Stock-Based Incentive Compensation Plans

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Incentive Compensation Plans

Stock-Based Incentive Compensation Plans

Stock Options

The table below summarizes the stock option activity for the nine months ended September 30, 2023:

	Number of Shares	Weighted- Average Exercise Price
Outstanding as of December 31, 2022	1,903,341	$8.82
Exercised	(670,494)	6.36
Canceled and forfeited	(16,006)	21.22
Outstanding as of September 30, 2023	1,216,841	10.84

As of September 30, 2023, there is no unrecognized compensation cost related to stock options.

There were no stock options granted during the three and nine months ended September 30, 2023 and 2022.

Restricted Stock Units (“RSUs”)

RSUs are share awards that entitle the holder to receive freely tradable shares of the Company’s common stock upon vesting. RSUs generally vest over two to four years based upon continued services and are settled at vesting in shares of the Company's common stock. Certain RSUs vest based upon continued services and the achievement of financial milestones. The grant date fair value of the RSUs is equal to the closing price of the Company’s common stock on the grant date. As of September 30, 2023, the unrecognized compensation cost related to the RSUs was $34.4 million, which is expected to be recognized over a period of approximately 2.5 years.

The Company granted performance-based restricted stock unit awards subject to market and service vesting conditions to certain executive officers under SI-BONE's 2018 Equity Incentive Plan (“PSUs”). The shares subject to PSUs vest over a three-year performance period. The actual number of PSUs that will vest in each measurement period will be determined by the Compensation Committee based on the Company’s total shareholder return (“TSR”) relative to the TSR of the Median Peer Companies (as defined in the award agreement). The grant date fair value of each stock award with a market condition was determined using the Monte Carlo valuation model. The table below summarizes the assumptions used to estimate the grant date fair value of the PSUs granted:

	Nine Months Ended September 30,
	2023			2022
Expected volatility of common stock	58.0%	to	73.0%	48.9%	to	58.7%
Expected volatility of peer companies	33.0%	to	141.0%	24.2%	to	152.5%
Correlation coefficient of peer companies	(0.15)	to	1.00	(0.13)	to	1.00
Risk-free interest rate	3.9%	to	5.0%	0.4%	to	1.2%
Dividend yield	—%	to	1.3%	—%	to	1.0%

As of September 30, 2023, the unrecognized compensation cost related to the PSUs was $2.8 million, which is expected to be recognized over a period of approximately 2.0 years.

The table below summarizes RSU and PSU activity for the nine months ended September 30, 2023:

	RSUs		PSUs
	Number of Shares	Weighted Average Grant Date Fair Value	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2022	1,794,928	$22.72	155,596	$19.50
Granted	1,204,086	16.85	255,458	12.33
Vested	(727,721)	20.99	(25,932)	19.50
Canceled and forfeited	(155,208)	21.46	—	—
Outstanding as of September 30, 2023	2,116,085	20.07	385,122	14.74

Employee Stock Purchase Plan

The Company’s 2018 Employee Stock Purchase Plan (the “ESPP”) allows eligible employees to purchase shares of the Company's common stock through payroll deductions at the price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each six month offering period. The offering period generally commences in May and November. On March 26, 2020, the Company's Compensation Committee approved the amendment of the terms of future offerings under the ESPP which, among other things, increased the maximum number of shares that may be purchased on any single purchase date, provided for automatic enrollment in a new offering, and provided that the offering which commenced in May 2020 be twelve months in duration and consist of two purchase periods.

The fair value of the ESPP shares is estimated using the Black-Scholes option pricing model, which is being amortized over the requisite service period. The Company issued 130,867 and 112,773 shares under ESPP, representing approximately $1.5 million and $1.2 million in employee contributions for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, total accumulated ESPP related employee payroll deductions amounted to $0.6 million and $0.3 million, respectively, which were included within accrued compensation and related expenses in the condensed consolidated balance sheets.

Stock-Based Compensation

The table below presents the detail of stock-based compensation expense amounts included in the condensed consolidated statements of operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)
Cost of goods sold	$	172	$	121	$	471	$	360
Sales and marketing	2,655		2,836		8,267		8,177
Research and development	699		672		2,198		1,968
General and administrative	2,402		2,293		7,184		6,675
	$	5,928	$	5,922	$	18,120	$	17,180

Warrants

During the three months ended June 30, 2023, a warrant holder exercised warrants, and the Company issued 22,603 net shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms. The table below summarizes common stock warrants activity for the nine months ended September 30, 2023:

Date		Outstanding Balance at December 31, 2022	Price per Share		Warrants Issued	Warrant Exercised	Warrant Expired	Outstanding Balance at September 30, 2023
Issuance	Expiration
3/1/2017	3/1/2027	1,388	$	5.94	—	—	—	1,388
7/22/2013	7/22/2023	32,983	$	9.10	—	(32,983)	—	—
11/26/2014	11/26/2024	6,680	$	16.47	—	—	—	6,680
10/20/2015	10/20/2025	41,650	$	16.47	—	—	—	41,650
11/9/2015	11/9/2025	25,709	$	16.47	—		—	25,709
12/22/2016	12/22/2026	9,712	$	10.03	—	—	—	9,712
		118,122			—	(32,983)	—	85,139