We have certain stock-based compensation plans under which we grant stock-based awards, including common stock, stock options, time-based restricted share units (“RSUs”), and performance-based restricted share units (“Performance RSUs”) to attract, retain, and reward talented employees, officers, and directors, and to align stockholder and employee interests.

Compensation expense for stock-based awards is based on fair value at the measurement date. This expense fluctuates over time as a function of the duration of vesting periods of the stock-based awards and the Company’s performance, as measured by criteria set forth in performance-based awards. Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations and the amount of expense ultimately recognized depends on the quantity of awards that actually vest. Accordingly, stock-based compensation expense may vary from period to period.

The performance criteria for the Company’s performance-based equity awards utilize the Company’s operating earnings (adjusted for certain amounts) as a percentage of contract revenues for the applicable annual period (a “Performance Year”) and its Performance Year operating cash flow level (adjusted for certain amounts). Additionally, certain awards include three-year performance measures that, if met, result in supplemental shares awarded. For Performance RSUs, the Company evaluates compensation expense quarterly and recognizes expense for performance-based awards only if it determines it is probable that performance criteria for the awards will be met.

During the three months ended July 27, 2024, the Company announced its CEO succession plan and transition. In connection with this transition, the Company will incur approximately $11.4 million of incremental stock-based compensation modification expense through the current CEOs retirement date of November 30, 2024 related to previously issued equity awards. Of this total, approximately $2.2 million was recognized during the three months ended July 27, 2024.

Stock-based compensation expense and the related tax benefit recognized during the three and six months ended July 27, 2024 and July 29, 2023 were as follows (dollars in thousands):


	For the Three Months Ended				For the Six Months Ended
	July 27, 2024		July 29, 2023		July 27, 2024		July 29, 2023
Stock-based compensation	$	9,482	$	6,323	$	17,305	$	12,942
Income tax effect of stock-based compensation	$	2,330	$	1,567	$	4,269	$	3,211

During the three months ended July 27, 2024 and July 29, 2023, the Company realized $0.1 million and $0.1 million of net excess tax benefits, respectively, related to the vesting and exercise of share-based awards. During the six months ended July 27, 2024 and July 29, 2023, the Company realized approximately $6.0 million and $2.8 million of net excess tax benefits, respectively, related to the vesting and exercise of share-based awards.

As of July 27, 2024, we had unrecognized compensation expense related to stock options, RSUs, and target Performance RSUs (based on the Company’s expected achievement of performance measures) of $6.6 million, $29.2 million, and $27.1 million, respectively. This expense will be recognized over a weighted-average number of years of 1.0, 2.7, and 1.4, respectively, based on the average remaining service periods for the awards. We may recognize an additional $12.8 million in compensation expense in future periods after July 27, 2024 if the maximum number of Performance RSUs is earned based on certain performance measures being met.

The following table summarizes stock option award activity during the six months ended July 27, 2024:


	Stock Options
	Shares	Weighted Average Exercise Price
Outstanding as of January 27, 2024	264,125	$	70.18
Granted	27,680	$	141.28
Options exercised	(3,976)	$	25.15

Outstanding as of July 27, 2024	287,829	$	77.64

Exercisable options as of July 27, 2024	207,589	$	64.92

The following table summarizes RSU and Performance RSU award activity during the six months ended July 27, 2024:


	Restricted Stock
	RSUs			Performance RSUs
	Share Units	Weighted Average Grant Date Fair Value		Share Units	Weighted Average Grant Date Fair Value
Outstanding as of January 27, 2024	390,765	$	74.89	431,190	$	95.98
Granted	99,897	$	145.33	170,526	$	141.28
Share units vested	(185,391)	$	53.93	(146,702)	$	92.07
Forfeited or canceled	(8,481)	$	82.47	(78,169)	$	93.25
Outstanding as of July 27, 2024	296,790	$	114.48	376,845	$	118.57

The total number of granted Performance RSUs presented above consists of 117,938 target shares and 52,588 supplemental shares. The total number of Performance RSUs outstanding as of July 27, 2024 consists of 257,672 target shares and 119,173 supplemental shares. With respect to the Company’s Performance Year ended January 27, 2024, the Company added 712 supplemental shares and cancelled 66,685 supplemental shares during the six months ended July 27, 2024, as a result of the performance period criteria not being met.