STOCK-BASED COMPENSATION (Notes)

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Wesco’s stock-based compensation awards consist of stock options, stock-settled stock appreciation rights, restricted stock units and performance-based awards. Compensation cost for all stock-based awards is measured at fair value on the date of grant and compensation cost is recognized, net of estimated forfeitures, over the service period for awards expected to vest. The fair value of stock options and stock-settled stock appreciation rights is determined using the Black-Scholes model. The fair value of restricted stock units and performance-based awards with performance conditions is determined by the grant-date closing price of Wesco’s common stock. The forfeiture assumption is based on Wesco’s historical participant behavior that is reviewed on at least an annual basis. For stock options and stock-settled stock appreciation rights that are exercised, and for restricted stock units and performance-based awards that vest, shares are issued out of Wesco's outstanding common stock.

Stock options and stock-settled stock appreciation rights vest ratably over a three-year period and terminate on the tenth anniversary of the grant date unless terminated sooner under certain conditions. Restricted stock unit awards that were granted under the Company’s 1999 Long-Term Incentive Plan, as amended and restated, vest fully on the third anniversary of the date of grant. Restricted stock units awarded under the WESCO International, Inc. 2021 Omnibus Incentive Plan, which was adopted on May 27, 2021, vest ratably over a three-year period on each of the first, second and third anniversaries of the grant date. Vesting of performance-based awards is based on a three-year performance period, and the number of shares earned, if any, depends on the attainment of certain performance levels, as described below. Outstanding awards would vest upon the consummation of a change in control transaction with performance-based awards vesting at the greater of the target level or actual.

Performance-based awards are based on two equally-weighted performance measures: the three-year average growth rate of Wesco’s net income attributable to common stockholders and the three-year cumulative return on net assets. These awards are accounted for as awards with performance conditions; compensation cost is recognized over the performance period based upon Wesco’s determination of whether it is probable that the performance targets will be achieved.

During the three months ended March 31, 2024 and 2023, Wesco granted the following stock options, restricted stock units, and performance-based awards at the following weighted-average fair values:


	Three Months Ended
		March 31, 2024		March 31, 2023
Stock options granted		85,425		75,182
Weighted-average fair value		$	72.05	$	76.77

Restricted stock units granted		202,299		170,569
Weighted-average fair value		$	152.10	$	171.03

Performance-based awards granted(1)		192,995		208,371
Weighted-average fair value(1)		$	108.72	$	85.94

(1) As described further below, the three months ended March 31, 2024 includes performance-based awards granted in February 2021 for which actual achievement levels were certified in February 2024, as well as performance-based awards granted during the three months ended March 31, 2024.

The fair values of stock options, as disclosed in the table above, were estimated using the following weighted-average assumptions in the respective periods:


	Three Months Ended
		March 31, 2024		March 31, 2023
Risk free interest rate		4.2	%	4.1	%
Expected life (in years)		5		5
Expected volatility		55	%	50	%
Expected dividend yield		1.09	%	0.88	%

The risk-free interest rate is based on the U.S. Treasury Daily Yield Curve rate as of the grant date. The expected life is based on historical exercise experience, the expected volatility is based on the volatility of the Company’s daily stock price over the expected life preceding the grant date of the award, and the expected dividend yield is based on the calculated yield on the Company’s common stock at date of grant using the current fiscal year projected dividend distribution rate.

The following table sets forth a summary of stock options and related information for the three months ended March 31, 2024:


	Awards	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In millions)
Outstanding at December 31, 2023	163,082	$	144.51
Granted	85,425	152.07
Exercised	(2,326)	122.09
Forfeited	(4,327)	155.67
Outstanding at March 31, 2024	241,854	$	147.20	8.9	$	5.9
Exercisable at March 31, 2024	77,608	$	136.81	8.2	$	2.7

For the three months ended March 31, 2024, the aggregate intrinsic value of stock options exercised during such period was not material.

The following table sets forth a summary of stock-settled stock appreciation rights and related information for the three months ended March 31, 2024:


	Awards	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In millions)
Outstanding at December 31, 2023	818,284	$	59.55
Granted	—	—
Exercised	(26,413)	63.82
Forfeited	(244)	85.35
Outstanding at March 31, 2024	791,627	$	59.40	4.8	$	88.6
Exercisable at March 31, 2024	790,495	$	59.37	4.8	$	88.5

For the three months ended March 31, 2024, the aggregate intrinsic value of stock-settled stock appreciation rights exercised during such period was $2.8 million.

The following table sets forth a summary of restricted stock units and related information for the three months ended March 31, 2024:


	Awards	Weighted- Average Fair Value
Unvested at December 31, 2023	407,613	$	127.49
Granted	202,299	152.10
Vested	(184,135)	116.57
Forfeited	(17,621)	138.41
Unvested at March 31, 2024	408,156	$	144.03

The following table sets forth a summary of performance-based awards and related information for the three months ended March 31, 2024:


	Awards	Weighted- Average Fair Value
Unvested at December 31, 2023	254,859	$	115.15
Granted(1)	192,995	108.72
Vested	(223,042)	77.08
Forfeited	(4,226)	159.15
Unvested at March 31, 2024	220,586	$	147.18

(1) Includes 80,951 performance-based awards granted in February 2024 with a fair value of $152.07 and three-year performance period ending December 31, 2026, and 111,521 of additional performance-based awards related to awards originally granted in February 2021 with a fair value of $77.08 and three-year performance period ended December 31, 2023 for which actual achievement levels were certified in February 2024.

Wesco recognized $10.1 million and $11.7 million of non-cash stock-based compensation expense for the three months ended March 31, 2024 and 2023, respectively, which is included in selling, general and administrative expenses for such periods. As of March 31, 2024, there was $84.1 million of total unrecognized compensation expense related to unvested stock-based compensation arrangements for all awards previously made, which is expected to be recognized as follows: