Equity Compensation and Other Benefits

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Equity Compensation and Other Benefits

11. Equity Compensation and Other Benefits

2019 Equity Incentive Plan

We currently have one stockholder-approved plan from which we can issue stock-based awards, which was approved by our stockholders in fiscal year 2019 (the "2019 Plan"). The 2019 Plan became effective on September 25, 2019 and replaced the Amended and Restated 2005 Stock Option / Stock Issuance Plan and the 2015 Stock Option/Stock Issuance Plan (collectively, the “Previous Plans”). The Previous Plans solely exist to satisfy outstanding options previously granted under those plans. The 2019 Plan provides for the grant of incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards, and other awards (collectively, "awards"). ISOs may be granted only to the Company's employees, including officers, and the employees of its affiliates. All other awards may be granted to the employees, including officers, non-employee directors and consultants and the employees and consultants of the Company's affiliates. The total number of shares of common stock authorized under the 2019 Plan is 13,471,733 shares. The remaining maximum number of shares of our common stock, net of vested and exercised shares, that may be issued under the 2019 Plan will not exceed 9,698,886 shares, of which, 3,192,145 were available for future awards as of December 31, 2023. The number of shares of the Company's common stock reserved for issuance under its 2019 Plan will automatically increase on January 1 of each year for the remaining term of the plan, by 5% of the total number of shares of its common stock outstanding on December 31 of the immediately preceding calendar year, or a lesser number of shares determined by the Board prior to the applicable January 1st. The shares available for issuance increased by 1,667,730 shares, on January 1, 2023, pursuant to the automatic share reserve increase provision.

2019 Employee Stock Purchase Plan

In September 2019, the Board adopted, and stockholders approved, the Company's 2019 Employee Stock Purchase Plan (the "ESPP"). The ESPP became effective on September 25, 2019. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward the Company's success and that of its affiliates. The ESPP includes two components. One component is designed to allow eligible U.S. employees to purchase common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code. In addition, purchase rights may be granted under a component that does not qualify for such favorable tax treatment when necessary or appropriate to permit participation by eligible employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws. The maximum aggregate number of shares of common stock that may be issued under the ESPP is 1,926,598 shares and as of December 31, 2023, no shares have been issued under the ESPP. The number of shares of the Company's common stock reserved for issuance under its ESPP will automatically increase on January 1 of each calendar year for the remaining term of the plan by the lesser of (1) 1% of the total number of shares of its capital stock outstanding on December 31 of the preceding calendar year, (2) 726,186 shares, and (3) a number of shares determined by the Board. The shares available for issuance increased by 333,546 shares, on January 1, 2023, pursuant to the automatic share reserve increase provision.

Generally, all regular employees, including executive officers, employed by the Company or by any of its designated affiliates, will be eligible to participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of common stock under the ESPP. Unless otherwise determined by the Board, common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of the Company's common stock on the first date of an offering or (b) 85% of the fair market value of a share of the common stock on the date of purchase.

2021 Inducement Equity Incentive Plan

Effective December 30, 2021, the Company adopted the 2021 Inducement Equity Incentive Plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 1,105,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The remaining maximum number of shares of our common stock that may be issued under the 2021 Inducement Plan net of vested and exercised shares, will not exceed 940,512 shares, of which, 518,558 were available for future awards as of December 31, 2023. The 2021 Inducement Plan was approved by the Company’s Board without stockholder approval in accordance with such rule.

Stock Options

The term of an option may not exceed 10 years as determined by the Board, and each option generally vests over a four-year period with 25% vesting on the first anniversary date of the grant and 1/36th of the remaining amount vesting at monthly intervals thereafter. Option holders are allowed to exercise unvested options to acquire restricted shares. Upon termination of employment, option holders have a period of up to three months in which to exercise any remaining vested options. The Company has the right to repurchase at the original purchase price any unvested but issued common shares upon termination of service. Unexercised options granted to participants who separate from the Company are forfeited and returned to the pool of stock options available for grant.

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The fair value is then amortized ratably over the requisite service periods of the awards, which is generally the vesting period.

The fair value of stock option grants was estimated with the following assumptions:

	Year Ended December 31,
	2023	2022
Expected volatility (employee)	71.7%	63.4%
Risk-free interest rate (employee)	3.9%	2.3%
Expected term (employee, in years)	6.1	6.1
Expected dividend	—%	—%

These assumptions are defined as follows:

•Expected Volatility ‑ Since the Company does not have enough trading history to use the volatility of its own common stock, the option’s expected volatility is estimated based on historical volatility of a peer group’s common stock.

•Risk-Free Interest Rate ‑ The risk-free interest rate is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

•Expected Term ‑ The option’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding.

•Expected Dividend - The Company has no plans to pay dividends.

Stock Option Activity - A summary of the Company's stock option activity under the 2005 Plan, 2015 Plan, and 2019 Plan at December 31, 2023 is as follows:

(in thousands, except share and per share data)	Options Outstanding	Options Weighted-Average Exercise Price	Weighted Average Remaining Life (in years)	Aggregate Intrinsic Value
Balance – January 1, 2023	3,298,538	17.71	5.43	$	202
Options granted	16,210	5.78
Options exercised	(182,214)	4.41
Options canceled	(467,333)	20.16
Options forfeited	(106,048)	14.74
Balance – December 31, 2023	2,559,153	18.25	4.31	$	—
Options vested and expected to vest - December 31, 2023	2,559,153	18.25	4.31	$	—
Options vested and exercisable - December 31, 2023	2,226,861	18.80	3.89	$	—

Information on stock options granted, exercised and vested is as follows:

	Year Ended December 31,
(in thousands, except per share data)	2023		2022
Weighted average fair value per share of options granted	$	3.85	$	7.76
Cash received from options exercised, net (1)	(46)		(4,636)
Aggregate intrinsic value of options exercised	268		11,884
Fair value of shares vested	3,500		3,863

(1) The amount reflected for the years ended December 31, 2023 and 2022, is the net of cash received from options exercised of $0.8 million and $1.6 million, respectively, and the cash paid for employee tax withholding settled in shares of $0.8 million and $6.2 million, respectively.

As of December 31, 2023 and 2022, the Company’s total unrecognized compensation cost related to nonvested stock-based option awards granted to employees was, $2.6 million and $6.2 million, respectively, which will be recognized over a weighted-average vesting period of approximately 1.9 years and 2.6 years, respectively.

Restricted Stock Units

The Company’s restricted stock units ("RSUs") vest upon the satisfaction of time-based criterion of up to four years. In most cases, the service-based requirement will be satisfied in installments as follows: 25% of the total number of RSUs awarded will have the service-based requirement satisfied during the month in which the 12-month anniversary of the vesting commencement date occurs, and thereafter 1/16th of the total award in a series of 12 successive equal quarterly installments or 1/4th of the total award in a series of three successive equal annual installments following the first anniversary of the initial service vest date.

Stock-based compensation cost for RSUs is measured based on the fair market value of the Company’s common stock on the date of grant.

A summary of the Company’s RSU activity under the 2015 Plan, 2019 Plan and 2021 Inducement Plan for the year ended December 31, 2023 is as follows:

	RSU Outstanding	Weighted Average Grant-Date Fair Value
Balance – January 1, 2023	4,494,947	14.37
Granted	2,786,247	4.85
Vested (1)	(1,638,135)	13.11
Forfeited	(1,601,185)	14.10
Balance – December 31, 2023	4,041,874	8.43
Expected to vest after December 31, 2023	3,922,079	8.44

(1) The Company allows its Board to defer all or a portion of monetary remuneration paid to the Director. As of December 31, 2023, there were 119,795 restricted stock units vested for which the holders elected to defer delivery of the Company's shares.

As of December 31, 2023 and 2022, the Company's total unrecognized compensation cost related to nonvested restricted stock unit awards granted to employees was, $24.8 million and $51.6 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.1 years and 2.7 years, respectively.

Stock-based Compensation - Total stock-based compensation expense included in the Consolidated Statements of Operations, net of amounts capitalized to system development costs is as follows:

	Year Ended December 31,
(in thousands of dollars)	2023		2022
Technology and facilities	$	4,602	$	6,993
Sales and marketing	63		143
Personnel	13,928		20,484
Total stock-based compensation (1)	$	18,593	$	27,620

(1) Amounts shown are net of $1.4 million and $2.5 million of capitalized stock-based compensation for the year ended December 31, 2023 and 2022, respectively.

Cash flows from the tax shortfalls or benefits for tax deductions resulting from the exercise of stock options in comparison to the compensation expense recorded for those options are required to be classified as cash from financing activities. The Company recognized $5.1 million and $8.1 million of income tax benefit in its Consolidated Statements of Operations related to stock-based compensation expense during the years ended December 31, 2023 and 2022, respectively. Additionally, the total income tax expense recognized in the income statement for share-based compensation exercises was $3.5 million and $3.3 million for the years ended December 31, 2023 and 2022, respectively.

Retirement Plan

The Company maintains a 401(k) Plan, which enables employees to make pre-tax or post-tax deferral contributions to the participating employees account. Employees may contribute a portion of their pay up to the annual amount as set periodically by the Internal Revenue Service. The Company provides for an employer 401(k) contribution match of up to 4% of an employee’s eligible compensation. In addition, the Company provides a contribution to various savings funds for India and Mexico-based employees. The total expense related to the employer match and contributions recognized by the Company for the years ended December 31, 2023 and 2022 was $6.2 million and $6.4 million, respectively. All employee and employer contributions will be invested according to participants’ individual elections.