STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based compensation expense recognized for restricted stock units and stock options granted to employees and non-employees is included in the consolidated statement of operations. There were no income tax benefits recognized on the stock-based compensation expense for both periods.


Table 12.1: Details of Stock Compensation Expense by Department
	For the Three Months Ended				For the Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022

	(in thousands)
Cost of sales – services	$	73	$	929	$	624	$	2,798
Sales and marketing	24		611		125		3,699
Research and development	328		897		1,945		2,884
General and administrative (1)	4,793		13,399		19,768		39,462
Total	$	5,218	$	15,836	$	22,462	$	48,843

(1) During the three and nine months ended September 30, 2023, the stock-based compensation expense related to stock options was $0.1 million and $0.2 million, respectively, and is recorded as part of selling, general and administrative expenses. There was no similar expense in 2022.

Restricted Stock


Table 12.2: Restricted Stock Unit Activity
	Service-Based	Performance-Based	Total Shares	Weighted-Average Grant Date Fair Value
Unvested outstanding units as of December 31, 2022	3,570,082	336,785	3,906,867	$	19.53
Granted	1,743,689	—	1,743,689	1.99
Vested	(1,807,929)	—	(1,807,929)	25.96
Forfeited	(396,694)	(71,177)	(467,871)	14.39
Unvested outstanding units as of September 30, 2023	3,109,148	265,608	3,374,756	$	8.34

As of September 30, 2023, the intrinsic value of the RSUs and PSUs outstanding and vested or expected to vest was $8.1 million. There were approximately $7.1 million of total compensation costs related to stock-based awards not yet recognized as of September 30, 2023, which is expected to be recognized on a straight-line basis over a weighted average remaining vesting period of 0.6 years.

Stock Options

The Company uses the Black-Scholes option pricing model to calculate the estimated fair value of stock options on the date of grant. Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant. The following weighted-average assumptions are used in the Black-Scholes valuation model to estimate the fair value of stock option awards, as granted.

•Expected term of the option – For options granted to employees and directors, the Company estimates the term over which option holders are expected to hold their stock option by using the "simplified method" in accordance with Staff Accounting Bulletin ("SAB") No. 107, Share-Based Payments, and SAB No. 110, Simplified Method for Plain Vanilla Share Options, to calculate the expected term of stock options determined to be "plain vanilla." The Company's stock option exercise history does not provide a reasonable basis to compute the expected term for stock options. Under this approach, the expected term is presumed to be a midpoint between the vesting date and the contractual end of the stock option grant. For options granted to non-employees, the Company elected to use the contractual term as the expected term.

•Risk-free interest rate – Based on the daily yield curve rates for U.S. Treasury obligations with terms that approximate the expected term of the stock options.

•Expected volatility – Due to the absence of the Company's historical price volatility for the expected contractual term of the stock options, the Company utilized the historical price volatility of a peer group.

•Expected dividend yield – The Company has not declared dividends, nor does it expect to in the foreseeable future. Therefore, a zero value was assumed for the expected dividend yield.


Table 12.3: Stock Options Fair Value and Weighted-Average Assumptions
	For the Nine Months Ended
	September 30, 2023	September 30, 2022
Weighted-average fair value of underlying stock options	$1.06	$—
Expected term (in years)	5.5 - 10.0	0
Risk-free interest rate	3.5%	—%
Expected volatility	30.7% - 35.1%	—%
Expected dividend yield	—%	—%


Table 12.4: Stock Option Activity
	Stock Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding option balance as of December 31, 2022	—	$	—	0.0	$	—
Granted	400,000	1.80
Exercised	—	—
Forfeited, cancelled, or expired	—	—
Outstanding option balance as of September 30, 2023	400,000	$	1.80	9.6	$	236,000
Exercisable stock option as of September 30, 2023	—	$	—	0.0	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the quoted closing price of the Company's common stock as of September 30, 2023.

The fair value of the stock options is expensed on a straight-line basis over the vesting period of one year, including the stock options granted to directors, as the next annual stockholders meeting is expected to occur at the same approximate time each year.

As of September 30, 2023, there were approximately $0.3 million of unrecognized compensation costs related to non-vested stock options.