Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Our 2016 LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock and dividend equivalent rights to our senior executives, directors, employees, and other service providers. Awards granted under the 2016 LTIP vest over the periods determined by the Board of Directors or the Compensation Committee of the Board of Directors, generally one to three years. The stock options granted under the 2016 LTIP expire no more than ten years after the date of grant. No stock options granted under the 2016 LTIP are outstanding as of March 31, 2022. Approximately 0.5 million shares of our common stock were reserved for future grants as of March 31, 2022 under the 2016 LTIP. The Company records stock-based compensation related to accrued compensation in which it intends to settle in shares of the Company’s common stock. However, it is the Company’s discretion on whether this compensation will ultimately be paid in stock or cash as it has the right to dictate the form of these payments up until the date at which they are paid.

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award.

The following are the stock-based compensation expense incurred for the Service-Based and Performance-Based RSUs, net of forfeitures, and accrued compensation (in thousands). There were no income tax benefits recognized on the share-based compensation expense for both periods.


	Three Months Ended March 31,
	2022		2021
Cost of sales - services	$	1,006	$	625
Sales and marketing	1,669		1,547
Research and development	1,312		461
General and administrative	10,311		11,037
Total stock-based compensation expense	$	14,298	$	13,670

Restricted Stock Awards and Restricted Stock Unit (collectively “RSU”) Activity

The Company grants RSUs to our senior executives, directors, employees and service providers. Our stock-based compensation primarily consists of service-based RSUs and performance-based RSUs.

Service-Based RSU Awards

A summary of the awards of Service-Based RSUs that vest upon the completion of a service requirement is presented below:


	Number of Shares	Weighted- Average Grant Date Fair Value (per share)		Weighted- Average Contractual Life (years)	Aggregate Intrinsic Value
					(in thousands)
For the Three Months Ended March 31, 2022
Beginning balance - unvested	3,030,608	$	34.94	1.3	$	46,700
Granted	3,438,602	10.19		—	—
Vested	(1,328,876)	33.38		—	—
Forfeited	(81,259)	35.83		—	—
Ending balance - unvested	5,059,075	$	18.38	1.1	$	50,043
For the Three Months Ended March 31, 2021
Beginning balance - unvested	59,521	$	0.18	2.4	$	2,000
Granted	2,674,863	36.56		—	—
Vested	—	—		—	—
Forfeited	(5,900)	36.63		—	—
Ending balance - unvested	2,728,484	$	35.76	1.9	$	103,500

As of March 31, 2022, there was approximately $79.6 million of unrecognized stock-based compensation expense related to Service-Based RSUs, and this unrecognized expense is expected to be recognized over a weighted-average period of 1.5 years on a straight-line basis.

Performance-Based RSU Awards

A summary of the awards of Performance-Based RSUs that vest upon the attainment of certain price targets of the Company’s common stock is presented below:


	Number of Shares	Weighted- Average Grant Date Fair Value (per share)		Weighted- Average Contractual Life (years)	Aggregate Intrinsic Value
					(in thousands)
For the Three Months Ended March 31, 2022
Beginning balance - unvested	492,727	$	30.07	2.2	$	7,600
Granted	—	—		—	—
Vested	—	—		—	—
Forfeited	(52,941)	30.84		—	—
Ending balance	439,786	$	29.97	1.8	$	4,385
For the Three Months Ended March 31, 2021
Beginning balance	—	$	—	—	—
Granted	438,403	30.84		—	—
Vested	—	—		—	—
Forfeited	—	—		—	—
Ending balance - unvested	438,403	$	30.84	0.2	$	16,600

In 2021 the Company granted certain senior executives awards of Performance-Based RSUs that could settle into 458,903 shares of our common stock. The awards will vest only if, during the three-year period from the date of grant, (a) the Company’s common stock, as listed on the Nasdaq Global Market, trades at or above $42.50 per share (the “Target Price”) for 20 of 30 consecutive trading days or (b) the weighted-average of the per-share price of the Company’s common stock over any 30 days consecutive trading days is at least equal to the Target Price. Further, the Company granted 50,000 shares of Performance-Based RSUs to certain employees that will fully vest upon achieving certain operational milestones during a three-year period from the grant date.

For the Performance-Based RSUs containing market conditions, the conditions are required to be considered when calculating the grant date fair value. In order to reflect the substantive characteristics of these awards, a Monte Carlo simulation valuation model was used to calculate the grant date fair value of such awards. Monte Carlo approaches are a class of computational algorithms that rely on repeated random sampling to compute their results. This approach allows the calculation of the value of such Performance-Based RSUs based on a large number of possible stock price path scenarios. As the Company recently completed its IPO in November 2020, expected volatility was based on the average historical stock price volatility of comparable publicly-traded companies over the performance period. The risk-free rate is based on the U.S. Treasury zero-coupon issues in effect at the time of grant over the performance period. The expense for these awards is recognized over the derived service period as determined through the Monte Carlo simulation model.

Our key assumptions include a performance period ranging from 2.45 to 2.92 years, expected volatility between 57.4% - 58.8%, and a risk-free rate of 0.18% - 0.29%. The fair value at the grant date and derived service periods calculated for these market condition Performance-Based RSUs were $19.12 - $30.84 and between 0.38 - 0.76 years, respectively.

As of March 31, 2022, there was approximately $1.1 million of unrecognized stock-based compensation expense related to these Performance-Based RSUs, and this unrecognized expense is expected to be recognized over a weighted-average period of 1.7 years on a straight-line basis.