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Share-based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Share-based Compensation | (8) Share-based Compensation Stock Incentive Plans On May 24, 2023, the Company’s stockholders approved the Company’s 2023 Equity Incentive Plan (the “2023 Equity Plan”) and the 2023 Equity Plan became effective as of such date. No awards may be granted under the 2023 Equity Plan more than 10 years after the 2023 Equity Plan’s effective date. No new awards will be granted under the Company’s 2013 Stock Incentive Plan (as amended, the “2013 Equity Plan”) following the date of such approval, though awards previously granted under the 2013 Equity Plan will remain outstanding in accordance with their terms. Under the 2023 Equity Plan and the 2013 Equity Plan (together, the “Stock Incentive Plans”), the Company’s employees, officers, directors, and other eligible participants may be (with respect to the 2023 Equity Plan) and have been (with respect to both the 2023 Equity Plan and the 2013 Equity Plan) awarded various types of share-based compensation, including options to purchase shares of the Company’s class A common stock, restricted stock units, and other stock-based awards. Under the 2023 Equity Plan, awards may also be granted that are subject to the achievement of one or more performance measures established by the Company’s Board of Directors or a duly authorized committee thereof. Any shares issued under the Stock Incentive Plans may consist in whole or in part of authorized but unissued shares or treasury shares. With the exception of awards granted subject to the achievement of a performance measure (as discussed further below), the accounting policies in place for awards granted under the 2023 Equity Plan are the same as those for the awards previously granted under the 2013 Equity Plan. With the exception of awards to non-employee members of the Company’s Board of Directors which vest in full after one year, and awards whose vesting is subject to the achievement of a performance measure (as discussed further below), awards granted under the 2023 Equity Plan generally vest over four years. An aggregate of up to 1,932,703 shares of the Company’s class A common stock were initially authorized for issuance under the 2023 Equity Plan, comprised of (i) 200,000 shares of the Company’s class A common stock authorized under the 2023 Equity Plan and (ii) up to an aggregate of 1,732,703 shares of the Company’s class A common stock consisting of: (a) the shares of class A common stock reserved for issuance under the 2013 Equity Plan that remained available for grant as of May 23, 2023, and (b) shares of class A common stock subject to awards granted under the 2013 Equity Plan that were outstanding as of May 23, 2023 and which subsequently expire, terminate or are otherwise surrendered, cancelled or forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right, including shares subject to awards granted under the 2013 Equity Plan that are delivered (either by actual delivery, attestation or net exercise) to the Company by a participant to (x) purchase shares upon the exercise of such award or (y) satisfy tax withholding obligations with respect to such awards, including shares retained from the award creating the tax obligation, subject, in the case of incentive stock options, to any limitations under the Internal Revenue Code of 1986, as amended. As of September 30, 2023, there were 232,327 shares of class A common stock reserved and available for future issuance under the 2023 Equity Plan. Stock option awards As of September 30, 2023, there were options to purchase 1,380,741 shares of class A common stock outstanding under the Stock Incentive Plans. The following table summarizes the Company’s stock option activity (in thousands, except per share data and years) for the nine months ended September 30, 2023:
|  | Stock Options Outstanding |
|  |  |  |  | Weighted Average |  |  | Aggregate |  |  | Weighted Average |
|  |  |  |  | Exercise Price |  |  | Intrinsic |  |  | Remaining Contractual |
|  | Shares |  |  | Per Share |  |  | Value |  |  | Term (Years) |
Balance as of January 1, 2023 |  |  | 1,577 |  |  | $ | 288.30 |  |  |  |  |  |  |
Granted |  |  | 36 |  |  | $ | 284.06 |  |  |  |  |  |  |
Exercised |  |  | (93 | ) |  | $ | 153.10 |  |  | $ | 13,254 |  |  |  |
Forfeited/Expired |  |  | (139 | ) |  | $ | 431.62 |  |  |  |  |  |  |
Balance as of September 30, 2023 |  |  | 1,381 |  |  | $ | 282.86 |  |  |  |  |  |  |
Exercisable as of September 30, 2023 |  |  | 875 |  |  | $ | 228.00 |  |  | $ | 133,368 |  |  |  | 3.5 |
Expected to vest as of September 30, 2023 |  |  | 506 |  |  | $ | 377.78 |  |  | $ | 27,187 |  |  |  | 8.0 |
Total |  |  | 1,381 |  |  | $ | 282.86 |  |  | $ | 160,555 |  |  |  | 5.2 |
Stock options outstanding as of September 30, 2023 are comprised of the following range of exercise prices per share (in thousands, except per share data and years):
|  | Stock Options Outstanding at September 30, 2023 |
|  |  |  |  | Weighted Average |  |  | Weighted Average |
|  |  |  |  | Exercise Price |  |  | Remaining Contractual |
Range of Exercise Prices per Share |  | Shares |  |  | Per Share |  |  | Term (Years) |
$121.43 - $200.00 |  |  | 795 |  |  | $ | 137.02 |  |  |  | 3.1 |
$200.01 - $300.00 |  |  | 111 |  |  | $ | 251.58 |  |  |  | 9.1 |
$300.01 - $400.00 |  |  | 3 |  |  | $ | 301.63 |  |  |  | 9.7 |
$400.01 - $500.00 |  |  | 261 |  |  | $ | 409.60 |  |  |  | 8.2 |
$600.01 - $691.23 |  |  | 211 |  |  | $ | 691.23 |  |  |  | 7.2 |
Total |  |  | 1,381 |  |  | $ | 282.86 |  |  |  | 5.2 |
An aggregate of 189,125 stock options with an aggregate grant date fair value of $47.3 million vested during the nine months ended September 30, 2023. The weighted average grant date fair value of stock option awards using the Black-Scholes valuation model was $190.86 and $209.85 for each share subject to a stock option granted during the nine months ended September 30, 2023 and 2022, respectively, based on the following assumptions:
|  | Nine Months Ended
|  | September 30,
|  | 2023 |  | 2022
Expected term of award in years |  | 5.5 - 6.3 |  | 6.3
Expected volatility |  | 71.8% - 74.1% |  | 58.4% - 70.9%
Risk-free interest rate |  | 3.7% - 3.9% |  | 1.9% - 3.5%
Expected dividend yield |  | 0.0% |  | 0.0%
For the three and nine months ended September 30, 2023, the Company recognized approximately $10.5 million and $33.9 million, respectively, in share-based compensation expense from stock options granted under the Stock Incentive Plans. For the three and nine months ended September 30, 2022, the Company recognized approximately $12.7 million and $35.4 million, respectively, in share-based compensation expense from stock options granted under the Stock Incentive Plans. As of September 30, 2023, there was approximately $81.4 million of total unrecognized share-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted average vesting period of approximately 2.2 years. Share-settled restricted stock units As of September 30, 2023, there were 198,993 share-settled restricted stock units outstanding under the Stock Incentive Plans. The following table summarizes the Company’s share-settled restricted stock unit activity (in thousands) for the periods indicated:
|  | Share-Settled Restricted Stock Units Outstanding |
|  |  |  |  | Aggregate |
|  | Units |  |  | Intrinsic Value |
Balance as of January 1, 2023 |  |  | 120 |  |  |  |
Granted |  |  | 115 |  |  |  |
Vested |  |  | (19 | ) |  | $ | 5,920 |
Forfeited |  |  | (17 | ) |  |  |
Balance as of September 30, 2023 |  |  | 199 |  |  |  |
Expected to vest as of September 30, 2023 |  |  | 199 |  |  | $ | 65,325 |
During the nine months ended September 30, 2023, 18,891 share-settled restricted stock units having an aggregate grant date fair value of $9.0 million vested, and 4,817 shares were withheld to satisfy tax obligations, resulting in 14,074 issued shares. The weighted average grant date fair value of share-settled restricted stock units granted during the nine months ended September 30, 2023 and 2022 was $280.09 and $269.14, respectively, based on the fair value of the Company’s class A common stock. For the three and nine months ended September 30, 2023, the Company recognized approximately $4.9 million and $12.2 million, respectively, in share-based compensation expense from share-settled restricted stock units granted under the Stock Incentive Plans. For the three and nine months ended September 30, 2022, the Company recognized approximately $3.6 million and $10.0 million, respectively, in share-based compensation expense from share-settled restricted stock units granted under the Stock Incentive Plans. As of September 30, 2023, there was approximately $52.2 million of total unrecognized share-based compensation expense related to unvested share-settled restricted stock units, which the Company expects to recognize over a weighted average vesting period of approximately 2.9 years. Share-settled performance stock units During the second quarter of 2023, the Company granted performance stock units under the 2023 Equity Plan. Performance stock units entitle recipients to receive a number of shares of the Company’s class A common stock at a specified date in the future based on achievement of one or more performance measures, as specified in the applicable performance stock unit agreement. Although the Company may in its sole discretion elect to pay fully or partially in cash in lieu of settling solely in shares, it does not currently intend to do so. The vesting of each performance stock unit granted is subject to the Company’s achievement of a relative total shareholder return (“TSR”) performance goal over a three-year performance period with the number of performance stock units granted representing the number of performance stock units that would vest based on target performance. As more fully specified in the applicable grant agreements, the number of performance stock units that will vest will be based on the percentile ranking of the Company’s TSR over the three-year performance period as compared to the TSR of the members of the Nasdaq Composite Index over the same period (the “TSR Goal”), with the payout factor ranging from 0% to 200% of the number of performance stock units granted. The performance stock units, to the extent vested, will vest on the date the Compensation Committee of the Company’s Board of Directors certifies the level of achievement of the TSR Goal. Vesting of the performance stock units is also generally subject to the provision of service through the vesting date of the award (unless accelerated in connection with a termination following a change in control event as set forth in the applicable performance stock unit agreement or otherwise in accordance with provisions of the 2023 Equity Plan or applicable performance stock unit agreement). The TSR Goal is considered a “market condition” under ASC 718, Compensation—Stock Compensation. The Company uses a Monte Carlo simulation model to determine the grant date fair value of performance awards with a market condition. The Monte Carlo simulation takes into consideration the assumptions noted below, in addition to the probability that the market condition will be achieved based on predicted stock price paths compared to peer companies in the Nasdaq Composite Index. The Company did not grant any performance awards prior to June 2023. The weighted average grant date fair value of performance stock units using the Monte-Carlo simulation model was $486.18 for each performance stock unit granted during the nine months ended September 30, 2023 based on the following assumptions:
|  | Nine Months Ended |
|  | September 30, |
|  | 2023 |
Expected term of award in years |  |  | 3.0 |
Expected volatility |  |  | 95.6 | %
Risk-free interest rate |  |  | 4.1 | %
Expected dividend yield |  |  | 0.0 | %
Since the Company continues to account for forfeitures as they occur, as long as the performance stock unit recipient provides service to the Company during the requisite service period, share-based compensation expense associated with the grant date fair value of the performance stock units is recognized ratably over the performance period, regardless of the Company’s actual level of achievement against the TSR Goal. As of September 30, 2023, there were 25,375 performance stock units outstanding under the 2023 Equity Plan. The following table summarizes the Company’s performance stock unit activity (in thousands) for the periods indicated:
|  | Share-Settled Performance Stock Units Outstanding |
|  |  |  |  | Aggregate |
|  | Units |  |  | Intrinsic Value |
Balance as of January 1, 2023 |  |  | 0 |  |  |  |
Granted |  |  | 27 |  |  |  |
Vested |  |  | 0 |  |  | $ | 0 |
Forfeited |  |  | (2 | ) |  |  |
Balance as of September 30, 2023 |  |  | 25 |  |  |  |
Expected to vest as of September 30, 2023 |  |  | 25 |  |  | $ | 16,660 |
No performance stock units vested during the three and nine months ended September 30, 2023. For the three and nine months ended September 30, 2023, the Company recognized approximately $1.0 million and $1.3 million, respectively, in share-based compensation expense from performance stock units granted under the 2023 Equity Plan. As of September 30, 2023, there was approximately $11.0 million of total unrecognized share-based compensation expense related to unvested performance stock units, which the Company expects to recognize over a weighted average vesting period of approximately 2.7 years. Other stock-based awards and cash-settled restricted stock units From time to time the Company has granted “other stock-based awards” and “cash-settled restricted stock units” under the 2013 Equity Plan. Other stock-based awards are similar to stock options, and cash-settled restricted stock units are similar to the Company’s share-settled restricted stock units, except in each case these awards are settled in cash only and not in shares of the Company’s class A common stock. Due to their required cash settlement feature, these awards are classified as liabilities in the Company’s Consolidated Balance Sheets and the fair value of the awards is remeasured each quarterly reporting period. For the three months ended September 30, 2023, the share-based compensation expense from other stock-based awards and cash-settled restricted stock units was not material. For the nine months ended September 30, 2023, the Company recognized approximately $1.1 million in share-based compensation expense from other stock-based awards and cash-settled restricted stock units. For the three and nine months ended September 30, 2022, the Company recognized approximately $0.2 million in share-based compensation expense and a reduction of $0.4 million in share-based compensation expense, respectively, from other stock-based awards and cash-settled restricted stock units. As of September 30, 2023, there was approximately $0.6 million of total unrecognized share-based compensation expense related to other stock-based awards and cash-settled restricted stock units, which the Company expects to recognize over a weighted average vesting period of approximately 1.4 years, subject to additional fair value adjustments through the earlier of settlement or expiration. 2021 ESPP The Company also maintains the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The purpose of the 2021 ESPP is to provide eligible employees of the Company and certain of its subsidiaries with opportunities to purchase shares of the Company’s class A common stock in 6-month offering periods commencing on each March 1 and September 1. An aggregate of 100,000 shares of the Company’s class A common stock has been authorized for issuance under the 2021 ESPP. During the nine months ended September 30, 2023, 19,856 shares of class A common stock were issued in connection with the 2021 ESPP. As of September 30, 2023, 59,607 shares of the Company’s class A common stock remained available for issuance under the 2021 ESPP. For the three and nine months ended September 30, 2023, the Company recognized approximately $0.4 million and $1.4 million, respectively, in share-based compensation expense related to the 2021 ESPP. For the three and nine months ended September 30, 2022, the Company recognized approximately $0.5 million and $1.6 million, respectively, in share-based compensation expense related to the 2021 ESPP. As of September 30, 2023, there was approximately $0.9 million of total unrecognized share-based compensation expense related to the 2021 ESPP, which the Company expects to recognize over a period of approximately 0.4 years. Tax Benefits Related to Equity Plans The following table summarizes the tax (benefit) expense related to the Company’s equity plans (in thousands) for the three and nine months ended September 30, 2023 and 2022:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Tax (benefit) expense related to: |  |  |  |  |  |  |  |  |  |  |  |
Share-based compensation expense |  | $ | (3,417 | ) |  | $ | (2,906 | ) |  | $ | (9,396 | ) |  | $ | (9,146 | )
Exercises of stock options and vesting of share-settled restricted stock units |  |  | 813 |  |  |  | 680 |  |  |  | 1,098 |  |  |  | 790 |
Total tax benefit related to the Company's equity plans |  | $ | (2,604 | ) |  | $ | (2,226 | ) |  | $ | (8,298 | ) |  | $ | (8,356 | )

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