EQUITY INCENTIVE PLANS

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

2016 Plan

In October 2016, the Company adopted the 2016 Equity Incentive Plan, (the “2016 Plan”). The 2016 Plan was approved by the Company’s stockholders and became effective on October 19, 2016. On the first day of each fiscal year starting from the 2017 fiscal year, the 2016 Plan authorizes an annual increase in the number of shares available for issuance equal to the least of (i) 3,865,000 shares, (ii) 5% of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year or (iii) such number of shares determined by the Board. As of December 31, 2023, the Company has reserved 6,764,972 shares of common stock for issuance under the 2016 Plan.

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, 2021			7,160
Additional awards authorized			1,476
Awards granted1			(1,036)
Awards forfeited1			223
Balance as of December 31, 2022			7,823

Awards granted1			(1,373)
Awards forfeited1			315
Balance as of December 31, 2023			6,765

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 TSR, as described below.

Pursuant to the 2016 Plan, stock options, restricted stock, RSUs, performance units, performance shares, and stock appreciation rights may be granted to employees, consultants and directors of the Company. Stock options were not granted during the years ended December 31, 2023, 2022 and 2021.

Employee Stock Purchase Plan

In October 2016, the Board and stockholders approved the 2016 Employee Stock Purchase Plan (“ESPP”) which provides eligible employees of the Company with an opportunity to purchase shares of the Company's common stock at a discounted price through accumulated contributions not exceeding $25,000 in a given calendar year. On the first day of each fiscal year, the number of shares reserved for the ESPP increases by the least of (i) 966,062 shares, (ii) 1.5% of the shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the Board. 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 each 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. If the stock price of the Company's common stock on any purchase date in an offering period is lower than the stock price on the first trading date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period.

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 Units			Performance Based Restricted Stock Units and Market-Based Units
	Shares Underlying RSUs	Weighted Average Grant Date Fair Value		Shares Underlying PRSUs 1	Weighted Average Grant Date Fair Value
Balance as of December 31, 2021	1,360	$	84.99	288	$	119.21
Granted	691	147.94		345	138.99
Vested	(390)	85.55		(47)	257.61
Forfeited	(196)	110.22		(25)	109.82
Balance as of December 31, 2022	1,465	111.16		561	120.22
Granted	903	114.84		470	124.17
Vested	(622)	96.54		(24)	107.05
Forfeited	(204)	121.08		(111)	127.07
Balance as of December 31, 2023	1,542	$	117.90	896	$	121.80

1Based on the maximum number of performance based restricted stock units in the key executive grant agreements, the actual number of units granted will be based on the annual unit volume compound annual growth rate ("CAGR") as described below.

As of December 31, 2023, there was total unamortized compensation costs of $127.5 million, net of estimated forfeitures, related to RSUs, which the Company expects to recognize over a weighted average period of 1.8 years. Aggregate intrinsic value of the RSUs was $165.1 million, $137.2 million, and $160.1 million as of December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, 1.4 million shares of RSUs were expected to vest with an aggregate intrinsic value of $153.9 million. Total grant date fair value of vested RSUs was $60.0 million, $33.4 million, and $22.3 million during the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, there was total unamortized compensation costs of $41.3 million, net of estimated forfeitures, related to PRSUs, which the Company expects to recognize over a weighted average period of 2.1 years. Aggregate intrinsic value of the PRSUs was $95.9 million, $52.6 million, and $33.9 million as of December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, 0.9 million shares of PRSUs were expected to vest with an aggregate intrinsic value of $92.0 million. Total grant date fair value of vested PRSUs was $2.6 million, $12.1 million, and $20.9 million during the years ended December 31, 2023, 2022, and 2021, respectively.

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.

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's and fiscal year 2022's annual unit volume and measuring performance thresholds mentioned above, as well as a comparison of the S&P Healthcare Index to the Company's 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 respective senior executive officer's 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 respective continued employment of the recipients through the vesting date of August 7, 2026.

Options

The following table summarizes stock option activity:


	Options Outstanding
	Options Outstanding (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2021	504	$	40.97	5.20	$	38,675

Options exercised	(175)	36.82
Options forfeited	(1)	83.15
Balance at December 31, 2022	328	43.00		4.43	16,635

Options exercised	(21)	52.56
Options forfeited	—	—
Balance at December 31, 2023	307	42.34		3.29	19,859
Options exercisable – December 31, 2023	307	42.34		3.29	19,859
Options vested and expected to vest – December 31, 2023	307	$	42.34	3.29	$	19,859

There have been no options granted since December 31, 2019. As of December 31, 2023, the options were fully vested. The total estimated grant date fair value of options vested during the period was $0.1 million, $2.4 million, and $2.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Employee Stock Purchase Plan

The Company issued approximately 94,000, 88,000, and 95,000 shares of common stock under the ESPP during the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, approximately 2.1 million shares of the Company's common stock remained available for issuance under the ESPP.

The ESPP provides for 12-month offering periods that contain two six-month purchase periods. The Company determined the fair value of the stock purchase rights under the ESPP using the Black-Scholes option pricing model with the following assumptions for the specified periods.


	Year Ended December 31,
	2023	2022	2021
Expected Term (years)	0.5 - 1	0.5 - 1	0.5 - 1
Expected Volatility	48.8% - 59.2%	68.1% - 96.3%	93.9% - 106.9%
Dividend Yield	—%	—%	—%
Risk-Free Interest Rate	5.1% - 5.4%	1.6% - 4.7%	0.0% - 0.2%

As of December 31, 2023, the Company had $3.9 million of unrecognized compensation expense that will be recognized over a weighted average period of 0.7 years.