The Company accounts for stock-based compensation arrangements with employees in accordance with Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation. ASC 718 requires the recognition of compensation expense, using a fair value-based method, for costs related to all share-based payments including stock options. The Company estimates forfeitures expected to occur to determine the amount of compensation cost recognized in each period.

In addition to restricted stock units, the Company grants performance stock units (PSUs) to certain members of the management team. These PSUs vest over a three-year period, subject to continued service, and are based on (1) the total shareholder return (TSR) of the Company’s common stock price compared to the S&P Healthcare Equipment Select Industry Index (the Index) over a two-year period or (2) specific revenue targets over a two-year performance period. Additionally, in 2022, the Company made PSU grants to its then CEO that included attainment criteria that required the Company's stock price to reach certain pre-specified stock prices. Since TSR and stock price attainment are considered market conditions, the PSUs based on TSR and stock price attainment have fair values that are determined at the grant date using the Monte Carlo simulation model, with the recorded expense based on fair value. Since revenue targets are considered performance conditions, the PSUs based on revenue targets have a fair value that is equal to the closing stock price on the grant date, with the recorded expense based on the fair value and the probability of achievement, which is reassessed at each reporting period.

The PSU grant activity is as follows:


	Three Months Ended				Six Months Ended
	June 30, 2024				June 30, 2024
	Shares		Weighted Average Fair Value		Shares		Weighted Average Fair Value
Total shareholder return		6,110	$	15.80		245,833	$	20.89
Revenue targets		6,110	$	11.53		245,844	$	15.23
Total PSUs granted		12,220	$	13.67		491,677	$	18.06


	Three Months Ended				Six Months Ended
	June 30, 2023				June 30, 2023
	Shares		Weighted Average Fair Value		Shares		Weighted Average Fair Value
Total shareholder return		85,393	$	44.68		172,924	$	45.09
Revenue targets		85,395	$	32.10		172,952	$	32.20
Total PSUs granted		170,788	$	38.39		345,876	$	38.65

A summary of stock-based compensation expense by line items in the condensed consolidated statements of operations is as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Cost of revenue		803		670		1,362		1,112
Research and development		3,518		2,269		6,321		4,913
Sales, general and administrative		10,100		13,227		19,576		23,701
Total stock-based compensation expense		14,421		16,166		27,259		29,726

A summary of pre-tax stock-based compensation expense by category was as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Stock Options		—		244		—		539
Restricted stock units		12,482		14,092		23,232		23,647
Performance stock units		1,579		1,334		3,163		4,166
Employee stock purchase plan		360		496		864		1,374
Total stock-based compensation expense		14,421		16,166		27,259		29,726