Crexendo, Inc. Stock Compensation Disclosure
14. Stock-Based Compensation
We have various incentive stock-based compensation plans that provide for the grant of stock options, restricted stock units (RSUs), and other share-based awards of up to 8,734 shares to eligible employees, consultants, and directors. As of December 31, 2024, we had 1,612 shares remaining in the plans available to grant.
Stock Options
The weighted-average fair value of stock options on the date of grant and the assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2024 and 2023 using the Black-Scholes option-pricing model were as follows:
|
| Year Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Weighted-average fair value of options granted |
| $ | 3.64 |
|
| $ | 1.38 |
|
Expected volatility |
|
| 75 | % |
|
| 88 | % |
Expected life (in years) |
|
| 5.69 |
|
|
| 5.74 |
|
Risk-free interest rate |
|
| 4.13 | % |
|
| 3.76 | % |
Expected dividend yield |
|
| 0.00 | % |
|
| 0.00 | % |
The expected volatility of the options is determined using historical volatilities based on historical stock prices. The expected life of the options granted is based on our historical share option exercise experience. The risk-free interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the option. During 2023, the Company declared and paid one quarterly dividends of $0.005, however, the expected annual dividend yield was less than half of one percent during 2023. In March 2023, our Board of Directors cancelled the quarterly dividend.
The following table summarizes the stock option activity under the plans for the years ended December 31, 2024 and 2023 (in thousands, except share data):
|
|
|
|
| Weighted- |
|
| Weighted- Average |
| Aggregate |
| |||
|
| Number of |
|
| Average |
|
| Remaining |
| Intrinsic Value |
| |||
|
| Shares |
|
| Exercise Price |
|
| Contract Life |
| (in thousands) |
| |||
Outstanding at January 1, 2023 |
|
| 7,652,964 |
|
|
| 2.73 |
|
| 5.3 years |
|
| 3,362 |
|
Granted |
|
| 965,500 |
|
|
| 1.88 |
|
|
|
|
|
|
|
Exercised |
|
| (183,521 | ) |
|
| 1.32 |
|
|
|
|
|
|
|
Cancelled/forfeited |
|
| (439,144 | ) |
|
| 3.04 |
|
|
|
|
|
|
|
Outstanding at December 31, 2023 |
|
| 7,995,799 |
|
|
| 2.64 |
|
| 4.9 years |
|
| 19,469 |
|
Granted |
|
| 328,500 |
|
|
| 5.42 |
|
|
|
|
|
|
|
Exercised |
|
| (1,460,404 | ) |
|
| 1.74 |
|
|
|
|
|
|
|
Cancelled/forfeited |
|
| (201,096 | ) |
|
| 4.01 |
|
|
|
|
|
|
|
Outstanding at December 31, 2024 |
|
| 6,662,799 |
|
|
| 2.93 |
|
| 4.4 years |
|
| 16,584 |
|
Shares vested and expected to vest |
|
| 6,558,048 |
|
|
| 2.93 |
|
| 4.3 years |
|
| 16,369 |
|
Exercisable as of December 31, 2024 |
|
| 5,866,379 |
|
|
| 2.89 |
|
| 3.8 years |
|
| 14,950 |
|
Exercisable as of December 31, 2023 |
|
| 6,417,000 |
|
|
| 2.57 |
|
| 3.9 years |
|
| 16,278 |
|
The total intrinsic value of options exercised during the years ended December 31, 2024 and 2023, was $5,098 and $154, respectively.
As of December 31, 2024, the total future compensation expense related to non-vested options not yet recognized in the consolidated statements of operations was approximately $1,712 and the weighted-average period over which these awards are expected to be recognized is approximately 1.5 years.
Restricted Stock Units:
The following table summarizes the RSUs outstanding with service vesting in future years (in thousands):
|
| Years Ended December 31, |
| |||||||||
|
| 2025 |
|
| 2026 |
|
| 2027 |
| |||
RSUs with service-based vesting conditions |
|
| 135 |
|
|
| 135 |
|
|
| 36 |
|
The following table summarizes the RSUs activity under the plans for the years ended December 31, 2024 and 2023 (in thousands, except unit data):
|
| Number of |
|
| Weighted-Average |
| ||
|
| Units |
|
| Fair Value |
| ||
Outstanding at January 1, 2023 |
|
| 155,985 |
|
| $ | 3.62 |
|
Granted |
|
| 255,000 |
|
|
| 1.87 |
|
Vested/released |
|
| (397,651 | ) |
|
| 2.57 |
|
Cancelled/forfeited |
|
| - |
|
|
| - |
|
Outstanding at December 31, 2023 |
|
| 13,334 |
|
|
| 1.73 |
|
Granted |
|
| 440,000 |
|
|
| 5.24 |
|
Vested/released |
|
| (109,166 | ) |
|
| 5.05 |
|
Cancelled/forfeited |
|
| (38,334 | ) |
|
| 4.73 |
|
Outstanding at December 31, 2024 |
|
| 305,834 |
|
|
| 5.21 |
|
The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2024 and 2023 was $5.24 and $1.87, respectively.
The total intrinsic value of RSUs that vested and were released during the years ended December 31, 2024 and 2023 was $480 and $793 respectively.
As of December 31, 2024, the total future compensation expense related to non-vested RSUs not yet recognized in the consolidated statements of operations was approximately $1,542 and the weighted-average period over which these awards are expected to be recognized is approximately 1.1 year.
The following table summarizes the statement of operations effect of stock-based compensation for the years ended December 31, 2024 and 2023 (in thousands):
|
| Year Ended December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Share-based compensation expense by type: |
|
|
|
|
|
| ||
Stock options |
| $ | 2,399 |
|
| $ | 3,221 |
|
Restricted stock units |
|
| 603 |
|
|
| 628 |
|
Total cost related to share-based compensation expense |
| $ | 3,002 |
|
| $ | 3,849 |
|
Share-based compensation expense by financial statement line item: |
|
|
|
|
|
|
|
|
Cost of revenue |
| $ | 476 |
|
| $ | 582 |
|
Research and development |
|
| 611 |
|
|
| 610 |
|
Selling and marketing |
|
| 548 |
|
|
| 658 |
|
General and administrative |
|
| 1,367 |
|
|
| 1,999 |
|
Total cost related to share-based compensation expense |
| $ | 3,002 |
|
| $ | 3,849 |
|
The tax benefit related to stock compensation expense on net deferred tax assets at December 31, 2024 and 2023 was $812 and $747, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.