Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.22.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2022
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
Management Incentive Units
During 2019, LiveVox TopCo established a Management Incentive Unit program whereby the LiveVox TopCo board of directors has the power and discretion to approve the issuance of Class B Units of LiveVox TopCo that represent MIUs to any manager, director, employee, officer or consultant of the Company or its subsidiaries. Vesting begins on the date of issuance, and the MIUs vest ratably over five years with 20% of the MIUs vesting on each anniversary of a specified vesting commencement date, subject to the grantee’s continued employment with the Company on the applicable vesting date. Vesting of the MIUs will accelerate upon consummation of a “sale of the company”, which is defined by the LiveVox TopCo limited liability company agreement.
The Company records stock-based compensation expense for the issued and outstanding MIUs based on the service condition on a straight-line basis over the requisite service period of five years, reduced for actual forfeited MIUs. Stock-based compensation
expense for MIUs is measured based on the grant date fair value of the award estimated by using a Monte Carlo simulation. The weighted average assumptions (weighted by relative grant date fair value) used in the Monte Carlo simulation to value MIUs during the periods presented are as follows:

March 31, 2022 December 31, 2021
Holding period 2.00 years 2.00 years
Volatility 45.0 % 45.0  %
Discount for lack of marketability 28.0 % 28.0  %
Risk-free rate 1.6 % 1.6  %
MIU activities for the three months ended March 31, 2022 are summarized as follows (in thousands, except for per share data):

Number of Shares Weighted-average Grant Date Fair Value (per share) Weighted-average Remaining Contractual Term (1)
Outstanding at December 31, 2021 2,814 $ 0.79 
Granted — 
Vested (704) 0.79 
Forfeited — 
Outstanding at March 31, 2022 2,110 $ 0.79  1.31 years
(1) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding by the end of the reporting period.

2021 Equity Incentive Plan
On June 16, 2021, the stockholders of the Company approved the 2021 Plan, which became effective upon the closing of the Merger on June 18, 2021. As of March 31, 2022, the number of shares reserved for issuance is 14,682,036. The Company grants RSUs and PSUs to employees, executive officers, directors, and consultants of the Company.
On February 11, 2022, the board of directors granted RSUs and PSUs to the Company’s Chief Legal Officer (the “CLO”). The vesting of the time-based component of the RSUs and PSUs associated with the first vesting date (i.e., 25% of the RSUs and PSUs) can be accelerated if the CLO is involuntarily terminated for any reason other than Cause (as defined in the Award Agreements) before November 8, 2022. As of the grant date, the Company determined that it was probable that the vesting period for the entire award would be achieved, and it was not probable that an involuntary termination would occur during the first time-vesting period. Therefore, the grant-date fair values of the CLO’s RSU and PSU awards are recognized over his requisite service period.
Restricted Stock Units
RSUs are subject to service conditions only. Stock-based compensation expense for RSUs issued to employees is recognized on a straight-line basis over the vesting period for the entire award, reduced for actual forfeited RSUs. Stock-based compensation expense for RSUs issued to nonemployees is recognized as the goods are received or services are performed. The fair value of the RSUs is estimated by using the closing price of the Company’s Class A common stock on Nasdaq on the measurement date. As of March 31, 2022, all RSUs granted to employees and nonemployees are classified as equity.
RSU activities for the three months ended March 31, 2022 are summarized as follows (in thousands, except for per share data):
Equity-classified RSUs - employee (1)
Number of Shares Weighted-average Grant Date Fair Value (per share) Weighted-average Remaining Contractual Term (2)
Outstanding at December 31, 2021 4,962  $ 6.44 
Granted 599  4.75 
Vested —  — 
Forfeited (101) 6.26 
Outstanding at March 31, 2022 5,460  $ 6.26  1.65 years
(1) Represents awards granted to employees, executive officers and directors of the Company. Nonemployee directors acting in their role as members of a board of directors are treated as employees if (a) those directors were elected by the Company’s shareholders and (b) the awards granted to nonemployee directors are for their services as directors but not for other services.
(2) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding by the end of the reporting period.
Equity-classified RSUs - nonemployee (1)
Number of Shares Weighted-average Grant Date Fair Value (per share) Weighted-average Remaining Contractual Term (2)
Outstanding at December 31, 2021 20  $ 6.51 
Granted 4.94 
Vested —  — 
Forfeited —  — 
Outstanding at March 31, 2022 22  $ 6.34  1.44 years
(1) Represents awards granted to consultants of the Company.
(2) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding by the end of the reporting period.
Performance-Based Restricted Stock Units
PSUs vest either based on the achievement of predetermined market conditions or based on both service and market conditions. The Company recognizes stock-based compensation expense for PSUs on a tranche-by-tranche basis (i.e., the accelerated attribution method) over an employee’s requisite service period, which is the longer of the time-vesting period or the derived service period inferred from the valuation model. As of March 31, 2022, all PSUs granted to employees are classified as equity, and stock-based compensation expense of equity-classified PSUs is recognized provided that the good is delivered or the service is rendered, regardless of when, if ever, the market conditions are satisfied.
The Company estimates the fair value of the PSUs at each measurement date by using a Monte Carlo simulation. The weighted average assumptions (weighted by relative grant date fair value) used in the Monte Carlo simulation to value PSUs granted during the periods presented are as follows:
March 31, 2022 December 31, 2021
Stock price $ 4.94  $ 6.13 
Measurement period 30.00 years 30.00 years
Expected volatility 47.50  % 47.50  %
Risk-free rate 2.24  % 1.89 %
Vesting hurdle 1 $ 12.50  $ 12.50 
Vesting hurdle 2 $ 15.00  $ 15.00 
Vesting hurdle 3 $ 17.00  $ 17.50 
PSU activities for the three months ended March 31, 2022 are summarized as follows (in thousands, except for per share data):

Equity-classified PSUs - employee (1)
Number of Shares Weighted-average Grant Date Fair Value (per share) Weighted-average Remaining Contractual Term (2)
Outstanding at December 31, 2021 1,612  $ 6.50 
Granted 125  4.94 
Vested —  — 
Forfeited —  — 
Outstanding at March 31, 2022 1,737  $ 6.39  10.67 years
(1) Represents awards granted to employees and executive officers of the Company.
(2) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding by the end of the reporting period.

Stock-Based Compensation Expense
The following tables present the Company's stock-based compensation expense by financial statement line and by award type for the three months ended March 31, 2022 and 2021 (dollars in thousands):

Three Months Ended March 31,
2022 2021
Cost of revenue $ 312  $ 15 
Sales and marketing expense 607  28 
General and administrative expense 660  68 
Research and development expense 900  28 
Total stock-based compensation $ 2,479  $ 139 

Three Months Ended March 31,
2022 2021
Equity-classified awards:
MIUs $ 139  $ 139 
RSUs - employee 2,067  — 
RSUs - nonemployee — 
PSUs - employee 264  — 
Total equity-classified awards 2,479  139 
Total stock-based compensation $ 2,479  $ 139 
As of March 31, 2022, unrecognized stock-based compensation expense related to nonvested awards by award type and their expected weighted-average recognition periods are summarized in the following table (dollars in thousands):

Unrecognized Stock-based Compensation Expense Weighted-average Recognition Period (1)
Equity-classified awards:
MIUs $ 1,529  2.75 years
RSUs - employee 29,166  3.33 years
RSUs - nonemployee 119  3.22 years
PSUs - employee 10,450  10.67 years
Total equity-classified awards 41,264 
Total unrecognized stock-based compensation $ 41,264 
(1) The weighted-average recognition period is calculated as the sum of the weighted remaining period to recognize expense for nonvested awards divided by the sum of the shares that are expected to vest for all awards that have not vested or expired by the end of the reporting period. For awards for which the straight-line method is used for expense recognition, the remaining recognition period is the amount of time between the end of the reporting period and the end of the entire award. For awards for which the accelerated attribution method is used for expense recognition, the remaining recognition period is the amount of time between the end of the reporting period and the end of each separately vesting portion of the award.