Stockholders' Equity

3 Months Ended

Jun. 30, 2023

Stockholders Equity Note [Abstract]

Stockholders' Equity

15. Stockholders’ Equity

Equity Incentive Plans

In August 2015, our shareholders approved a stock option and incentive plan (the “2015 Plan”) under which 11,500,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance stock awards and other share-based awards. In August 2017, our shareholders approved an amendment to the 2015 Plan, to, among other items, increase the number of shares of common stock reserved for issuance thereunder by 6,000,000 shares, which was further amended in August 2019 as approved by our shareholders, to, among other items, increase the number of shares of common stock reserved for issuance thereunder by an additional 3,575,000 shares. In October 2021, our shareholders approved an amendment and restatement of the Company’s 2015 Equity Incentive Plan (the “Amended 2015 Plan”), to, among other items, increase the number of common stock reserved for issuance thereunder by an additional 1,850,000 shares. The Amended 2015 Plan provides that our employees and directors may, at the discretion of the Board of Directors (“Board”) or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the Amended 2015 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the Amended 2015 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the Amended 2015 Plan, awards under the Amended 2015 Plan will fully vest under certain circumstances. As of June 30, 2023, there were 937,289 outstanding options, 3,078,430 outstanding shares of restricted stock awards, certain outstanding performance stock unit awards as described further below, and 876,740 shares available for future grant under the Amended 2015 Plan.

In September 2021, the Board adopted the 2021 Employment Inducement Equity Incentive Plan (the “Inducement Plan”) and initially reserved 1,500,000 shares of common stock for issuance under the Inducement Plan. The Inducement Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board or the Board of Directors or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. The terms of the Inducement Plan are substantially similar to the terms of our Amended 2015 Plan, with the exception that incentive stock options may not be granted under the Inducement Plan.

As of June 30, 2023, there were 675,195 outstanding shares of restricted stock awards, 425,666 outstanding performance stock unit awards, and 159,384 shares available for future grant under the Inducement Plan.

Stock-Based Compensation

The following table summarizes total share-based compensation expense included in the condensed consolidated statements of net income and comprehensive income for the three months ended June 30, 2023 and 2022:

	Three Months Ended June 30,
	2023			2022
Costs and expenses:
Cost of revenue	$	842		$	563
Research and development costs		655			1,583
Selling, general and administrative		6,459			6,620
Total share-based compensation		7,956			8,766
Income tax benefit		(1,894	)		(2,045	)
Decrease in net income	$	6,062		$	6,721

Share-based compensation expense under our equity incentive plans is based on the number awards that ultimately vest and forfeitures are accounted for as they occur.

Restricted Stock Awards

Restricted stock awards activity during the three months ended June 30, 2023 is summarized as follows:

				Weighted-
				Average
				Grant-Date
	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2023		3,297,512		$	16.72
Granted		1,307,856			15.49
Vested		(749,953	)		15.82
Canceled		(101,790	)		16.42
Outstanding, June 30, 2023		3,753,625		$	16.48

Share-based compensation expense related to restricted stock awards was $5,991 and $6,279 for the three months ended June 30, 2023 and 2022, respectively.

The weighted-average grant date fair value for the restricted stock awards was estimated using the market price of the common stock on the date of grant. The fair value of the restricted stock awards is amortized on a straight-line basis over the vesting period, which is generally between one to three years.

As of June 30, 2023, $51,999 of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of 2.1 years. This amount does not include the cost of new restricted stock awards that may be granted in future periods.

The total fair value of restricted stock awards vested as of the vesting dates were $11,692 and $11,091 for the three months ended June 30, 2023 and 2022, respectively.

Stock Options

The following table summarizes the stock option transactions during the three months ended June 30, 2023:

				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
	Number of			Price		Contractual		Value
	Shares			per Share		Life (years)		(in thousands)
Outstanding, March 31, 2023		1,130,813		$	14.75		1.7	$	3,011
Exercised		(188,324	)		14.15		1.4	$	228
Forfeited/Canceled		(500	)		—
Expired		(4,700	)		16.64
Outstanding, June 30, 2023		937,289		$	14.86		1.8	$	1,342
Vested and expected to vest, June 30, 2023		937,289		$	14.86		1.8	$	1,342
Exercisable, June 30, 2023		937,289		$	14.86		1.8	$	1,342

Net Share Settlements

Restricted stock awards and performance stock units are generally net share-settled upon vesting to cover the required withholding taxes, and the remaining share amount is transferred to the employee. The majority of restricted stock awards and performance stock units that vested during the three months ended June 30, 2023 and 2022 were net-share settled such that we withheld shares with value equivalent to the employees’ applicable income tax obligations for the applicable income and other employment taxes and remitted the equivalent amount of cash to the appropriate taxing authorities. Total payments for the employees’ applicable income tax obligations are reflected as a financing activity within the accompanying consolidated statements of cash flows. The total shares withheld during the three months ended June 30, 2023 and 2022 were 249,975 and 202,512 respectively, and were based on the value of the restricted stock awards and performance stock units on their vesting date as determined by our closing stock price. These net-share settlements had the effect of share repurchases by us as they reduced the number of shares that would have otherwise been issued at the vesting date.

Performance Stock Units and Awards

On October 26, 2020, the Compensation Committee of the Board approved 408,861 performance stock unit awards to be granted to certain executives and non-executive members of the executive leadership team, which vest only in the event certain performance goals are achieved and with continuous service through the date the goals are certified. Approximately 80% of the performance stock units are tied to the Company’s fiscal year 2022 revenue goal and 20% are tied to the Company’s fiscal year 2023 revenue goal. Performance stock unit awards funded for fiscal year 2022 and fiscal year 2023 revenue performance will be modified for cumulative 3-year TSR on the three-year grant date anniversary, which is also the cliff vest date. The number of shares to be issued may vary between 8.5% and 199.5% of the number of target performance stock units depending on performance, and no such shares will be issued if threshold performance is not achieved. The weighted-average grant date fair value of the awards was $16.25 per share, which was estimated using a Monte Carlo-based valuation model for the awards based on total shareholder return and using a probability adjusted achievement rate combined with the market price of the common stock on the date of grant for the awards based on revenue targets.

On September 20, 2021, the Compensation Committee of the Board approved an award of 450,000 performance stock units to be granted to our Chief Executive Officer under the Inducement Plan. The award has a grant date of September 22, 2021 and portions of the award vest upon both the attainment of five separate pre-determined stock price milestones during a five-year performance period and continued service over a period of three years following the grant date. The fair value and derived service period for each share-price milestone tranche was estimated separately using a Monte-Carlo based valuation model. The expense for each share-price milestone tranche is amortized over the longer of the derived service period or the explicit service period. The weighted-average grant date fair value of the award was $10.52 per share. As of June 30, 2023, 24,334 units were earned and issued as shares.

On October 26, 2021, the Compensation Committee of the Board approved 476,713 performance stock units to be granted to certain members of the executive leadership team. The awards have a grant date of November 2, 2021 and portions of the award vest upon both the attainment of four separate pre-determined stock price milestones through September 22, 2026 and continued service over a period of three years following the grant date. The fair value and derived service period for each share-price milestone tranche was estimated separately using a Monte-Carlo based valuation model. The expense for each share-price milestone tranche is amortized over the longer of the derived service period or the explicit service period. The weighted-average grant date fair value of the award was $13.02 per share. During the year ended June 30, 2023, 33,998 units were earned and issued as shares.

On October 25, 2022, the Compensation Committee of the Board approved 475,337 target performance stock unit awards to be granted to certain executives and non-executive members of the executive leadership team. The awards have a grant date of October 28, 2022 and vest only in the event certain performance goals are achieved and with continuous service through the date

the goals are certified. Approximately 50% of the performance stock units are tied to the Company’s fiscal year 2025 revenue goal and 50% are tied to the Company’s fiscal year 2025 EBITDA goal. Performance stock unit awards funded will be modified for cumulative 3-year TSR on the three-year grant date anniversary, which is also the cliff vest date. The number of shares to be issued may vary between 0% and 210% of the number of target performance stock units depending on performance, and no such shares will be issued if threshold performance is not achieved. The weighted-average grant date fair value of the awards was $22.81 per share, which was estimated using a Monte Carlo-based valuation model for the awards based on total shareholder return and using a probability adjusted achievement rate combined with the market price of the common stock on the date of grant.

Share-based compensation expense related to the performance stock units and awards was $1,774 for the three months ended June 30, 2023. Share-based compensation expense related to the performance stock units and awards was $2,202 for the three months ended June 30, 2022.

As of June 30, 2023, $9,588 of total estimated unrecognized compensation costs related to performance stock units and awards is expected to be recognized over a weighted-average period of 2.0 years. This amount does not include the cost of new performance stock units and awards that may be granted in future periods.

Employee Share Purchase Plan

On August 11, 2014, our shareholders approved an Employee Share Purchase Plan (the “Purchase Plan”) under which 4,000,000 shares of common stock were reserved for future grant. The Purchase Plan allows eligible employees to purchase shares through payroll deductions of up to 15% of total base salary at a price equal to 90% of the lower of the fair market values of the shares as of the beginning or the end of the corresponding offering period. Any shares purchased under the Purchase Plan are subject to a six-month holding period. Employees are limited to purchasing no more than 1,500 shares on any single purchase date and no more than $25 in total fair market value of shares during any one calendar year. As of June 30, 2023, we have issued 1,103,056 shares under the Purchase Plan and 2,896,944 shares are available for future issuance.

Share-based compensation expense recorded for the employee share purchase plan was $191 and $219 for the three months ended June 30, 2023 and 2022, respectively.

Share Repurchase Program

In October 2021, the Board authorized a share repurchase program under which we may repurchase up to $60,000 of our outstanding shares of common stock through March 2023. On October 25, 2022, the Board authorized a new share repurchase program under which we may repurchase up to an additional $100,000 of outstanding shares of our common stock through March 2025.

The timing and amount of any share repurchases under the share repurchase programs will be determined by our management at its discretion based on ongoing assessments of the capital needs of the business, the market price of our common stock and general market conditions. Share repurchases under the programs may be made through a variety of methods, which may include open market purchases, in block trades, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. Repurchases may also be made under Rule 10b5-1 plans, which permit shares of common stock to be repurchased through pre-determined criteria. The programs do not obligate the Company to acquire any particular amount of our common stock, and the share repurchase programs may be suspended or discontinued at any time at our discretion.

We did not repurchase any shares of common stock in the three months ended June 30, 2023. As of June 30, 2023, $74,303 remained available for share repurchases pursuant to our share repurchase programs.