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Employee Stock Purchase Plan, Stock Options and Warrants | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Employee Stock Purchase Plan, Stock Options and Warrants | 12.EMPLOYEE STOCK PURCHASE PLAN, STOCK OPTIONS AND WARRANTS. Our stock-based compensation primarily consists of the following plans: 2018 Long-Term Incentive Plan. In June 2018, our Board of Directors adopted and our shareholders approved, the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan, which was subsequently amended effective December 14, 2018 (the “2018 Incentive Plan”) to supplement the Merit Medical Systems, Inc. 2006 Long-Term Incentive plan (the "2006 Incentive Plan"). The 2018 Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, stock units (including restricted stock units) and performance awards (including performance stock units). Options may be granted to directors, officers, outside consultants and key employees and may be granted upon such terms and such conditions as the Compensation Committee of our Board of Directors determines. Options typically vest on an annual basis over a three to five-year life with a contractual life of seven years. At our annual meeting, held June 17, 2021, our shareholders approved the addition of 3,000,000 shares to the 2018 Incentive Plan. As of December 31, 2021, a total of 3,205,529 shares remained available to be issued under the 2018 Incentive Plan. 2006 Long-Term Incentive Plan. In May 2006, our Board of Directors adopted, and our shareholders approved, the 2006 Incentive Plan. As of December 31, 2021, the 2006 Incentive Plan was no longer being used for new equity award grants. However, as of December 31, 2021, options granted under this plan were still outstanding, vesting, and being exercised and will continue to be outstanding until the vesting periods end and the terms of the equity awards expire. Employee Stock Purchase Plan. We have a non-qualified Employee Stock Purchase Plan (“ESPP”), which has an expiration date of June 30, 2026. At our annual meeting, held June 17, 2021, our shareholders approved the addition of 100,000 shares to our ESPP. As of December 31, 2021, the total number of shares of common stock that remained available to be issued under our non-qualified plan was 121,959 shares. ESPP participants purchase shares on a quarterly basis at a price equal to 95% of the market price of the common stock at the end of the applicable offering period. Stock-Based Compensation Expense. The stock-based compensation expense before income tax expense for the years ended December 31, 2021, 2020 and 2019, consisted of the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
Cost of sales | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nonqualified stock options | ​ | $ | 1,476 | ​ | $ | 1,357 | ​ | $ | 1,289
Research and development | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nonqualified stock options | ​ | ​ | 1,343 | ​ | ​ | 1,157 | ​ | ​ | 961
Selling, general and administrative |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nonqualified stock options | ​ | ​ | 6,678 | ​ | ​ | 7,332 | ​ | ​ | 7,132
Performance-based restricted stock units | ​ | ​ | 3,525 | ​ | ​ | 2,829 | ​ | ​ | —
Restricted stock units | ​ | ​ | 1,557 | ​ | ​ | 758 | ​ | ​ | —
Cash-settled performance-based share-based awards ("Liability Awards") | ​ | ​ | 1,511 | ​ | ​ | 906 | ​ | ​ | —
Total selling, general and administrative | ​ | ​ | 13,271 | ​ | ​ | 11,825 | ​ | ​ | 7,132
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Stock-based compensation expense before taxes |  | $ | 16,090 | ​ | $ | 14,339 | ​ | $ | 9,382
​ We recognize stock-based compensation expense (net of a forfeiture rate) for those awards which are expected to vest on a straight-line basis over the requisite service period. We estimate the forfeiture rate based on our historical experience and expectations about future forfeitures. Nonqualified Stock Options As of December 31, 2021, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was $26.5 million and is expected to be recognized over a weighted average period of 2.5 years. In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted were estimated using the following assumptions for the years ended December 31, 2021, 2020 and 2019:
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
Risk-free interest rate | ​ | 0.5% - 1.1% | ​ | 0.3% - 1.7% | ​ | 1.4% - 2.6%
Expected option term | ​ | 4.0 years | ​ | 4.0 - 5.0 years | ​ | 3.0 - 5.0 years
Expected dividend yield | ​ | — | ​ | — | ​ | —
Expected price volatility | ​ | 46.1% - 46.7% | ​ | 38.7% - 45.1% | ​ | 28.7% - 39.4%
​ The average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock option. We determine the expected term of the stock options using the historical exercise behavior of employees. The expected price volatility was determined based upon the historical volatility for our stock. We recognize compensation expense for options on a straight-line basis over the service period, which corresponds to the vesting period. During the years ended December 31, 2021, 2020 and 2019, approximately 716,000, 329,000 and 1.2 million nonqualified stock option grants were made, respectively, for a total fair value of $17.5 million, $4.5 million and $20.9 million. The table below presents information related to stock option activity for the years ended December 31, 2021, 2020 and 2019 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
Total intrinsic value of stock options exercised | ​ | $ | 36,086 | ​ | $ | 11,733 | ​ | $ | 9,910
Cash received from stock option exercises | ​ |  | 20,194 | ​ |  | 5,481 | ​ |  | 4,837
Excess tax benefit from the exercise of stock options | ​ |  | 5,571 | ​ |  | 1,815 | ​ |  | 1,654
​ Changes in stock options for the year ended December 31, 2021, consisted of the following (shares and intrinsic value in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Number | ​ | Weighted Average | ​ | Remaining Contractual | ​ | Intrinsic
​ |  | of Shares |  | Exercise Price |  | Term (in years) |  | Value
Beginning balance |  | 3,942 | ​ | $ | 35.98 |  |  |  | ​ |
Granted |  | 716 | ​ |  | 66.60 |  |  |  | ​ |
Exercised |  | (883) | ​ |  | 23.08 |  |  |  | ​ |
Forfeited/expired |  | (135) | ​ |  | 47.60 |  |  |  | ​ |
Outstanding at December 31 |  | 3,640 | ​ |  | 44.70 |  | 3.90 | ​ | $ | 67,868
Exercisable |  | 1,762 | ​ |  | 35.86 |  | 2.80 | ​ |  | 46,601
Ending vested and expected to vest |  | 3,537 | ​ |  | 44.32 |  | 3.85 | ​ |  | 67,063
​ The weighted average grant-date fair value of options granted during the years ended December 31, 2021, 2020 and 2019 was $24.38, $13.70 and $16.78, respectively. Stock-Settled Performance-Based Restricted Stock Units (“PSUs”) and Time-Vested Restricted Stock Units (“RSUs”) ​ Since 2020 we have granted PSUs to certain of our executive officers. Conversion of PSUs occurs at the end of one, two and three-year performance periods, or one year after the agreement date, whichever is later. The conversion ratio is based upon attaining targeted levels of free cash flow (“FCF”) and relative shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements. In 2020, our Board of Directors amended PSUs granted in 2020 with a one-year performance period to adjust the performance targets and reduce the maximum FCF multiplier to 100% for the one-year awards, which lowered the potential shares of our common stock to be granted pursuant to the one-year awards by 25,415 shares. We accounted for this amendment in accordance with ASC 718 as a “Type I” modification. ​ The payout for each PSU is equal to one share of common stock multiplied by a FCF multiplier (between 0% and 100% in the case of the 2020 one-year awards, as amended, or 0% and 200% in the case of all other PSU awards) and a rTSR multiplier (between 75% and 125%). PSUs convey no shareholder rights unless and until shares are issued in settlement of the award. We use Monte-Carlo simulations to estimate the grant-date fair value of the PSUs linked to total shareholder return. Compensation expense is recognized using the grant-date fair value for the number of shares that are probable of being awarded based on the performance conditions. Each reporting period, this probability assessment is updated, and cumulative catchups are recorded based on the level of FCF that is expected to be achieved. At the end of the performance period, cumulative expense is calculated based on the actual level of FCF achieved. ​ We grant RSUs to our non-employee directors, which are subject to continued service through the vesting date, which is one year from the date of grant. The expense recognized for RSUs is equal to the closing stock price on the date of grant, which is recognized over the vesting period. ​ Changes in PSUs and RSUs for the year ended December 31, 2021, consisted of the following:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | PSUs | ​ | RSUs
​ | ​ | ​ | ​ | Weighted Average | ​ | ​ | ​ | Weighted Average
​ | ​ | Stock Units | ​ | Grant Date | ​ | Stock Units | ​ | Grant Date
​ |  | (In Thousands) | (1) | Fair Value |  | (In Thousands) |  | Fair Value
Beginning nonvested balance |  | 102 | ​ | $ | 43.63 |  | 34 | ​ | $ | 42.98
Granted |  | 103 | ​ |  | 61.39 |  | 26 |  |  | 61.77
rTSR adjustment | ​ | 5 | (2) | ​ | 43.43 | ​ | — | ​ | ​ | —
Vested |  | (26) | ​ |  | 43.43 |  | (34) |  |  | 42.98
Forfeited |  | (21) | ​ |  | 52.56 |  | — |  |  | —
Nonvested balance at December 31 |  | 163 | ​ |  | 53.71 |  | 26 | ​ |  | 61.77
| (1) | Based on the maximum payout, excluding the impact of the rTSR multiplier. The actual number of shares which vest is determined based on the satisfaction of performance conditions and the application of an rTSR multiplier between 75% and 125%.
| (2) | Represents the application of an rTSR multiplier of 125% to awards vested in 2021 based on the performance of our common stock and the terms of the awards.
​ The following table summarizes PSUs and RSUs granted during the years ended December 31, 2021, 2020 and 2019 (units and shares in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
PSUs | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Target units granted | ​ | ​ | 52 | ​ | ​ | 61 | ​ | ​ | —
Maximum units granted (1) | ​ | ​ | 103 | ​ | ​ | 102 | (3) | ​ | —
Maximum potential shares (1)(2) | ​ | ​ | 129 | ​ | ​ | 127 | (3) | ​ | —
Weighted average grant date fair value | ​ | $ | 61.39 | ​ | $ | 43.63 | ​ | ​ | N/A
RSUs |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Units granted | ​ | ​ | 26 | ​ | ​ | 34 | ​ | ​ | —
Weighted average grant date fair value | ​ | $ | 61.77 | ​ | $ | 42.98 | ​ | ​ | N/A
| (1) | Based on the maximum payout, excluding the impact of the rTSR multiplier.
| (2) | Includes the impact of the maximum potential rTSR multiplier of 125%.
| (3) | Includes the impact of the 2020 amendment which reduced the maximum FCF multiplier for one-year awards from 200% to 100%.
​ ​ During the year ended December 31, 2021, there were approximately 26,000 shares that vested under PSUs, prior to the reduction of shares withheld to satisfy tax withholding obligations. Vested shares were calculated based upon achievement of the maximum performance multiplier, as amended, of 100% and an rTSR multiplier of 125%. There were no shares that vested under PSUs during the years ended December 31, 2020 and 2019. During the year ended December 31, 2021 there were approximately 34,000 shares that vested under RSUs. There were no shares that vested under RSUs during the years ended December 31, 2020 and 2019. ​ The fair value of each PSU was estimated as of the grant date using the following assumptions for awards granted in the years ended December 31, 2021 and 2020: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2021 | ​ | 2020 |
Risk-free interest rate |  | 0.1% - 0.3% |  | 1.1% - 1.3% | ​
Performance period |  | 1.8 - 2.8 years |  | 0.8 - 2.8 years | ​
Expected dividend yield |  | — |  | — | ​
Expected price volatility |  | 43.7% - 49.3% |  | 40.2% - 56.1% | ​
​ The risk-free interest rate of return was determined using the U.S. Treasury rate at the time of grant with a remaining term equal to the expected term of the award. The expected volatility was based on a weighted average volatility of our stock price and the average volatility of our compensation peer group's volatilities. The expected dividend yield was assumed to be zero because, at the time of the grant, we had no plans to declare a dividend. As of December 31, 2021, the total remaining unrecognized compensation cost related to stock-settled performance stock units and restricted stock units, net of expected forfeitures, was $4.4 million and $0.7 million, respectively, which is expected to be recognized over a weighted average period of 1.5 years and 0.5 years, respectively. Cash-Settled Performance-Based Share-Based Awards (“Liability Awards”) ​ During the years ended December 31, 2021 and 2020, we granted liability awards to our Chief Executive Officer. These awards entitle him to cash payments equal to a total target cash incentive of $1.0 million and $1.0 million, respectively, multiplied by rTSR and FCF multipliers, as defined in the award agreements. In 2020, our Board of Directors amended the liability awards with a one-year performance period. The potential maximum payout of these liability awards is 125% of the target cash incentive for the 2020 one-year award, as amended, and 250% of the target cash incentive for all other liability awards, resulting in a total potential maximum payout of $2.5 million and $2.1 million for liability awards granted during the years ended December 31, 2021 and 2020, respectively. Settlement generally occurs at the end of one, two and three-year performance periods based upon the same performance metrics and vesting period as our performance stock units. ​ These awards are classified as liabilities and reported in accrued expenses and other long-term liabilities within our consolidated balance sheet. The fair value of these awards is remeasured at each reporting period until the awards are settled. As of December 31, 2021, our recorded liabilities associated with these awards was $2.0 million, and we had remaining unrecognized compensation cost related to cash-settled performance-based share-based awards of $1.7 million, which is expected to be recognized over a weighted average period of 1.6 years. During 2021, we paid $417,000 in connection with liability awards, and no awards were forfeited. There were no liability awards vested or forfeited in the years ended December 31, 2020 or 2019.

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