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EQUITY INCENTIVE PLAN AND STOCK-BASED COMPENSATION
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
EQUITY INCENTIVE PLAN AND STOCK-BASED COMPENSATION EQUITY INCENTIVE PLAN AND STOCK-BASED COMPENSATION
A summary of awards available for grant under the Company’s 2016 Equity Incentive Plan is as follows (in thousands):
Shares Available for Grant
Balance as of December 31, 20227,823 
Awards granted 1
(1,317)
Awards forfeited 1
222 
Balance as of September 30, 20236,728 
1 Awards granted and forfeited include PRSUs, which are based on the maximum number of PRSUs in the key executive grant agreements. The actual number of PRSUs granted will be based on company performance criteria and relative Total Shareholder Return, as discussed in Note 12, Equity Incentive Plan and Stock-Based Compensation.
Restricted Stock Units and Performance-Based Restricted Stock Units
The fair value of RSUs and PRSUs are based on the Company’s closing stock price on the date of grant. The fair value of market based PRSUs were estimated at the date of grant using the Monte-Carlo option pricing model. A summary is as follows (in thousands, except weighted average grant date fair value):
Restricted Stock UnitsPerformance Based Restricted Stock Units and Market-Based Units
Shares Underlying RSUsWeighted Average Grant Date Fair Value
Shares Underlying PRSUs 1
Weighted Average Grant Date Fair Value
Balance as of December 31, 20221,465 $111.16 561 $120.22 
Granted853 116.49 464 124.56 
Vested(349)118.30 (24)107.05 
Forfeited(129)119.60 (93)127.04 
Balance as of September 30, 20231,839 $111.69 908 $122.09 
1Based on the maximum number of PRSUs in the key executive grant agreements. The actual number of PRSUs granted will be based on company performance criteria and relative Total Shareholder Return, as discussed in Note 12, Equity Incentive Plan and Stock-Based Compensation.
As of September 30, 2023, there was total unamortized compensation costs of $142.3 million, net of estimated forfeitures, related to unrecognized RSU expense, which the Company expects to recognize over a weighted average remaining period of 1.9 years. Aggregate intrinsic value of the RSUs was $173.4 million as of September 30, 2023.
As of September 30, 2023, there was total unamortized compensation costs of $41.9 million, net of estimated forfeitures, related to unrecognized PRSU expense, which the Company expects to recognize over a weighted average remaining period of 2.3 years. Aggregate intrinsic value of the PRSUs was $85.6 million as of September 30, 2023.
PRSUs and Market-based RSUs
The Company grants PRSUs to its key executives. PRSUs can be earned in accordance with the performance equity program for each respective grant.
For further details on PRSUs granted in 2022 and prior years, please refer to Note 13, Equity Incentive Plans, in the financial statements accompanying the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
In February 2023, the Company granted PRSUs (“February 2023 awards”) to be earned based on the CAGR calculated between fiscal year 2025's and fiscal year 2022's annual unit volume and measuring a minimum performance threshold of 15% to earn 50.0% of target, and a maximum threshold of 25% achieved to earn 200.0% of target. These February 2023 awards are subject to the recipient's continued employment through the vesting date of March 15, 2026.
In addition, in February 2023, the Company granted market-based PRSUs to senior executive officers. These PRSUs to be earned will be based on the CAGR calculated between fiscal year 2025 and fiscal year 2022 annual unit volume and measuring performance thresholds mentioned above, as well as a comparison of the S&P Healthcare Index to the Company's Total Shareholder Return (“TSR”). The grant date fair value of the TSR was based on the expected term of 2.9 years, interest risk free rate of 4.5%, implied volatility of 83.8% and no dividend yield. These February 2023 awards are subject to the senior executive officers continued employment through the vesting date of March 15, 2026.
In August 2023, the Company granted market-based retention PRSUs ("August 2023 awards") to its Chief Executive Officer, other senior executive officers, and other members of the Company’s management team. The purpose of the performance-based awards was tied to several important long-term operational objectives, including to: (i) create stability among the leadership team, (ii) retain other critical talent and (iii) drive achievement of strategic objectives while the Company transforms and scales its business model. The performance period of the August 2023 awards will be measured between July 1, 2023 and June 30, 2026, with Company results subject to adjustment by the Company’s TSR as compared to the TSR of the S&P Healthcare Index. The grant date fair value of the TSR was based on the expected term of 2.9 years, interest risk free rate of 4.4%, implied volatility of 80.1% and no dividend yield. The August 2023 awards are subject to the continued employment of the recipients through the vesting date of August 7, 2026.
Options
The following table summarizes stock option activity during the nine months ended September 30, 2023 (in thousands, except weighted average exercise price per share and years):
Options Outstanding
Options
Outstanding		Weighted-
Average
Exercise
Price Per
Share		Weighted-
Average
Remaining
Contractual
Life (years)		Aggregate
Intrinsic Value
Balance as of December 31, 2022328 $43.00 4.43$16,635 
Options exercised(21)53.03 
Balance as of September 30, 2023307 42.32 3.6615,964 
Options exercisable – September 30, 2023307 $42.32 3.66$15,964 
There have been no options granted since December 31, 2019. As of September 30, 2023, the options were fully vested.
Employee Stock Purchase Plan
In October 2016, the Board and stockholders approved the ESPP. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The ESPP provides for 12 month offering periods that contain two six-month purchase periods. At the end of each purchase period, employees purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the purchase period. During the nine months ended September 30, 2023, approximately 46 thousand shares of the Company's common stock were issued to employees participating in the ESPP and approximately 2.2 million shares of the Company’s common stock remained available for issuance under the ESPP.
For the offering period which started on June 1, 2023, the assumptions included the expected term ranging from 0.5 year to 1.0 year, expected volatility ranging from 48.8% to 59.2%, risk-free interest rate ranging from 5.1% to 5.4% and dividend yield of 0.0%.
During the nine months ended September 30, 2023 there were no material changes to the ESPP from those described in Note 13, Equity Incentive Plans, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
As of September 30, 2023, the Company had $3.2 million of unrecognized compensation expense related to ESPP subscriptions that will be recognized over a weighted average period of 0.5 years.
Stock-Based Compensation Expense
The following table summarizes the total stock-based compensation expense included in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of revenue$1,236 $618 $2,584 $1,540 
Research and development3,370 1,717 7,912 4,841 
Selling, general and administrative16,402 10,610 42,862 35,565 
Total stock-based compensation expense$21,008 $12,945 $53,358 $41,946