COMMON STOCK OFFERING, RESTRICTED STOCK UNITS, STOCK OPTIONS AND WARRANTS

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

COMMON STOCK OFFERING, RESTRICTED STOCK UNITS, STOCK OPTIONS AND WARRANTS

Common Stock Retired

On May 28, 2022, the Board of Directors authorized an increase to the Company’s previously announced Common Stock repurchase program to increase the value of the shares that could be acquired by the Company from up to $15.0 million over two years to up to $50.0 million over the next four years, subject to compliance with the Company’s Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

On February 27, 2022, the Board of Directors approved the adoption of a stock repurchase program to acquire up to $15.0 million of the Company’s Common Stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, through March 4, 2024, subject to compliance with the Company's Credit Facility, which was amended effective January 14, 2022 to increase the aggregate value of the shares of Common Stock that could be acquired by the Company to no greater than $15.0 million during the term of the Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

During the three and six months ended June 30, 2023, the Company acquired 0.2 million shares of its Common Stock on the open market at a cost of $1.0 million. For the three months ended June 30, 2022, the Company acquired 0.1 million shares of its Common Stock on the open market at a cost of $0.5 million. For the six months ended June 30, 2022, the Company acquired an aggregate 0.7 million shares of Common Stock on the open market at a total cost of $3.7 million. Upon completion of all repurchase transactions, the associated shares of Common Stock were retired.

Stock Plans

The Company’s stock plans consist of the 2007 Stock Plan (the “2007 Plan”) and the 2013 Equity Incentive Plan, as amended and restated in July 2017 (the “2013 Plan”). The 2007 Plan and the 2013 Plan are collectively referred to as the “Stock Plans”. On February 23, 2023, pursuant to the “evergreen” provisions of the 2013 Plan, the Board of Directors authorized an increase of approximately 3.5 million shares available for grant under the 2013 Plan. For additional information about the Stock Plans, please refer to Note 8 to the Company’s Consolidated Financial Statements for the year ended December 31, 2022, included in Part II, Item 8 of the 2022 Form 10-K. The information presented below provides an update for activity under the Stock Plans for the three and six months ended June 30, 2023.

On March 31, 2023, the Company’s Board of Directors, approved the Company’s 2023 Long-Term Incentive Plan (the “2023 LTI Plan”), consisting of awards of performance units (“PSUs”), restricted stock units (“RSUs”) and stock options to purchase shares of the Company’s Common Stock under the terms of the Company’s 2013 Equity Incentive Plan (the “2013 Equity Plan”), as amended, effective as of April 3, 2023.

Performance Units

The PSUs awarded under the 2023 LTI Plan (the “Target PSUs”) will be measured over a performance period beginning on January 1, 2023 and ending on December 31, 2023 (the “Performance Period”), but will remain subject to a continued service-based vesting requirement. Half of the PSUs awarded will be eligible to vest based on the Company’s achievement against a target adjusted EBITDA goal for fiscal year 2023, and the remaining half of the PSUs awarded will be eligible to vest based on the Company’s achievement against a target total revenue goal for fiscal year 2023. The ultimate number of PSUs that may vest (as calculated, the “Earned PSUs”) range from zero to 200% of the Target PSUs. Under the terms of the 2023 LTI Plan, the Earned PSUs will vest in equal annual installments on the first, second and third anniversaries of the Date of Grant, generally subject to the awardee continuing to be a Service Provider through the applicable vesting date.

The Company granted 0.6 million PSUs on April 3, 2023 at a grant price of $3.93. The Company recognized compensation expense of $0.3 million for the three months and six months ended June 30, 2023.

Restricted Stock Units

For the six months ended June 30, 2023, the Board of Directors granted RSUs under the 2013 Plan to employees and to non-employee members of the Board of Directors for an aggregate of approximately 1.3 million shares of Common Stock. RSU grants vest over periods generally ranging from 12 to 36 months from the respective grant dates and the awards are subject to forfeiture upon termination of employment or service on the Board of Directors, as applicable. Based on the weighted average fair market value of the Common Stock on the date of grant of $4.27 per share, the aggregate fair value for the shares underlying the RSUs amounted to $5.4 million as of the grant date that will be recognized as compensation cost over the vesting period. For the three months ended June 30, 2023 and 2022, the Company recognized compensation expense related to RSUs of approximately $2.6 million and $2.2 million, respectively. For the six months ended June 30, 2023 and 2022, the Company recognized expense of $4.0 million and $4.8 million, respectively. As of June 30, 2023, the unrecognized expense of $8.4 million net of forfeitures is expected to be charged to expense on a straight-line basis as the RSUs vest over a weighted-average period of approximately 1.7 years.

Stock Options

For the six months ended June 30, 2023, the Board of Directors granted stock options for the purchase of an aggregate of approximately 1.8 million shares of Common Stock at exercise prices that were equal to the fair market value of the Common Stock on the date of grant. Options granted to employees generally vest as to one-third of the shares subject to the award on each anniversary of the designated vesting commencement date, which may precede the grant date of such award, and expire ten years after the grant date.

The following table sets forth a summary of stock option activity under the Stock Plans for the six months ended June 30, 2023 (shares in thousands):


	Shares	Price (1)		Term (2)
Outstanding, December 31, 2022	6,994	$	6.17	5.5
Granted	1,818	4.27
Forfeited	(232)	6.03
Expired	(148)	7.08
Exercised	(57)	1.38
Outstanding, June 30, 2023 (3)(4)	8,375	5.78		6.0
Vested, June 30, 2023 (3)	5,050	6.19		4.0

(1)Represents the weighted average exercise price.

(2)Represents the weighted average remaining contractual term until the stock options expire, in years.

(3)As of June 30, 2023, the aggregate intrinsic value of all stock options outstanding was $1.4 million. As of June 30, 2023, the aggregate intrinsic value of vested stock options was $0.3 million.

(4)The number of outstanding stock options that are not expected to ultimately vest due to forfeiture amounted to 0.5 million shares as of June 30, 2023.

The following table presents activity affecting the total number of shares available for grant under the Stock Plans for the six months ended June 30, 2023 (in thousands):


Available, December 31, 2022			7,543
Newly authorized by Board of Directors			3,541
Stock options granted			(1,818)
RSUs and PSUs granted			(1,871)
Expired options under Stock Plans			148
Forfeited options under Stock Plans			232
Forfeited RSUs under Stock Plans			151
Retired shares of Common Stock			248
Issuance of Common Stock			(75)
Available, June 30, 2023			8,099

The aggregate fair value of approximately 1.8 million stock options granted for the six months ended June 30, 2023 amounted to $4.3 million, or $2.36 per stock option as of the grant date utilizing the Black-Scholes-Merton (“BSM”) method. The fair valued derived under the BSM method will result in the recognition of compensation cost over the vesting period of the stock options. For the six months ended June 30, 2023, the fair value of each stock option grant under the Stock Plans was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions:


Expected life (in years)			6.0
Volatility			55%
Dividend yield			0%
Risk-free interest rate			3.73%
Fair value per share of Common Stock on date of grant			$4.27

As of June 30, 2023 and December 31, 2022, total unrecognized compensation costs related to unvested stock options, net of estimated forfeitures, was $6.0 million and $4.1 million, respectively. As of June 30, 2023, the unrecognized costs are expected to be charged to expense on a straight-line basis over a weighted-average vesting period of approximately 2.2 years.

Stock-Based Compensation Expense

Stock-based compensation expense attributable to RSUs and stock options is classified as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenue	$	507	$	573	$	920	$	1,081
Sales and marketing	791		853		1,249		1,680
General and administrative	2,650		1,733		3,756		3,449
Total	$	3,948	$	3,159	$	5,925	$	6,210

Warrants

As of June 30, 2023, warrants were outstanding for an aggregate of 3.4 million shares of Common Stock exercisable at $5.64 per share. For additional information about these warrants, please refer to Note 8 to the Company’s Consolidated Financial Statements for the year ended December 31, 2022, included in Part II, Item 8 of the 2022 Form 10-K.