Quarterly report pursuant to Section 13 or 15(d)

Stockholders??? Equity

v3.24.3
Stockholders’ Equity
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Stockholders’ Equity Stockholders’ Equity
Stock-Based Compensation Expense
Stock-based compensation expense, consisting of service-based expense related to the equity incentive plans, including expense from stock options and restricted stock units, and the employee stock purchase plan, was classified as follows in the accompanying condensed consolidated statements of operations for each of the periods presented (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Cost of revenue $ 237  $ 258  $ 720  $ 722 
Sales and marketing 1,758  1,274  4,605  3,457 
Research and development 1,848  1,474  5,924  3,727 
General and administrative 4,179  3,181  11,836  8,670 
Total $ 8,022  $ 6,187  $ 23,085  $ 16,576 
Equity Incentive Plan
In November 2021, in connection with the IPO, the Company adopted the 2021 Equity Incentive Plan (the “2021 EIP” or “EIP”) under which the Company could issue stock options or restricted stock units (“RSUs”) as awards. In addition to shares remaining available for issuance under a prior plan and shares subject to awards under the prior plan that may return to EIP, the Company reserved 9.0 million shares of common stock for future issuance under the 2021 EIP, with scheduled annual increases to the reserve for amounts to be determined by the board of directors of the Company (the “Board”), subject to a maximum amount. In the first quarter of 2024 and 2023, the Board reserved an additional 3.5 million and 3.3 million common shares, respectively, for future issuance under the 2021 EIP.
In March 2023, the Company adopted the 2022 Inducement Equity Incentive Plan and reserved an additional 7.0 million shares of common stock for future issuance.
Stock-based compensation expense related to the EIP was $7.8 million and $6.0 million for the three months ended September 30, 2024 and 2023, respectively, and $22.4 million and $16.1 million for the nine months ended September 30, 2024 and 2023, respectively.
Stock Options
Most options have a four-year vesting schedule with a one-year cliff and are classified as incentive stock options (“ISOs”). Some options have been granted in lieu of bonuses and have expedited two- or three-year vesting schedules. All awards vest based on service conditions.
Options with accelerated vesting clauses, should there be a change in Company control, were 120,666 and 632,700 as of September 30, 2024 and 2023, respectively.
Unrecognized stock-based compensation expense related to outstanding stock options as of September 30, 2024 and 2023 was $1.0 million and $5.4 million, respectively. Stock-based compensation expense is recognized on a straight-line basis over the remaining weighted-average vesting periods. As of September 30, 2024 and 2023 the weighted-average vesting periods approximated 0.69 years and 1.40 years, respectively.
Stock option activity was as follows:
Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value
(in thousands)
Outstanding as of December 31, 2023 1,840,735  $ 4.32  5.96 $ 13,165 
Exercisable as of December 31, 2023 1,480,536  $ 3.82  5.62 $ 11,320 
Granted —  $ — 
Exercised (60,548) $ 4.80 
Forfeited and expired (2,075) $ 5.81 
Outstanding as of March 31, 2024 1,778,112  $ 4.30  5.71 $ 12,768 
Exercisable as of March 31, 2024 1,495,817  $ 3.89  5.44 $ 11,348 
Granted —  $ — 
Exercised (32,345) $ 2.05 
Forfeited and expired (1,472) $ 5.01 
Outstanding as of June 30, 2024 1,744,295  $ 4.34  5.48 $ 8,162 
Exercisable as of June 30, 2024 1,537,446  $ 4.04  5.28 $ 7,664 
Granted —  $ — 
Exercised (41,112) $ 4.70 
Forfeited and expired (45,480) $ 6.92 
Outstanding as of September 30, 2024 1,657,703  $ 4.26  4.66 $ 14,155 
Exercisable as of September 30, 2024 1,549,863  $ 4.09  4.52 $ 13,498 
The aggregate intrinsic value of options exercised was $0.3 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively, and $1.0 million and $3.3 million for the nine months ended September 30, 2024 and 2023, respectively. The intrinsic value represents the excess of the estimated fair value of the Company's common stock on the date of exercise over the exercise price of each option.
Stock-based compensation expense is measured at the grant date based on the estimated fair value of the award. The fair value of the awards is fixed at grant date and amortized over the remaining service period. The Company uses the Black-Scholes model to estimate the value of its stock options issued under the EIP. Management reviews option grants and determines whether further valuation adjustments are appropriate based on recent company performance and/or changes in market conditions. The volatility assumed in the estimate was based on publicly traded companies in the same industry and considers the expected term calculated by the Company. The expected term of the options was derived from a simplified method which estimates the term based on an averaging of the vesting period and contractual term of the option grant. The risk-free rate utilized was the average of the five- and seven-year U.S. Treasury yields as the estimated expected term for options approximates 6 years. The Company has no plans to declare dividends in the foreseeable future.
Restricted Stock Units
RSUs granted under the Plan vest and settle upon the satisfaction of a service-based condition. The service based condition for these awards is generally satisfied over three or four years. A total of 20,670 RSUs have a four-year vesting schedule with 25% cliff vesting one year from grant date and the remaining 75% vesting monthly over the remaining three years. A total of 19,788 RSUs issued to non-employee directors have a three-year vesting schedule, with 33% vesting one year from the grant date and the remaining 67% vesting annually over the remaining two years. A total of 116,298 RSUs issued to non-employee directors have a one-year vesting schedule, with 100% vesting on the earlier of one year from the grant date or the annual meeting of stockholders. The remaining RSUs that have been issued
have a three-year vesting schedule with 33% vesting one year from grant date and the remaining 67% vesting quarterly over the remaining two years.
As of September 30, 2024, there was $55.2 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 2.2 years.
RSU activity was as follows:
Number of Shares Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2023 7,504,848  $ 5.98 
Granted 2,068,200  $ 11.64 
Vested (1,205,838) $ 5.28 
Canceled (81,064) $ 6.78 
Outstanding as of March 31, 2024 8,286,146  $ 7.48 
Granted 247,798  $ 8.84 
Vested (1,014,237) $ 5.82 
Canceled (51,041) $ 6.95 
Outstanding as of June 30, 2024 7,468,666  $ 7.76 
Granted 1,320,443  $ 10.52 
Vested (1,113,289) $ 6.55 
Canceled (231,746) $ 7.96 
Outstanding as of September 30, 2024 7,444,074  $ 8.43 
The total fair value of RSUs that vested during the three months ended September 30, 2024 and 2023 was $7.3 million and $6.2 million, respectively. The total fair value of RSUs that vested during the nine months ended September 30, 2024 and 2023 was $19.6 million and $15.9 million, respectively. A portion of these RSUs were net-settled such that the Company withheld shares with a value equivalent to the employees’ obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. During the three months ended September 30, 2024 and 2023, the Company withheld 425,070 and 464,843 shares, which was based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price. During the nine months ended September 30, 2024 and 2023 the Company withheld 1,286,087 and 998,356 shares, respectively. Total payments for the employees’ tax obligations to taxing authorities was $4.5 million and $4.8 million for the three months ended September 30, 2024 and 2023, respectively, and $13.9 million and $7.5 million for the nine months ended September 30, 2024 and 2023, respectively.
Employee Stock Purchase Plan
In October 2021, the Company adopted the Employee Stock Purchase Plan (“ESPP”) in which eligible employees may contribute up to 50% of their base compensation to purchase shares of common stock at a price equal to 85% of the lower of (1) the fair market value of a share of the Company’s common stock at the beginning of the offering period and (2) the fair market value of a share of the Company’s common stock on the purchase date. No participant may purchase more than 2,500 shares during any offering period. As of September 30, 2024 and December 31, 2023, 3,301,800 and 2,600,637 shares were reserved for issuance, and 677,635 and 457,593 shares, respectively, of common stock had been issued under the ESPP. The number of shares available for issuance under the ESPP may be increased on the first day of each fiscal year by an amount to be determined by the Board. In the first quarter of 2024, the Board reserved an additional 0.7 million common shares for issuance under the ESPP.
The 2021 ESPP provides for six-month offering periods beginning February 16 and August 16 of each year, and the last day of each offering period is the purchase date for that period.
During each of the three months ended September 30, 2024 and 2023, the Company recognized $0.2 million of stock-based compensation expense related to the ESPP. During the nine months ended September 30, 2024 and 2023, respectively, the Company recognized $0.7 million and $0.5 million of stock-based compensation expense related to the ESPP. As of September 30, 2024 and December 31, 2023, $0.4 million and $0.9 million in accrued ESPP employee payroll contributions are included within accrued liabilities on the consolidated balance sheets, respectively. As of September 30, 2024, total unrecognized compensation costs related to the ESPP was $0.3 million, which will be amortized over the remaining offering period through August 15, 2024.