Stock-Based Compensation | Stock-Based Compensation We have the following stock-based compensation plans: the EosHealth, Inc. 2008 Stock Incentive Plan (the “2008 Plan”), the Livongo Health, Inc. 2014 Stock Incentive Plan (the “2014 Plan”), and the 2019 Equity Incentive Plan (the "2019 Plan", and, together with the 2014 Plan and the 2008 Plan, the "Plans"). Our 2019 Plan became effective as of the business day immediately prior to the effective date of our IPO. A total of 8,004,000 shares of our common stock was initially reserved for issuance pursuant to our 2019 Plan. In addition, the shares reserved for issuance under our 2019 Plan include (i) shares that were reserved but unissued under our 2014 Plan as of immediately prior to its termination, plus (ii) shares subject to awards under our 2014 Plan, and our 2008 Plan that, on or after the termination of the 2014 Plan, expire or terminate and shares previously issued pursuant to our 2014 Plan or 2008 Plan, as applicable, that, on or after the termination of the 2014 Plan, are forfeited or repurchased by us (provided that the maximum number of shares that may be added to our 2019 Plan from the 2014 Plan and 2008 Plan is 21,770,029 shares). The number of shares of our common stock available for issuance under our 2019 Plan will also include an annual increase on the first day of each fiscal year beginning on January 1, 2020, equal to the least of: (i) 7,120,000 shares; (ii) 4% of the outstanding shares of our common stock as of the last day of our immediately preceding fiscal year; or (iii) such other amount as our board of directors may determine as of no later than the last day of our immediately preceding fiscal year. Stock Options Stock option activity under the Plans is as follows: Options Outstanding Shares Available for Grant Shares Subject to Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands, except per share data and years) Balance as of December 31, 2019 8,160 14,020 $ 1.85 6.7 $ 325,474 Shares authorized 3,812 — Exercised — (1,247 ) $ 1.38 Forfeited/cancelled 144 (144 ) $ 1.88 Restricted stock units and PSUs granted (726 ) — Restricted stock units and PSUs forfeited 101 — Restricted stock units and PSUs withheld for income taxes 375 — Balance as of March 31, 2020 11,866 12,629 $ 1.89 6.4 $ 336,424 Vested and exercisable as of March 31, 2020 9,176 $ 1.53 6.0 $ 247,727 The aggregate intrinsic value of stock option awards exercised was $31.2 million and $4.2 million for the three months ended March 31, 2020 and 2019 , respectively. Aggregate intrinsic value represents the difference between the exercise price and the fair value of the shares underlying common stock on the date of exercise. No options were granted during the three months ended March 31, 2020 and 2019. As of March 31, 2020 , total unrecognized compensation expense related to unvested stock options, Performance RSUs and restricted stock units granted was $49.8 million , which is expected to be recognized over a weighted-average period of 3.2 years. Options and Restricted Stock Units with Service- and Market-Based Vesting Conditions In March 2019, we canceled stock options with a combination of service- and market-based vesting conditions covering a total of 196,460 shares that were granted in 2018. In January 2019, we granted restricted stock units covering a total of 161,250 shares with a combination of service- and market-based vesting conditions to an executive. We recognized stock-based compensation expense of $0.2 million and $0.4 million for the three months ended March 31, 2020 and 2019 , respectively, in connection with these service- and market-based grants. Additionally, we recognized stock-based compensation expense of $0.2 million related to the canceled market-based options for the three months ended March 31, 2019 . The unrecognized stock-based compensation expense for market-based awards as of March 31, 2020 was $1.4 million , which is expected to be recognized over a weighted-average period of 2.5 years. Restricted Stock Awards Shares Weighted- Average Grant Date Fair Value (in thousands, except per share data) Unvested balance, December 31, 2019 736 $ 9.76 Vested (122 ) $ 9.76 Unvested balance, March 31, 2020 614 $ 9.76 In March 2019, we issued a restricted stock award covering 982,301 shares of our common stock to an executive with a grant date fair value of $9.6 million . We recognized restricted stock awards related stock-based compensation expense of $0.5 million and $0.2 million for the three months ended March 31, 2020 and 2019 , respectively. As of March 31, 2020 , the unrecognized stock-based compensation expense related to these restricted stock awards was $5.0 million , which is expected to be recognized over a weighted-average period of 2.4 years. Restricted Stock Units and Performance Stock Units Restricted Weighted- (in thousands, except per Balance as of December 31, 2019 4,708 $ 11.31 Granted 726 $ 24.41 Released (620 ) $ 8.79 Forfeited (101 ) $ 17.95 Balance as of March 31, 2020 4,713 $ 13.52 Prior to our IPO, we granted restricted stock units that contain both service- and performance-based vesting conditions to our executives, employees and consultants (“Performance RSUs”). The service-based vesting condition is generally satisfied (i) over four years with 25% vesting on the one-year anniversary of the award and the remainder vesting monthly over the next 36 months , or (ii) over four years with 1/48 vesting on the one-month anniversary of the award, and remainder vesting monthly over the next 47 months , subject to the grantee’s continued service with us through the vesting dates. The performance-based vesting condition is satisfied upon the earlier of (i) a change in control where the consideration paid to our equity security holders is cash, publicly traded stock, or a combination of both, or (ii) six months and one day following our IPO. The satisfaction of the performance-based vesting condition became probable upon the completion of our IPO in July 2019, at which point we recorded cumulative stock-based compensation expense using the accelerated attribution method. During the three months ended March 31, 2020, the vesting terms for Performance RSUs were modified from monthly to quarterly basis. The modification had no material impact on our condensed consolidated financial statements. Subsequent to our IPO in July 2019, we grant restricted stock units to our executives, employees and consultants that only contain service-based vesting conditions ("RSUs"). The service-based vesting condition is generally satisfied over four years on a quarterly basis, with each 1/16 vesting on prefixed quarterly vesting anchor dates, subject to the grantee's continued service with us through the vesting dates. In January 2019, we granted restricted stock units covering 982,301 shares to an executive that contain only service-based vesting conditions over a four year period and recognized stock-based compensation expense of $0.5 million and 0.4 million , respectively, during the three months ended March 31, 2020 and 2019. In addition, we granted restricted stock units covering 491,151 shares that immediately vested on the grant date and recognized $3.8 million of stock-based compensation expense in our condensed consolidated statements of operations for the three months ended March 31, 2019. During the three months ended March 31, 2020 and 2019, $6.1 million and $4.2 million stock-based compensation expense related to performance RSUs and RSUs, respectively, was recognized in our condensed consolidated statements of operations. Additionally, included in the shares granted during the three months ended March 31, 2020, we issued performance-based restricted stock units covering 23,196 shares which consist of both service- and performance-based conditions. The service-based vesting condition is satisfied over one year on a quarterly basis from the date the applicable sales milestones are met. The performance-based vesting condition is satisfied upon the achievement of certain sales milestones. In April 2019, we issued other performance-based restricted stock units covering 100,000 shares which consist of both service- and performance-based vesting conditions including both the achievement of certain sales milestones and our IPO. The service-based vesting condition is satisfied over four years from the date the sales milestones were met. The performance-based vesting condition was satisfied upon both the achievement of certain sales milestones and our IPO. Stock-based compensation expense related to these performance-based restricted stock units that are expected to vest was $0.1 million during the three months ended March 31, 2020 . 2019 Employee Stock Purchase Plan In July 2019, our board of directors adopted, and our stockholders approved, our Employee Stock Purchase Plan ("ESPP"). Our ESPP became effective as of the business day immediately prior to the effective date of our IPO. A total of 890,000 shares of our common stock was initially available for sale under our ESPP. In addition, the number of shares available for sale under our ESPP will include an annual increase on the first day of each fiscal year beginning on January 1, 2020, equal to the least of: (i) 2,670,000 shares, (ii) 1% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as our board of directors may determine as of no later than the last day of our immediately preceding fiscal year. Each offering period will be approximately six months in duration commencing on the first trading day on or after May 15 and November 15 of each year and terminating on the first trading day on or after November 15 and May 15 approximately six months later, provided however that the first offering period commenced on the first trading day after our IPO date and will end on May 15, 2020. All regular employees, including executive officers, employed by us or by any of our designated affiliates, except for those holding 5% or more of the total combined voting power or value of our common stock, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of our common stock under the ESPP. Unless otherwise determined by our board of directors, the purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the first trading day of each offering period or on the purchase date, subject to a limit of the lesser of (i) 500 shares of our common stock, or (ii) $12,500 divided by the fair market value of our common stock as of the first day of the offering period, with any resulting fractional share rounded down to the nearest whole share. As of March 31, 2020 , no shares of common stock have been purchased under our ESPP. During the three months ended March 31, 2020 , we recognized $0.4 million in stock-based compensation expense related to our ESPP in our condensed consolidated statements of operations. As of March 31, 2020 , the unrecognized stock-based compensation expense related to our ESPP is $0.2 million , which is expected to be recognized over a weighted average period of 0.1 year. Award Modifications In March 2020, we accelerated vesting of 11,412 RSUs for terminated employees, resulting in an incremental stock-based compensation expense of $0.1 million recognized in the consolidated statements of operations for the three months ended March 31, 2020. Stock-Based Compensation Expense Stock-based compensation expense in the condensed consolidated statements of operations is summarized as follows: Three Months Ended March 31, 2020 2019 (in thousands) Cost of revenue $ 92 $ 6 Research and development expenses 2,216 361 Sales and marketing expenses 2,052 219 General and administrative expenses 3,703 4,924 Total stock-based compensation expense $ 8,063 $ 5,510 Stock-based compensation costs related to capitalized internal-use software during the three months ended March 31, 2020 was $0.1 million , and less than $0.1 million for the three months ended March 31, 2019. |