Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.24.1
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation
18. Stock-Based Compensation
Legacy BlackSky adopted two equity incentive plans in prior years and issued equity and equity-based awards under the 2014 Equity Incentive Plan (the “2014 Plan”) and the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”, together with the 2014 Plan, collectively the “Prior Plans”), which are now administered by the Company’s board of directors. The Prior Plans are no longer active; however, outstanding awards granted under these Prior Plans were not affected by the termination of the Prior Plans. Both of the Prior Plans allowed the board of directors of Legacy BlackSky to grant stock options, designated as incentive or nonqualified, and other equity awards to employees, officers, directors, and consultants. Stock options were granted with an exercise price per share equal to at least the estimated fair value of the underlying shares of Legacy BlackSky Class A common stock on the date of grant. The vesting period was determined through individual award agreements and was generally over a four-year period. Awards generally expired 10 years from the date of grant. As of December 31, 2023, the Company had 2 thousand and 945 thousand options outstanding, respectively, under the 2011 and 2014 Plans.
In connection with the Merger, the Company adopted its 2021 Equity Incentive Plan (the "2021 Plan", together with the Prior Plans, collectively the “Plans”) under which it has granted equity awards following the Merger and the Company adopted its ESPP under which eligible employees began participating in December 2023.
The stock-based compensation expense attributable to continuing operations is included in the consolidated statements of operations and comprehensive loss as indicated in the table below:
Years Ended December 31,
2023 2022
(in thousands)
Imagery & software analytical service costs, excluding depreciation and amortization $ 242  $ 553 
Professional & engineering service costs, excluding depreciation and amortization 502  1,341 
Selling, general and administrative 10,118  18,131 
Total stock-based compensation expense $ 10,862  $ 20,025 
The Company recorded stock-based compensation related to capitalized internal labor for software development activities of $0.7 million and $1.5 million during the years ended December 31, 2023 and 2022, respectively. These amounts are included in property, plant, and equipment - net in the consolidated balance sheets.
Stock Options
Following the Merger, the outstanding stock options issued under the 2011 Plan and the 2014 Plan may be exercised (subject to their original vesting, exercise and other terms and conditions) to purchase a number of shares of Class A common stock equal to the number of shares of Legacy BlackSky Class A common stock, as adjusted for the common stock exchange ratio in the Merger, subject to the same terms and conditions as were applicable to such Legacy BlackSky stock option (each an “Assumed Company Stock Option”). The exercise price per share of each Assumed Company Stock Option was equal to the quotient obtained by dividing the exercise price per share applicable to such Legacy BlackSky stock option by the common stock exchange ratio.
The Black-Scholes option pricing model is used to determine the fair value of options granted. The Company utilized assumptions concerning expected term, a risk-free interest rate, and expected volatility to determine such values. A summary of the weighted-average assumptions used by the Company is presented below:
Years Ended December 31,
2023 2022
Fair value per common share
$1.27
$2.06 - $2.15
Weighted-average risk-free interest rate
4.31%
3.20% - 4.72%
Volatility
31.20%
33.90% - 41.10%
Expected term (in years) 8.00 7.63
Dividend rate 0  % 0  %
Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options. For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already had vested, and for stock options that were not yet vested, the incremental fair value has been recognized as stock-based compensation expense over the remaining vesting period.
A summary of the Company’s stock option activity under the Plans during the year ended December 31, 2023 is presented below:
Options Weighted-Average Exercise Price Weighted Average Contractual Term Aggregate Intrinsic Value
(in thousands) (in years) (in thousands)
Outstanding - January 1, 2023 8,641  $ 3.10 
Granted 2,075  1.27 
Exercised (407) 0.02 
Forfeited (1,726) 4.62 
Expired (243) 2.06 
Outstanding - December 31, 2023 8,340  2.51  8.20 $ 1,364 
Exercisable - December 31, 2023 3,027  2.77  7.50 1,083
For options exercised, intrinsic value is calculated as the difference between the estimated fair value on the date of exercise and the exercise price. The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $0.6 million and $1.8 million, respectively. The total fair value of options vested during the years ended December 31, 2023 and 2022 was $2.0 million and $1.2 million, respectively.
As of December 31, 2023, there was $4.4 million of total unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.5 years.
Restricted Stock Awards
During the year ended December 31, 2020, the Company granted RSAs, which vest based upon the individual award agreements and generally vest over a three to four-year period. These shares are deemed issued as of the date of grant, but not outstanding until they vest. The Company intends to settle the RSAs in stock, and the Company has the shares available to do so.
A summary of the Company’s nonvested RSA activity during the year ended December 31, 2023 is presented below:
Restricted Stock Awards Weighted-Average Grant-Date Fair Value
(in thousands)
Nonvested - January 1, 2023 57  $ 0.01 
Vested (34) 0.01 
Canceled —  0.01 
Nonvested - December 31, 2023 23  0.01 
The Company has not granted any RSAs since 2020.
Restricted Stock Units
The Company granted an aggregate of 14.4 million RSUs to certain employees and service providers during the year ended December 31, 2023 under the 2021 Plan. The general vesting provisions are that 25% will vest on the one-year anniversary of the vesting commencement date and 75% will vest ratably over twelve consecutive quarters on specified quarterly vesting dates, with the first of such quarterly vesting dates occurring at least three months after the vesting of the initial 25% of the RSUs.
A summary of the Company’s nonvested RSU activity during the year ended December 31, 2023 is presented below:
Restricted Stock Units Weighted-Average Grant-Date Fair Value
(in thousands)
Nonvested - January 1, 2023 7,854  $ 4.08 
Granted 14,360  1.27 
Vested (4,029) 4.53 
Canceled (2,053) 2.28 
Nonvested - December 31, 2023 16,132  1.69 
During the year ended December 31, 2023, 1.0 million of the vested RSUs were withheld to satisfy payroll tax withholding obligations, which was recorded to additional paid-in capital totaling $1.4 million. Unrecognized compensation costs related to nonvested RSUs totaled $21.8 million as of December 31, 2023, which is expected to be recognized over a weighted-average period of 2.9 years.
Employee Stock Purchase Plan
Beginning in December 2023, the Company's eligible employees were able to begin participating in the Company's ESPP. The ESPP allows eligible participants to contribute up to 15% of their eligible compensation towards the purchase of Class A common stock at a discounted price, subject to certain limitations,. The purchase price of the shares on each purchase date is equal to 85% of the lower of the fair market value of Class A common stock on the first and last trading days of each offering period. The offerings under the ESPP are currently designed to be intended to qualify under Section 423 of the Internal Revenue Code. The Company estimates the fair value of each purchase right under the ESPP on the date of grant using the Black-Scholes valuation model and uses the straight-line attribution approach to record the expense over the six-month offering period. The maximum number of shares that may be issued under the ESPP is 3,000,700 plus any shares added to the ESPP under the automatic annual increase at the beginning of each fiscal year.