted-		Average
		Average		Remaining		Aggregate
	Number of	Exercise		Contractual		Intrinsic
	Awards	Price		Term		Value ($000's)
Awards outstanding—December 31, 2023	6,316,422	$	32.47	7.17
Awards issued	1,307,396	$	30.51
Awards exercised	(46,996)	$	8.97
Awards forfeited	(27,791)	$	37.14
Awards outstanding—June 30, 2024	7,549,031	$	32.26	7.20	$	27,893
Awards exercisable—June 30, 2024	3,772,766	$	30.50	6.30	$	21,050

Stock Appreciation Rights

The following table summarizes SARs activity for the six months ended June 30, 2024:

				Weighted-
		Weighted-		Average
		Average		Remaining		Aggregate
	Number of	Exercise		Contractual		Intrinsic
	Awards	Price		Term		Value ($000's)
Awards outstanding—December 31, 2023	43,208	$	9.38	5.32
Awards issued	—	$	—
Awards exercised	—	$	—
Awards forfeited	—	$	—
Awards outstanding—June 30, 2024	43,208	$	9.38	4.83	$	887
Awards exercisable—June 30, 2024	39,556	$	8.98	4.72	$	827

Restricted Stock Units

The following table summarizes RSU activity for the six months ended June 30, 2024:

		Weighted-
		Average
	Number of	Grant Date
	Awards	Fair Value
Awards outstanding—December 31, 2023	330,000	$	31.53
Awards issued	464,600	$	30.62
Awards vested	(15,000)	$	29.03
Awards forfeited	(3,250)	$	30.69
Awards outstanding—June 30, 2024	776,350	$	31.03

Value of Stock Options and SARs

The Company values options and SARs using the Black-Scholes option-pricing model. The Company lacks sufficient historical company-specific volatility information. Therefore, the Company estimates expected stock volatility based on historical volatility of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. For SARs, the expected term is based

upon the weighting of certain future events. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for the time periods approximately equal to the expected term of the award. An expected dividend yield of 0% is based on the fact that the Company has never paid cash dividends and does not expect to do so in the foreseeable future.

The assumptions used to value the awards are summarized in the following table.

	As of
	June 30,		December 31,
	2024		2023
Dividend yield	0.00	%	0.00	%
Expected volatility	69.84 - 72.98	%	74.87 - 80.78	%
Risk-free interest rate	4.06 - 4.65	%	3.42 - 4.62	%
Lack of marketability discount	0.00	%	0.00	%
Expected term (years)	2.04 - 6.11		2.26 - 10.77

Value of RSUs

The fair value of RSUs is equal to the value of the Company’s common stock on the grant date.

The weighted average per share fair value of awards issued under the 2017 Plan and 2020 Plan was $21.24 and $20.64 on June 30, 2024, and December 31, 2023, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense for the three and six months ended June 30, 2024, and 2023, was recorded in the unaudited condensed consolidated statements of operations and comprehensive income in the following line items:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Research and development expense	$	1,683	$	956	$	3,054	$	1,932
Sales and marketing expense		2,100		1,146		4,094		2,219
General and administrative expense		7,180		5,691		14,249		10,203
	$	10,963	$	7,793	$	21,397	$	14,354

Stock-based compensation expense related to options and RSUs issued under the 2017 Plan and 2020 Plan is included in stockholder’s equity, and a liability for SARs is included in other non-current liabilities, in the Company’s unaudited condensed consolidated balance sheet. As of June 30, 2024, the total unrecognized stock-based compensation expense was $68,926 and $19,749 for stock options and RSUs, respectively. This amount will be recognized in the Company’s consolidated statement of operations over a weighted average period of 2.6 years.

Employee Stock Purchase Plan

The 2020 Employee Stock Purchase Plan (“ESPP”) was adopted by the Company’s Board of Directors on April 30, 2021. The ESPP permits eligible employees to purchase shares of the Company’s common stock at a 15% discount from the lesser of the fair market value per share of the Company’s common stock on the first day of the offering period or the fair market value of the Company’s common stock on the purchase date. Funds are collected from employees through after-tax payroll deductions. The total number of shares reserved for issuance under the ESPP was initially 629,805, which automatically increases on January 1 of each year in an amount equal to the lesser of (i) 1.0% of the shares of the Company’s common stock outstanding on

December 31 of the preceding year or (ii) an amount determined by the Company’s board of directors. It is intended that the ESPP meet the requirements for an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. There were 10,707 and 14,043 shares issued under the ESPP for each of the three and six months ended June 30, 2024, and 2023, respectively. The discount on the ESPP was $78 and $103 for the three months ended June 30, 2024, and 2023, respectively, and $158 and $208 for the six months ended June 30, 2024, and 2023, respectively, and is recorded within stock-based compensation expense.