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Equity-Based Compensation | 3 Months Ended
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Mar. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Equity-Based Compensation | Equity-Based Compensation The Company has previously granted RSUs, PSUs and LSUs (each as defined below), as well as phantom unit awards under its equity compensation plans. Equity-based compensation expenses are recognized in general and administrative expenses on the Company’s Condensed Consolidated Statements of Operations. During the three months ended March 31, 2024 and 2023, the Company recognized $4.8 million and $11.9 million, respectively, in equity-based compensation expenses related to equity-classified awards. Equity-based compensation costs related to liability-classified awards were not material for the three months ended March 31, 2024 or 2023. Restricted stock units. Restricted stock units (“RSUs”) are contingent shares that generally vest on either a cliff or graded basis over a one-year, three-year or four-year period (as applicable) and are subject to a service condition. During the three months ended March 31, 2024, the Company granted 120,071 RSUs to employees of the Company with a weighted average grant date value of $163.48 per share. Performance share units. Performance share units (“PSUs”) that were granted prior to 2024 are contingent shares that vest on a graded basis over a three-year and four-year period and are subject to a service condition. 2024 Performance share units. During the three months ended March 31, 2024, the Company issued PSUs that include (i) total stockholder return (“TSR”) PSUs (“Absolute TSR PSUs”) and (ii) relative TSR PSUs (“Relative TSR PSUs” and collectively with the Absolute TSR PSUs, the “2024 PSUs”), which are eligible to vest and become earned at the end of the applicable performance period on December 31, 2026, subject to the level of achievement with respect to certain performance goals. The Absolute TSR PSUs are subject to time-based service requirements and market conditions based on the TSR achieved by the Company during the performance period. Depending on the Company’s TSR, award recipients may earn between 0% and 300% of the target number of Absolute TSR PSUs originally granted. The Relative TSR PSUs are subject to time-based service requirements and market conditions based on a comparison of the TSR achieved by the Company against the TSR achieved by the members of a defined peer group at the end of the performance period. Depending on the Company’s TSR performance relative to the TSR performance of the members of the defined peer group, award recipients may earn between 0% and 200% of the target number of Relative TSR PSUs originally granted. Any earned 2024 PSUs will be settled in shares of the Company’s common stock for up to 100% of the target number of PSUs subject to each applicable award, with any remaining earned PSUs that exceed the target number of PSUs subject to the award being settled in cash based on the fair market value of a share of the Company’s common stock on the applicable payment date. The 2024 PSUs are bifurcated and classified as equity-based and liability-based awards based on the probability of achieving various target performance thresholds. During the three months ended March 31, 2024, the Company granted (i) 14,677 Absolute TSR PSUs to employees of the Company with a weighted average grant date value of $233.19 per share and (ii) 44,033 Relative TSR PSUs to employees of the Company with a weighted average grant date value of $198.73 per share. Fair value assumptions. The aggregate grant date fair value of the 2024 PSUs was determined by a third-party valuation specialist using a Monte Carlo simulation model which uses a probabilistic approach for estimating the fair value of the awards. The key valuation inputs were: (i) the forecast period, (ii) risk-free interest rate, (iii) the yield curve associated with the Company’s credit rating, (iv) implied equity volatility, (v) stock price on the date of grant and, solely for Relative TSR PSUs, (vi) correlation coefficient. The risk-free interest rates are the U.S. Treasury bond rates on the date of grant that correspond to the performance period. Implied equity volatility is derived by solving for an asset volatility and equity volatility based on the leverage of the Company and each of its peers. For the Relative TSR PSUs, the correlation coefficient measures the strength of the linear relationship between and amongst the Company and its peers based on historical stock price data. The following table summarizes the assumptions used in the Monte Carlo simulation model to determine the grant date fair value and associated equity-based compensation expenses by grant date for the 2024 PSUs:
| Absolute TSR |  | Relative TSR
Grant date | February 20, 2024 |  | March 4, 2024 |  | February 20, 2024 |  | March 4, 2024
Forecast period (years) | 3 |  | 3 |  | 3 |  | 3
Risk-free interest rates | 4.4% |  | 4.4% |  | 4.4% |  | 4.4%
Implied equity volatility | 35% |  | 35% |  | 35% |  | 35%
Stock price on date of grant | $163.75 |  | $160.23 |  | $163.75 |  | $160.23
Leveraged stock units. Leveraged stock units (“LSUs”) are contingent shares granted to certain employees that cliff vest over a three-year and four-year period and are subject to a service condition. No LSUs were granted during the three months ended March 31, 2024. Phantom unit awards. Phantom unit awards represent the right to receive a cash payment equal to the fair market value of one share of common stock upon vesting and vest on a graded basis over a three-year period and are subject to a service condition. During the three months ended March 31, 2024, the Company granted 10,531 phantom unit awards to employees with a weighted average grant date fair value of $163.75 per share.

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