EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2023

EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

13.EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

The Company maintains a 401(k) plan that covers eligible employees. For the year ended December 31, 2021, the Company matched up to to 3% of eligible compensation during the period in which an eligible participant contributed to the plan and the Board approved a discretionary profit-sharing contribution of 3% of eligible compensation for eligible employees. Discretionary profit-sharing contributions aggregated $3,994 for the year ended December 31, 2021. Effective January 1, 2022, discretionary profit-sharing contributions were eliminated and the Company began to match up to 6% of eligible compensation during the period in which an eligible participant contributes to the plan. Matching 401(k) contributions were $11,285, $10,056, and $4,062 for the years ended December 31, 2023, 2022, and 2021, respectively.

Long-Term Rewards Plan

The Company had a long-term reward (“LTR”) compensation plan for certain key employees related to growth in certain financial measures over a three-year measurement period (the “Reward Performance Period’), subject to the terms of the plan. After December 31, 2020, no new awards were granted under the LTR plan as future long-term awards will only be made under the 2020 Plan.

Eligible LTR plan participants received an individual target award opportunity for a new three-year Reward Performance Period (i.e., target award grant made in 2019 is for years 2019 through 2021). Compensation earned for growth in the financial measures over each Reward Performance Period is paid in cash in the year following the end of the respective Reward Performance Period, assuming the minimum net income target was achieved in the final year of the Reward Performance Period. Estimated compensation is recorded during each year of a Reward Performance Period. At December 31, 2022, the Company had one open Reward Performance Period, which was paid in 2023.

Compensation expense associated with LTR plan was $0, $892, and $3,059 for the years ended December 31, 2023, 2022, and 2021, respectively. Amounts paid in 2023 and 2022 for the LTR plan were $2,237 and $4,023, respectively.

Stock-Based Award Plans

The 2020 Plan provides the ability to grant cash and equity-based incentive awards to eligible employees, directors and service providers in order to attract, retain, and motivate those that make important contributions to the Company. The 2020 Plan provides for the award of stock options, RSAs, RSUs, and other cash compensation. The ESPP provides eligible employees with rights during each six-month ESPP offering period to purchase shares of the Company’s Class A at the ESPP discount through payroll deductions. Amounts withheld or received from participants are reflected in accrued salaries and benefits in the consolidated balance sheets until such shares are purchased. Amounts withheld from participants for the offering periods ending May 31, 2024 and 2023 aggregated $371 and $311 as of December 31, 2023 and 2022, respectively.

2020 Plan

Upon commencement of the 2020 Plan, an aggregate of 16,500 shares of our Class A were available for issuance. The number of shares available for issuance are increased annually on January 1 of each calendar year beginning in 2021 and ending in and including 2030, equal to the lesser of (i) 4% of the shares of Class A and Class B outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by the Board. No more than 3,000 shares of Class A may be issued under the 2020 Plan upon the exercise of incentive stock options. Shares available under the 2020 Plan may consist of authorized but unissued shares, shares purchased on the open market, or treasury shares. If an award under the 2020 Plan expires, lapses, or is terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, any unused shares subject to the award will again be available for new grants under the 2020 Plan. Awards granted under the 2020 Plan in substitution for any options or other stock or stock-based awards granted by an entity before the entity’s merger or consolidation with or acquisition by the Company of the entity’s property or stock will not reduce the shares available for grant under the 2020 Plan but will count against the maximum number of shares that may be issued upon the exercise of incentive stock options.

As of December 31, 2023, 15,676 shares of our Class A were available for issuance under the 2020 Plan. No incentive stock options that would be subject to the 3,000 Class A share limit were issued or outstanding under the 2020 Plan at December 31, 2023.

Awards issued under the 2020 Plan vest based on service criteria established by the Board. The Company has elected to account for forfeitures as they occur rather than estimate forfeitures at date of grant.

Options under 2020 Plan

The following table summarizes activity for options outstanding under the 2020 Plan:

				Weighted
			Weighted	Average
			Average	Remaining	Aggregate
			Exercise	Contractual	Intrinsic
2020 Plan Option Activity	Units		Price	Life (Years)	Value
Outstanding at January 1, 2023	8,508	$	4.34	4.3	$	86,514
Exercised	(2,782)	$	2.32
Forfeited	(34)	$	5.82
2020 Plan options outstanding at December 31, 2023	5,692	$	5.32	4.7		124,327
2020 Plan options exercisable at December 31, 2023	4,289	$	4.31	4.1		97,737

The detail of options outstanding, vested and exercisable under the 2020 Plan as of December 31, 2023 is as follows:

	Options Outstanding		Options Vested and Exercisable
		Weighted		Weighted
		Average		Average
Exercise Prices	Units	Life (Years)	Units	Life (Years)
$0.15 to $0.71	786	*	786	*
$2.15	147	1.1	147	1.1
$2.50	1,721	2.7	1,721	2.7
$2.67	63	3.1	63	3.1
$3.17	431	4.4	431	4.4
$3.73	1,236	5.8	490	5.8
$4.70	603	6.1	261	6.1
$18.47	213	7.9	107	7.9
$18.96	185	7.6	120	7.6
$19.00	65	7.7	32	7.7
$32.16	242	7.2	131	7.2
	5,692		4,289
*These Options have indefinite contractual lives.

The Board intends all options granted to be exercisable at a price per share not less than the per share fair market value of the Company’s Class A underlying the options on the date of grant. Compensation expense to participants under the 2020 Plan is measured based on the grant date fair value of the awards and recognized in the consolidated statements of comprehensive loss over the period during which the participant is required to perform the requisite services. The vesting period is generally one to four years.

The Company issued 779 options under the 2020 Plan in 2021. No options were issued during 2022 or 2023. The assumptions used in the Black-Scholes models to determine the value of the options issued during these periods are as follows:

	Option Valuation Period
	Q4 2021			Q3 2021			Q3 2021			Q2 2021			Q1 2021
Fair market value of common stock	$	18.47		$	18.96		$	19.00		$	17.66		$	32.16
Volatility		37.4	%		37.1	%		37.1	%		36.8	%		36.8	%
Expected term (years)		5.0			5.0			5.0			6.0			6.0
Expected dividend yield		—	%		—	%		—	%		—	%		—	%
Risk-free interest rate		1.3	%		0.8	%		0.9	%		0.4	%		0.4	%

The fair market value of common stock reflects the market closing price on the NASDAQ Global Market exchange on the respective option grant date. As of the valuation dates, the Company lacked sufficient historical data on the volatility of its stock price. Selected volatility is representative of expected future volatility and was based on the historical and implied volatility of comparable publicly traded companies over a similar expected term. The expected term represents the term the options are expected to be exercised over, which differs from the term of the option grants which is ten years. The Company does not expect to pay dividends. The risk-free interest rate was based on the rate for a U.S. Treasury zero-coupon issue with a term that closely approximates the expected term of the option grants.

At December 31, 2023, $4,756 of unrecognized compensation expense associated with the options is expected to be recognized over a weighted average period of approximately 1.2 years.

Restricted Stock Units

The following table summarizes RSU activity for the periods presented:

		Weighted
		Average
		Grant Date Fair
	Units	Value Per Share
Outstanding at January 1, 2023	2,562	$	15.90
Granted	2,627		16.64
Vested	(796)		17.45
Forfeited	(222)		15.23
Outstanding at December 31, 2023	4,171	$	16.11

Stock-based compensation cost for RSUs is measured based on the fair value of the Company’s underlying common stock on the date of grant. Compensation cost will be recognized on a straight-line basis in the consolidated statements of comprehensive loss over the period during which the participant is required to perform services in exchange for the award, which is generally one to four years. At December 31, 2023, $46,180 of unrecognized compensation cost for RSUs is expected to be recognized over a weighted average period of approximately 2.6 years.

In connection with the Taxamo acquisition, certain continuing employees of Taxamo received RSUs with service and performance conditions, which were measured as of December 31, 2023. These targets were not met, therefore, no compensation expense was recorded and they have been forfeited as of December 31, 2023.

Restricted Stock Awards

The following table summarizes RSA activity for the periods presented:

		Weighted
		Average
		Grant Date Fair
	Units	Value Per Share
Outstanding at January 1, 2023	235	$	14.91
Granted	62		22.69
Vested	(206)		14.32
Outstanding at December 31, 2023	91	$	21.50

Stock-based compensation cost for RSAs is measured based on the fair value of the Company’s underlying common stock on the date of grant. Compensation cost will be recognized on a straight-line basis in the consolidated statements of comprehensive loss over the period during which the participants are required to perform services in exchange for the award, which is generally one to four years. At December 31, 2023, $949 of unrecognized compensation cost for RSAs is expected to be recognized over a weighted average period of approximately 0.5 year.

Employee Stock Purchase Plan

The ESPP permits participants to purchase Class A primarily through payroll deductions of up to a specified percentage of their eligible compensation. The maximum number of shares that may be purchased by a participant during any offering period is determined by the plan administrator in advance of each offering period.

A total of 1,000 shares of Class A were initially reserved for issuance under the ESPP. The number of shares available for issuance under the ESPP increases annually on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (i) 1% of the shares of Class A and Class B outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the Board, provided that no more than 16,000 shares of Class A may be issued. The ESPP is administered by a committee of the Board. As of December 31, 2023, there were 4,914 shares available for issuance under the ESPP.

On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of Class A. The option will expire at the end of the applicable offering period and will be exercised at that time to the extent of the payroll deductions accumulated or contributions made during such offering period. The purchase price of the shares, in the absence of a contrary designation, is 85% of the lower of the fair value of the Class A on the first or last day of the ESPP offering period. Participants may voluntarily end their participation in the plan at any time during a specified period prior to the end of the applicable offering period and will be paid their accrued payroll deductions and related contributions, if applicable, that have not yet been used to purchase shares of Class A. If a participant withdraws from the plan during an offering period, the participant cannot rejoin until the next offering period. Participation ends automatically upon a participant's termination of employment.

As of December 31, 2023 and 2022, there was approximately $375 and $324, respectively, of unrecognized ESPP stock-based compensation cost that is expected to be recognized on a straight-line basis over the remaining term of the offering periods ending on May 31, 2024 and 2023, respectively.

The fair value of ESPP purchase rights for the offering periods is comprised of the value of the 15% ESPP discount and the value associated with the call or put over the respective ESPP offering period. ESPP offering periods reflected in

the December 31, 2023, financial statements include the periods noted below in the table. The value of the call or put was estimated using the Black-Scholes model with the following assumptions:

		Offering Period Ending
	5/31/2024			11/30/2023			5/31/2023			11/30/2022			5/31/2022
Fair market value of common stock	$	27.82		$	21.76		$	17.21		$	11.16		$	17.38
Volatility		36.6	%		39.4	%		46.4	%		35.4	%		37.3	%
Expected term (years)		0.5			0.5			0.5			0.5			0.5
Expected dividend yield		-	%		-	%		-	%		-	%		-	%
Risk-free interest rate		5.3	%		5.4	%		4.7	%		1.6	%		0.1	%

Volatility is representative of expected stock price volatility over the offering period. Effective with the offering period beginning December 1, 2022, the Company’s volatility was applied and will be applied to future offering periods. Prior to this offering period, volatility was based on the historical and implied volatility of comparable publicly traded companies over a similar expected term for the respective offering periods. The expected term represents the term of the ESPP offering period, which is six months. The risk-free interest rate was based on the rate for a U.S. Treasury zero-coupon issue with a term that closely approximates the expected term of the award at the date nearest the offering term.

Stock-Based Compensation

The Company recognized total stock-based compensation cost related to incentive awards, net of forfeitures, as follows:

	For the year ended December 31,
	2023		2022		2021
Stock-based compensation expense:
Stock options	$	6,349	$	7,081	$	17,533
RSUs		24,257		9,286		2,964
RSAs		2,496		2,768		5,126
ESPP		817		594		537
Total stock-based compensation expense	$	33,919	$	19,729	$	26,160

The Company recognized stock-based compensation cost in the consolidated statements of comprehensive loss as follows:

	For the year ended December 31,
	2023		2022		2021
Stock-based compensation expense:
Cost of revenues, software subscriptions	$	2,834	$	2,090	$	2,336
Cost of revenues, services		1,846		1,433		2,648
Research and development		5,994		1,798		2,620
Selling and marketing		8,380		6,284		6,371
General and administrative		14,865		8,124		12,185
Total stock-based compensation expense	$	33,919	$	19,729	$	26,160

The total recognized tax benefit related to the stock-based compensation expense for the years ended December 31, 2023, 2022, and 2021 was $16,541, $3,324, and $14,683, respectively. The tax benefit from stock options exercised during the years ended December 31, 2023, 2022, and 2021 was $13,079, $2,710, and $14,159, respectively.