XML 31 R16.htm IDEA: XBRL DOCUMENT v3.20.4
Stock-Based Compensation
12 Months Ended
Dec. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

9. Stock-Based Compensation

Stock Plans

Common Stock Reserved for Future Issuance

A summary of the reserved shares of common stock for future issuance are as follows:

 

 

December 31,

 

Stock Plan

 

2020

 

 

2019

 

PCTEL, Inc. 2019 Stock Incentive Plan

 

 

2,109,184

 

 

 

2,240,669

 

PCTEL, Inc. 2015 Stock Incentive Plan

 

 

299,979

 

 

 

489,100

 

PCTEL, Inc. 2019 Employee Stock Purchase Plan

 

 

1,642,294

 

 

 

1,800,000

 

Total shares reserved

 

 

4,051,457

 

 

 

4,529,769

 

 

These shares available exclude stock options outstanding.

 

Stock Incentive Plans

On May 29, 2019, at the Annual Meeting of Shareholders, the shareholders adopted and approved the PCTEL, Inc. 2019 Stock Incentive Plan (the “2019 Stock Plan”) upon the recommendation of the Board of Directors. The purpose of the 2019 Stock Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors, and non-employee directors capable of assuring the future success of the Company, to provide such persons with opportunities for stock ownership in the Company and to offer such persons incentives to put forth maximum effort for the success of the Company’s business. The 2019 Stock Plan replaced the PCTEL, Inc. Stock Incentive Plan adopted in 2015 (the “2015 Stock Plan”).

The 2019 Stock Plan, which is administered by the Compensation Committee of the Company’s Board of Directors, authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. The aggregate number of shares that may be issued under all stock-based awards made under the 2019 Stock Plan will be (i) the sum of 2,213,000 shares and (ii) any shares subject to any outstanding award under the 2015 Stock Plan that after the effective date of the 2019 Stock Plan are not purchased, are forfeited, or are reacquired by the Company or otherwise not delivered to the participant due to termination or cancellation of such award.  At December 31, 2020, the number of shares available in the 2019 Stock Plan that were from the 2015 Plan was 103,865.  The Board of Directors may from time to time amend, suspend, or terminate the 2019 Stock Plan, subject to its terms.  Currently the 2019 Stock Plan does not allow share “recycling”, repricing of stock options or stock appreciation rights or dividend equivalents to be paid on unvested awards, and does not contain an “evergreen” provision that will automatically increase the number of shares authorized for issuance under the 2019 Stock Plan.

Employee Stock Purchase Plan

At the 2019 Annual Meeting of Shareholders, the shareholders adopted and approved the PCTEL, Inc. 2019 Employee Stock Purchase Plan (the “2019 ESPP”) upon recommendation of the Board of Directors. The purpose of the 2019 ESPP is to provide employees with an opportunity to purchase shares of PCTEL common stock through accumulated payroll deductions. Encouraging employees to acquire equity ownership in PCTEL assures a closer alignment of the interests of participating employees with those of the Company’s stockholders. The 2019 ESPP replaced the 2014 ESPP effective for the trading period commencing October 1, 2019.  On October 1, 2019, the remaining shares from the 2014 ESPP were cancelled.

The 2019 ESPP is administered by the Compensation Committee of the Company’s Board of Directors. Subject to change by the administrator, shares of PCTEL common stock may be purchased during consecutive offering periods that begin approximately every six months commencing on the first trading day on or after April 1 and terminating on the last trading day of the offering period ending on September 30 and commencing on the first trading day on or after October 1 and terminating on the last trading day of the offering period ending on March 31. The maximum number of shares of common stock which are available for sale under the 2019 ESPP is 1,800,000 shares. Unless and until the administrator determines otherwise, the purchase price will be equal to 85% of the fair market value of PCTEL common stock on the first day of an offering period or the last day of an offering period, whichever is lower. The administrator may from time to time amend, suspend, or terminate the 2019 ESPP, subject to its terms.

Stock-Based Compensation Expense

The consolidated statements of income include $2.5 million and $4.1 million of stock compensation expense for the years ended December 31, 2020 and 2019, respectively.   The Company did not capitalize any stock compensation expense during the years ended December 31, 2020, and 2019.

The stock-based compensation expense by type is as follows:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

Service-based awards

 

$

1,803

 

 

$

1,963

 

Director awards

 

 

402

 

 

 

402

 

Performance-based awards (long-term incentive plan)

 

 

28

 

 

 

226

 

Performance-based awards (short-term incentive plan)

 

 

0

 

 

 

1,335

 

Employee stock purchase plan

 

 

245

 

 

 

205

 

Stock options

 

 

1

 

 

 

2

 

Total

 

$

2,479

 

 

$

4,133

 

 

 

The stock-based compensation is reflected in the consolidated statements of income as follows:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

Cost of revenues

 

$

272

 

 

$

408

 

Research and development

 

 

530

 

 

 

652

 

Sales and marketing

 

 

559

 

 

 

672

 

General and administrative

 

 

1,118

 

 

 

2,401

 

Total

 

$

2,479

 

 

$

4,133

 

 

 

The following table presents a summary of the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of December 31, 2020:

Award Type

 

Remaining Unrecognized Compensation Expense

 

 

Weighted Average Life (Years)

 

Service-based awards

 

$

1,425

 

 

 

1.4

 

Performance-based awards

 

$

446

 

 

 

1.8

 

 

 

Service-Based Awards

 

Restricted Stock

 

The Company grants service-based restricted shares as employee incentives under the 2019 Stock Plan. During the years ended December 31, 2020 and 2019, the Company awarded executives and key-managers long-term incentives comprised one-third of service-

based restricted stock and two-thirds of performance-based restricted stock. When service-based restricted stock is granted to employees, the Company records deferred stock compensation within additional paid-in capital, representing the fair value of the common stock on the date the restricted shares are granted.  The Company records stock compensation expense on a straight-line basis over the vesting period of the applicable service-based restricted shares.  These grants vest over various periods; however, the restricted stock grants in 2020 and 2019 vest over three years in equal increments.

The following table summarizes service-based restricted stock activity:

 

 

Years ended December 31,

 

 

 

2020

 

 

2019

 

Unvested Restricted Stock Awards

 

Shares

 

 

Weighted

Average

Fair Value

 

 

Shares

 

 

Weighted

Average

Fair Value

 

Beginning of year

 

 

477,187

 

 

$

6.11

 

 

 

838,967

 

 

$

6.21

 

Shares awarded

 

 

201,233

 

 

 

7.91

 

 

 

190,159

 

 

 

5.25

 

Shares vested

 

 

(239,615

)

 

 

6.18

 

 

 

(538,137

)

 

 

5.96

 

Shares cancelled

 

 

(3,967

)

 

 

6.19

 

 

 

(13,802

)

 

 

6.27

 

End of year

 

 

434,838

 

 

$

6.91

 

 

 

477,187

 

 

$

6.11

 

 

 

In February 2020, the Company issued to employees 153,694 service-based restricted stock awards that vest in three substantially equal annual increments commencing in 2021. In April 2020, as part of our efforts to reduce expenses and conserve cash, the Company reduced the salary of each executive and key manager by 10% and in connection therewith issued restricted stock, under the LTIP, with a one-year vesting period to such employee equal to 5% of his/her salary. In total 47,539 service-based restricted stock awards were issued. The intrinsic values of service-based restricted shares that vested were $1.9 million and $3.3 million during the years ended December 31, 2020, and 2019, respectively.

Restricted Stock Units

The Company grants service-based restricted stock units as employee incentives.  Restricted stock units are primarily granted to foreign employees for long-term incentive purposes.  Employee restricted stock units are service-based awards and are amortized over the vesting period.  At the vesting date, these units are converted to shares of common stock.  The Company records expense on a straight-line basis for restricted stock units.

The following summarizes the service-based restricted stock unit activity:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

Unvested Restricted Stock Units

 

Shares

 

 

Weighted

Average

Fair Value

 

 

Shares

 

 

Weighted

Average

Fair Value

 

Beginning of year

 

 

8,117

 

 

$

5.83

 

 

 

18,638

 

 

$

5.66

 

Units awarded

 

 

6,448

 

 

 

7.48

 

 

 

2,700

 

 

 

5.27

 

Units vested/Shares awarded

 

 

(5,482

)

 

 

5.80

 

 

 

(13,221

)

 

 

5.35

 

End of year

 

 

9,083

 

 

$

7.02

 

 

 

8,117

 

 

$

5.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The intrinsic values of service-based restricted stock units that vested were $44 and $97, during the years ended December 31, 2020, and 2019, respectively.

Stock Options

The Company may grant stock options to purchase common stock to new employees.  The Company issues stock options with exercise prices no less than the fair value of the Company’s stock on the grant date.  Employee options are subject to installment vesting and although the vesting may vary from year to year, it is typically over a period of three years.  Stock options may be exercised at any time prior to their expiration date or within 180 days of termination of employment, or such shorter time as may be provided in the related stock option agreement.  The Company grants stock options with a ten-year life.

The following table summarizes the Company’s stock option activity:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

Options

Outstanding

 

 

Weighted

Average

Exercise

Price

 

 

Options

Outstanding

 

 

Weighted

Average

Exercise

Price

 

Beginning of Year

 

 

150,246

 

 

$

7.11

 

 

 

423,534

 

 

$

7.15

 

Options exercised

 

 

(61,767

)

 

 

7.13

 

 

 

(154,409

)

 

 

7.18

 

Options forfeited

 

 

(188

)

 

 

5.00

 

 

 

0

 

 

 

0.00

 

Options cancelled/expired

 

 

(72,041

)

 

 

7.23

 

 

 

(118,879

)

 

 

7.16

 

End of Year

 

 

16,250

 

 

$

6.54

 

 

 

150,246

 

 

$

7.11

 

Exercisable

 

 

15,620

 

 

$

6.52

 

 

 

147,394

 

 

$

7.13

 

 

 

The Company did not grant any stock options during 2020 or 2019.  During the year ended December 31, 2020, the Company received proceeds of $0.1 million from the exercise of 9,412 options and issued 10,194 shares for the exercise of 52,355 options.  The intrinsic value of the options exercised was $0.1 million.

During the year ended December 31, 2019, the Company received proceeds of $0.5 million from the exercise of 62,909 options and issued 10,771 shares for the exercise of 91,500 options.  The intrinsic value of the options exercised was $0.2 million.

The range of exercise prices for options outstanding and exercisable on December 31, 2020, was $5.06 to $8.21.  The following table summarizes information about stock options outstanding under all stock option plans:

 

 

 

 

Options Outstanding

 

 

Options Exercisable

 

Range of

Exercise Prices

 

Number

Outstanding

 

 

Weighted

Average

Contractual

Life (Years)

 

 

Weighted-

Average

Exercise

Price

 

 

Number

Exercisable

 

 

Weighted

Average

Exercise

Price

 

$ 5.06

 

 

7,000

 

 

 

2.71

 

 

$

5.06

 

 

 

7,000

 

 

$

5.06

 

$ 6.98 — $ 7.55

 

 

4,750

 

 

 

2.16

 

 

$

7.22

 

 

 

4,120

 

 

$

7.26

 

$ 8.09 — $ 8.21

 

 

4,500

 

 

 

0.92

 

 

$

8.12

 

 

 

4,500

 

 

$

8.12

 

$ 5.06 — $ 8.21

 

 

16,250

 

 

 

2.05

 

 

$

6.54

 

 

 

15,620

 

 

$

6.52

 

 

The weighted average contractual life and intrinsic value on December 31, 2020, was the following:

 

 

Weighted

Average

Contractual

Life (years)

 

 

Intrinsic

Value

 

Options Outstanding

 

 

2.05

 

 

$

11

 

Options Exercisable

 

 

1.97

 

 

$

11

 

 

 

The intrinsic value is based on the share price of $6.57 at December 31, 2020.

For the outstanding stock options, the Company used the Black-Scholes option valuation model for estimating the fair value.  The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.  Option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life as well a risk-free rate and the dividend yield. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the employee stock options.

The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate was based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted.  The Company calculated the volatility based on a five-year historical period of the Company’s stock price. The expected life used for options granted was based on historical data of employee exercise performance.  The Company records expense based on the grading vesting method.

 

 

Performance-Based Awards

Short-Term Incentive Plan

Incentive compensation earned by executives and key managers under the Company’s 2020 Short-Term Incentive Plan (“STIP”) were to be settled 50% in cash and 50% in shares of the Company’s stock and was earned based on revenues and adjusted EBITDA targets.  No shares will be issued pursuant to the 2020 STIP because the performance thresholds were not met.

Incentive compensation earned by executives and key managers under the Company’s 2019 STIP were settled 50% in cash and 50% in shares of the Company’s stock and was earned based on revenues and adjusted EBITDA targets. Shares valued at $1.2 million earned pursuant to the 2019 STIP were issued to executives and key managers during the first quarter 2020. For the 2019 STIP, the Company issued 129,285 shares net of shares withheld for taxes.  

Long-Term Incentive Plan

The Company awards performance-based awards to executives and key managers to encourage sustainable growth, consistent earnings, and management retention.  Based on the fair value of the shares on the grant date, the Company records stock compensation expense over the performance period based on the estimated achievement of the award.

The following table summarizes the performance award activity:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

Unvested Performance Awards - at Target

 

Awards

 

 

Weighted

Average

Fair Value

 

 

Awards

 

 

Weighted

Average

Fair Value

 

Beginning of Year

 

 

171,417

 

 

$

5.27

 

 

 

0

 

 

$

0.00

 

Awards granted

 

 

145,289

 

 

 

8.70

 

 

 

174,117

 

 

 

5.27

 

Awards cancelled

 

 

0

 

 

 

0.00

 

 

 

(2,700

)

 

 

5.27

 

End of Year

 

 

316,706

 

 

$

6.84

 

 

 

171,417

 

 

$

5.27

 

 

 

The Company granted performance awards to executives and key managers in February 2020 (“2020 LTIP”) and in February 2019 (“2019 LTIP”).  Under the 2020 LTIP and 2019 LTIP, shares of the Company’s stock can be earned based on achievement of a three-year revenue growth target with a penalty if a certain adjusted EBITDA level is not maintained. If the Company achieves less than the target growth over the performance period, the participant will receive fewer shares than the target award, determined on a straight-line basis. If the Company, achieves greater than the target growth, the participant will receive more shares than the target award on an accelerated basis.  Participants are required to be in service at the determination date of the award following the end of the performance period in order to receive the award. Shares earned under the 2020 LTIP and 2019 LTIP will be fully vested shares. The Company records stock compensation expense over the performance periods based on the Company’s estimate of the aggregate number of shares that will be earned under the incentive plans. Despite the COVID-19 pandemic and ensuing economic recession in 2020, the Compensation Committee did not make any changes to the revenue or EBITDA targets or to the targets and maximum shares that can be earned under the 2020 or 2019 STIP.

 

The performance period for the 2020 LTIP is from January 1, 2020 through December 31, 2022. At target, the total fair market value of the award was $1.3 million based on the share price of $8.70 on the grant date. On the award date, the aggregate number of shares that could be earned at target was 145,289 and the maximum number of aggregate shares that could be earned was 254,256.  

 

The performance period for the 2019 LTIP is from January 1, 2019 through December 31, 2021. At target, the total fair market value of the award was $0.9 million based on the share price of $5.27 on the grant date.  On the award date, the aggregate number of shares that could be earned at target was 174,117 and the maximum number of aggregate shares that could be earned was 299,979. During the year ended December 31, 2019, the target and maximum shares that can be earned declined by 2,700 and 4,725, respectively due to employee terminations.  

    

 

 

 

 

 

 

 

 

Employee Stock Purchase Plan

The following table summarizes the ESPP activity:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

Shares

 

 

Weighted

Average

Fair Value

at Grant

Date

 

 

Shares

 

 

Weighted

Average

Fair Value

at Grant

Date

 

Outstanding, beginning of year

 

 

0

 

 

$

0.00

 

 

 

0

 

 

$

0.00

 

Granted

 

 

157,706

 

 

 

1.68

 

 

 

180,859

 

 

 

1.08

 

Vested

 

 

(157,706

)

 

 

1.68

 

 

 

(180,859

)

 

 

1.08

 

Outstanding, end of year

 

 

0

 

 

$

0.00

 

 

 

0

 

 

$

0.00

 

 

 

Based on the 15% discount and the fair value of the option feature of this plan, the ESPP is considered compensatory.  Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model.  During the years ended December 31, 2020 and 2019, the Company received proceeds of $0.9 million and $0.7 million from the ESPP, respectively.

The Company calculated the fair value of each employee stock purchase grant under the ESPP on the date of grant using the Black-Scholes option-pricing model using the following assumptions:

 

 

Employee Stock Purchase Plan

 

 

 

2020

 

 

2019

 

Dividend yield

 

 

4.1

%

 

 

4.1

%

Risk-free interest rate

 

 

0.1

%

 

 

2.5

%

Expected volatility

 

 

44

%

 

 

34

%

Expected life (in years)

 

 

0.5

 

 

 

0.5

 

 

 

The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate was based on the U.S. Treasury yields with remaining term that approximates the expected life of the options granted.  The Company calculated the volatility based on a five-year historical period of the Company’s stock price.  The expected life used was based on the offering period.

Board of Director Awards

The Company grants equity awards to members of its Board of Directors for an annual retainer and for committee service in shares of the Company’s stock.  These awards vest immediately.  In addition, new directors receive a one-time grant of $55 paid in service-based restricted shares which vest in equal annual increments over three years. During the year ended December 31, 2020, the Company issued 60,998 shares of the Company’s stock with a fair value of $0.4 million which vested immediately.  During the year ended December 31, 2019, the Company issued 79,918 shares of the Company’s stock with a fair value of $0.4 million which vested immediately.       

The following table summarizes the director awards activity:

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

 

Shares

 

 

Weighted

Average

Fair Value

at Grant

Date

 

 

Shares

 

 

Weighted

Average

Fair Value

at Grant

Date

 

Outstanding, beginning of year

 

 

4,831

 

 

$

6.90

 

 

 

7,246

 

 

$

6.90

 

Granted

 

 

60,998

 

 

 

6.59

 

 

 

79,918

 

 

 

5.03

 

Vested

 

 

(63,413

)

 

 

(6.60

)

 

 

(82,333

)

 

 

(5.08

)

Outstanding, end of year

 

 

2,416

 

 

$

6.90

 

 

 

4,831

 

 

$

6.90

 

 

Employee Withholding Taxes on Stock Awards

 

For ease in administering the issuance of stock awards, the Company holds back shares of vested restricted stock awards and short-term incentive plan stock awards, if paid in the Company’s stock, for the value of the statutory withholding taxes.  For each individual receiving a stock award, the Company redeems the shares it computes as the value for the withholding tax and remits this amount to the

appropriate tax authority.  For withholding taxes related to stock awards, the Company paid $1.1 million and $1.2 million during the years ended December 31, 2020 and December 31, 2019, respectively.

 

Share Repurchases

 

On November 6, 2019, the Board of Directors approved a share repurchase program, and on March 10, 2020 the Board of Directors reauthorized the program pursuant to which the Company was authorized to repurchase up to $7.0 million of its common stock through the end of 2020. The Company spent $2.0 million to repurchase 375,046 shares at an average price of $5.36 during the three months ended March 31, 2020. The Company cancelled the repurchased shares. Due to uncertainties related to the COVID-19 pandemic and to protect the Company’s cash position, on April 1, 2020 the Board of Directors approved the termination of the stock repurchase program.

 

On November 4, 2020, the Board of Directors approved a new share repurchase program, pursuant to which the Company was authorized to repurchase $5.0 million of its common stock through the end of 2021. The plan became effective November 10, 2020.  The Company spent $1.8 million to repurchase 288,573 shares at an average price of $6.30 during the three months ended December 31, 2020. The Company cancelled the repurchased shares.

 

Authorized Shares

 

On May 29, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (i) changing the Company’s name from “PC-Tel, Inc.” to “PCTEL, Inc.” and (ii) decreasing the number of authorized shares of common stock from 100,000,000 shares to 50,000,000 shares.