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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation |
22. | Stock-Based Compensation
On June 4, 2021, our stockholders approved the Amended and Restated 2019 Equity and Incentive Plan (the “Amended 2019 Plan”), which had previously been adopted by the Company’s Board of Directors subject to stockholder approval. The Amended 2019 Plan amends and restates the Company’s 2019 Equity and Incentive Plan (the “Original 2019 Plan”) to provide that (i) 4,500,000 shares of the Company’s common stock, reduced by the number of shares of the Company’s common stock subject to awards granted under the Original 2019 Plan between March 21, 2021 and June 4, 2021, will be available for the issuance of new awards under the Amended 2019 Plan after the date of the annual meeting of stockholders which occurred on June 4, 2021, (ii) 1,235,669 shares of the Company’s common stock will be reserved for issuance in respect of awards granted under the Original 2019 Plan between May 9, 2019 and March 21, 2021, and (iii) the number of shares of the Company’s common stock (up to 776,777) as is equal to the number of shares of the Company’s common stock subject to awards granted under the Company’s 2010 Equity and Incentive Plan, which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company pursuant to a contractual repurchase right will be made available for the issuance of awards under the Amended 2019 Plan. Under the Amended 2019 Plan, the Company regularly grants equity awards in the form of stock options, restricted stock, restricted stock units and other stock-based awards to certain employees and directors. There were 4.4 million shares of common stock available for grant for future equity compensation awards under the Amended 2019 Plan as of December 31, 2021. Stock-based compensation expense recognized under our equity incentive plans was $74.8 million, $63.9 million and $45.6 million for 2021, 2020 and 2019, respectively. In connection with the Noventis acquisition, the Company recognized an additional $5.5 million of compensation cost for 2019. Refer to Note 4, Acquisitions, for further information. The associated tax benefit related to these costs was $14.1 million, $11.5 million and $9.9 million, for 2021, 2020 and 2019, respectively. Restricted Stock Units The Company periodically grants RSUs, a right to receive a specific number of shares of the Company’s common stock at a specified date, to non-employee directors and certain employees. RSUs granted to non-employee directors vest 12 months from the date of grant, or upon termination of board service if the director elects to defer receipt. RSUs issued to certain employees generally vest evenly over up to three years and provide for accelerated vesting if there is a change of control (as defined in the Amended 2019 Plan). The following is a summary of RSU activity during the year ended December 31, 2021:
(In thousands except per share data) | Units |  | Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2021 | 472 |  |  | $ | 145.77 |
Granted | 229 |  |  | 194.41 |
Vested, including 55 shares withheld for tax 1 | (175) |  |  | 139.08 |
Forfeited | (41) |  |  | 169.13 |
Unvested at December 31, 2021 | 485 |  |  | $ | 169.19 |
1 The Company withholds shares of common stock to pay the minimum required statutory taxes due upon RSU vesting. Cash is then remitted by the Company to the appropriate taxing authorities. As of December 31, 2021, there was $40.1 million of total unrecognized compensation cost related to RSUs. That cost is expected to be recognized over a weighted-average period of 1.2 years. The total grant-date fair value of RSUs granted was $44.5 million, $37.0 million and $34.0 million during 2021, 2020 and 2019, respectively. The total fair value of RSUs that vested during 2021, 2020 and 2019 was $24.4 million, $11.9 million and $7.6 million, respectively. Performance-Based Restricted Stock Units Performance-based restricted stock units The Company periodically grants PBRSUs to employees. A PBRSU is a right to receive stock based on the achievement of both performance goals and continued employment during the vesting period. In a PBRSU, the number of shares earned varies based upon meeting certain performance goals. PBRSU awards generally have performance goals spanning one to three years, depending on the nature of the performance goal. Performance-based restricted stock units with a market condition The Company periodically grants employees PBRSUs with an added relative TSR modifier to scale the payment up or down by +/- 15 percent. The TSR modifier’s performance period generally spans one to three years and the ultimate modifier is based on the Company’s TSR relative to the TSR of the companies included in the S&P MidCap 400 Index (the “Benchmark Group”) over the specified TSR performance period. Market-based restricted stock units (TSR awards) The Company grants certain employees PBRSUs with market-only conditions (“TSR awards”). Attainment of the Company's TSR awards is tied to WEX's TSR relative to the Benchmark Group over the specified TSR performance period, which generally spans one to three years. Award Modifications during 2020 Given the economic uncertainty and business disruption created by the COVID-19 pandemic, effective June 23, 2020, the Company's Leadership Development and Compensation Committee approved certain modifications to PBRSUs previously granted on March 16, 2020 and March 20, 2019. Such changes included (i) replacing Company performance metrics with TSR metrics for the March 16, 2020 awards and (ii) adding a relative TSR modifier to scale the payment up or down by +/- 15 percent for the March 20, 2019 awards. The modification to awards originally granted on March 16, 2020 resulted in incremental compensation cost of $21.8 million while affecting all 332 grantees. The modification to awards originally granted on March 20, 2019 resulted in incremental compensation cost of $1.3 million while affecting all 215 grantees. For the Company's awards that were modified on June 23, 2020, the final attainment for recipients other than executive officers will be based on the greater of the payout under the original awards’ performance metrics or the modified metrics as described above. As a result, the Company is required to assess which payout is more likely and adjust the expense accordingly. If the original awards’ performance metrics are expected to result in a higher number of shares vesting, then the expense recorded will be based on awards expected to vest at the grant-date stock price. Alternatively, if the modified metrics are expected to result in a higher number of shares vesting, then the expense recorded will be based on the fair value calculated using the Monte Carlo simulation valuation model. As of December 31, 2021 and 2020, the expense recognized associated with these modified awards is calculated using the Monte Carlo modification-date fair value. Grant-date fair value of PBRSUs with market conditions The grant date fair value of awards with market conditions is estimated on the date of grant using a Monte-Carlo simulation model used to simulate a distribution of future stock price paths based on historical volatility levels. The key inputs for the fair values and other relevant information by grant date are outlined below:
Grant date | 3/15/2021 |  | 6/24/2020 |  | 6/24/2020 2 |  | 3/16/2020 3 |  | 3/20/2019 3
Risk-free interest rate | 0.29% |  | 0.21% |  | 0.21% |  | 0.20% |  | 0.18%
Stock price 1 | $226.02 |  | $160.14 |  | $160.14 |  | $173.15 |  | $173.15
Expected stock price volatility | 53.65% |  | 47.72% |  | 47.72% |  | 51.32% |  | 62.29%
Weighted-average fair value per share 1 | $238.92 |  | $264.17 |  | $240.55 |  | $280.93 |  | $188.21
1 At the date of grant or modification date, whichever is applicable. 2 CEO-only award; Has a one-year post-vesting holding period. 3 Awards modified on June 23, 2020. Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the period matching the vesting term of the awards. Expected stock price volatility – The Company estimates expected stock price volatility based on historical volatility of the Company’s common stock over a period matching the vesting term of the awards. Expected dividend yield – We have never paid, nor do we expect to pay, any cash dividends on our common stock; therefore, we assume that no dividends will be paid over the vesting term of the awards. Rollforward of PBRSUs The following is a summary of PBRSU activity during the year ended December 31, 2021:
(In thousands except per share data) | Shares |  |  |  |  |  | Weighted-Average Grant-Date Fair Value
Unvested at January 1, 2021 | 582 |  |  |  |  |  |  | $ | 170.05 |
Granted | 148 |  |  |  |  |  |  | 236.44 |
Forfeited | (56) |  |  |  |  |  |  | 219.29 |
Vested, including 54 shares withheld for tax 1 | (150) |  |  |  |  |  |  | 157.55 |
Performance adjustment 2, 3 | 33 |  |  |  |  |  |  | NM
Unvested at December 31, 2021 3 | 557 |  |  |  |  |  |  | $ | 230.01 |
NM - Not meaningful 1 The Company withholds shares of common stock to pay the minimum required statutory taxes due upon PBRSU vesting. Cash is then remitted by the Company to the appropriate taxing authorities. 2 Reflects adjustments to the number of shares of PBRSUs expected to vest based on the change in estimated performance attainments during the year ended December 31, 2021. 3 The impact on awards as a result of expected market condition attainments is not reflected in this table until the attainment measurement period concludes. As of December 31, 2021, there was $52.8 million of unrecognized compensation cost related to PBRSUs that is expected to be recognized over a weighted-average period of 1.7 years. The total grant-date fair value of PBRSUs granted during 2021, 2020 and 2019 was $34.9 million, $58.5 million and $19.0 million, respectively. The total grant-date fair value of PBRSUs that vested during 2021, 2020 and 2019 was $23.7 million, $21.7 million and $9.3 million, respectively. Stock Options Market Performance-Based Stock Options In May 2017, the Company granted market performance-based stock options with a contractual term of ten years to certain members of senior management. The options contained a market condition that required the closing price of the Company’s stock to meet or exceed certain price thresholds for twenty consecutive trading days (“Stock Price Hurdle”) in order for shares to vest. The options also contained a service condition that required the award recipients to be continually employed from the grant date until such date that the Stock Price Hurdle is satisfied in order for shares to vest. The Stock Price Hurdle began operating in May 2020 on the third anniversary of the grant date. As of December 31, 2021, 100 percent of the shares had vested as a result of the Company's stock exceeding the applicable Stock Price Hurdle. The grant date fair value of these options was estimated on the date of grant using a Monte-Carlo simulation model used to simulate a distribution of future stock price paths based on historical volatility levels. The Company expensed the total grant date fair value of these options on a graded basis over the derived service period of approximately three years. Service-Based Stock Options The Company periodically grants stock options to certain officers and employees, which generally become exercisable over three years (with approximately 33 percent of the total grant vesting each year on the anniversary of the grant date) and expire 10 years from the date of grant. All service-based stock option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant as reported by the NYSE. The fair value of option awards is estimated on the grant date using the Black-Scholes-Merton option-pricing model utilizing the assumptions included in the following table:
| 2021 |  | 2020 |  | 2019
Weighted average grant date fair value | $ | 92.82 |  |  | $ | 35.13 |  |  | $ | 58.28 |
Weighted average expected term (in years) | 6 |  | 6 |  | 6
Weighted average exercise price | $ | 226.02 |  |  | $ | 109.66 |  |  | $ | 184.81 |
Expected stock price volatility | 41.81 | % |  | 32.37 | % |  | 27.21 | %
Risk-free interest rate | 1.05 | % |  | 0.58 | % |  | 2.37 | %
Expected term – Based on the Company’s limited history of option exercises and its granting of stock options with “plain vanilla” characteristics, the Company uses the simplified method to estimate the expected term of its employee stock options. The expected term assumption as it relates to the valuation of the options represents the period of time that options granted are expected to be outstanding. Expected stock price volatility – The Company estimates expected stock price volatility based on historical volatility of the Company’s common stock over a period matching the expected term of the options granted. Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the period matching the expected term of the option. Expected dividend yield – We have never paid, nor do we expect to pay any cash dividends on our common stock; therefore, we assume that no dividends will be paid over the expected terms of option awards. The following is a summary of all stock option activity during the year ended December 31, 2021:
(In thousands, except per share data) | Shares |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value
Outstanding at January 1, 2021 | 1,043 |  |  | $ | 115.72 |  |  |  |  |
Granted | 119 |  |  | 226.02 |  |  |  |  |
Exercised | (432) |  |  | 102.40 |  |  |  |  |
Forfeited or expired | (26) |  |  | 147.28 |  |  |  |  |
Outstanding at December 31, 2021 | 704 |  |  | $ | 141.42 |  |  | 7.1 |  | $ | 14,850 |
Exercisable on December 31, 2021 | 399 |  |  | $ | 125.95 |  |  | 6.1 |  | $ | 10,036 |
Vested and expected to vest at December 31, 2021 | 300 |  |  | $ | 161.14 |  |  | 8.5 |  | $ | 4,768 |
As of December 31, 2021, there was $10.3 million of total unrecognized compensation cost related to options. That cost is expected to be recognized over a weighted-average period of 1.3 years. The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $48.1 million, $8.7 million and $5.7 million, respectively. Deferred Stock Units Non-employee directors may elect to defer their cash fees and RSUs in the form of DSUs. These awards are distributed as common stock 200 days immediately following the date upon which such director’s service as a member of the Company’s Board of Directors terminates for any reason. There were approximately 58 thousand and 54 thousand DSUs outstanding as of December 31, 2021 and 2020, respectively. DSU activity is included in the RSU table above. Unvested DSUs as of December 31, 2021 and 2020 were not material.

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