Stock-Based Compensation and Employee Benefit Plans

3 Months Ended

Mar. 31, 2024

Stock-Based Compensation and Employee Benefit Plans

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense in the condensed consolidated statements of operations (in thousands):


	Three Months Ended March 31,
	2024		2023

Cost of revenue	$	3,814	$	4,161
Research and development	5,084		8,410
Sales and marketing	2,090		5,817
General and administrative	7,872		11,165
	$	18,860	$	29,553

As of March 31, 2024 and December 31, 2023, we capitalized $10.0 million and $8.9 million of stock-based compensation cost, respectively, into inventory and deferred cost of goods sold.

Stock Option and Stock Award Activity

The following table summarizes the stock option activity under our stock plans during the reporting period:


	Outstanding Options
	Number of Shares	Weighted Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value
	(in thousands)
Balances at December 31, 2023	7,247,624	$	20.93	3.8	$	19,446
Granted	1,000,000	9.08
Exercised	(99,640)	5.44

Expired	(284,187)	27.03
Balances at March 31, 2024	7,863,797	19.39		4.7	24,003
Vested and expected to vest at March 31, 2024	7,519,528	19.86		4.4	22,034
Exercisable at March 31, 2024	6,859,630	$	20.89	3.7	$	18,252

During the three months ended March 31, 2024 and 2023, we recognized $0.2 million and $0.2 million of stock-based compensation costs for stock options, respectively.

During the three months ended March 31, 2024 we granted 1,000,000 stock options. We did not grant stock options in the three months ended March 31, 2023.

During the three months ended March 31, 2024 and 2023, the intrinsic value of stock options exercised was $0.5 million and $0.8 million, respectively.

As of March 31, 2024 and December 31, 2023, we had unrecognized compensation costs related to unvested stock options of $7.0 million and $0.1 million, respectively. This cost is expected to be recognized over the remaining weighted-average period of 3.3 years and 0.3 years, respectively. Cash received from stock options exercised totaled $0.5 million and $0.8 million for the three months ended March 31, 2024 and 2023, respectively.

Executive Performance-Based Stock Options

During the three months ended March 31, 2024, we granted 955,000 stock options to certain executives to purchase shares of common stock that contain certain performance-based vesting criteria related to corporate milestones (the “performance-based stock options”). The performance-based stock options were granted “at-the-money” and have a term of 10 years. The performance-based stock options vest based over a four-year or a three-year requisite service period.

The fair value of each performance-based stock option is estimated on the date of grant using the Black-Scholes valuation model. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones. Forfeitures of the performance-based stock options are recognized as they occur.

We used the following weighted-average assumptions in applying the Black-Scholes valuation model for determination of the performance-based stock options valuation:


						Three Months Ended March 31, 2024

Risk-free interest rate						4.1%
Expected term (years)						6.0
Expected dividend yield						—
Expected volatility						97.1%

Stock Awards

A summary of our stock awards activity and related information is as follows:


	Number of Awards Outstanding	Weighted Average Grant Date Fair Value

Unvested Balance at December 31, 2023	9,889,341	$	18.25
Granted	3,948,296	9.52
Vested	(1,483,902)	19.43
Forfeited	(707,643)	20.33
Unvested Balance at March 31, 2024	11,646,092	$	15.01

Stock Awards — The estimated fair value of restricted stock units (“RSUs”) and performance stock units (“PSUs”) is based on the fair value of our Class A common stock on the date of grant. For the three months ended March 31, 2024 and 2023, we recognized $17.9 million and $22.6 million of stock-based compensation costs for stock awards, respectively.

As of March 31, 2024 and December 31, 2023, we had $99.5 million and $113.5 million of unrecognized stock-based compensation expense related to unvested stock awards, expected to be recognized over a weighted average period of 2.3 years and 2.0 years, respectively.

Executive Awards

On March 1, 2024, the Company granted RSU, PSU and the performance-based stock option awards (the “2024 Executive Awards”) to certain executive staff pursuant to the 2018 Equity Incentive Plan. The RSUs have time-based vesting schedules, started vesting on January 15, 2024 and shall vest over a four-year period. The PSUs have either a four-year, a three-year, or a one-year cliff vesting period, and the performance-based stock options have either a four-year or a three-year cliff vesting period. The PSUs and performance-based stock options will vest based on a combination of time and achievement against performance metrics targets assuming continued employment and service through each vesting date. Stock-based compensation costs associated with the 2024 Executive Awards are recognized over the service period as we evaluate the probability of the achievement of the performance conditions. As of March 31, 2024, the unamortized compensation expense for the RSUs, PSUs, and the performance-based stock options per the 2024 Executive Awards was $9.4 million.

For details on the 2023, 2022, and 2021 Executive Awards refer to Part II, Item 8, Note 9 — Stock-Based Compensation and Employee Benefit Plans in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

As of March 31, 2024 and December 31, 2023, the unamortized compensation expense for the RSUs and PSUs per the 2023 Executive Awards was $4.1 million and $7.0 million, respectively.

As of March 31, 2024 and December 31, 2023, the unamortized compensation expense for the RSUs and PSUs per the 2022 Executive Awards was $1.2 million and $6.2 million, respectively.

As of March 31, 2024 and December 31, 2023, the unamortized compensation expense for the RSUs and PSUs per the 2021 Executive Awards was $7.1 million and $8.2 million.

The following table presents the stock activity and the total number of shares available for grant under our stock plans:


						Plan Shares Available for Grant

Balances at December 31, 2023						32,877,906
Added to plan						9,871,670
Granted						(4,944,248)

Cancelled/Forfeited						789,664
Expired						(221,086)
Balances at March 31, 2024						38,373,906

2018 Employee Stock Purchase Plan

For details on the 2018 Employee Stock Purchase Plan (the “2018 ESPP”), refer to Part II, Item 8, Note 9 — Stock-Based Compensation and Employee Benefit Plans in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

During the three months ended March 31, 2024 and 2023, we (reversed) recognized $(1.1) million and $6.5 million of stock-based compensation costs for the 2018 ESPP, respectively. We issued 632,688 and 449,525 shares in the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, we added an additional 2,418,528 and 2,239,563 shares and there were 16,990,424 and 15,204,584 shares available for issuance as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, we had $10.8 million and $8.8 million of unrecognized stock-based compensation costs, expected to be recognized over a weighted average period of 1.2 years and 0.8 years, respectively.