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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including PSUs, RSAs, RSUs, and DSUs, to employees, non-employee directors and other consultants who provide services to us. We also provide an ESPP and 401(k) stock match to eligible participants. We recognize stock-based compensation expense based on grant date award fair value. This cost is recognized over the period for which the employee is required to provide service in exchange for the award or the award performance period, except for expenses relating to retirement-eligible employees that have not given their required notice, which is recognized on a pro-rata basis over the notice period prior to retirement. At December 31, 2023 there were 12.7 million shares available for grant under approved equity compensation plans. Stock-based compensation expense was allocated in the consolidated statements of comprehensive income as follows:
| Year Ended December 31,
(in thousands) | 2023 |  | 2022 |  | 2021
Cost of revenues | $ | 10,169 |  |  | $ | 8,684 |  |  | $ | 6,760 |
Operating expenses |  |  |  |  |
Sales and marketing | 9,774 |  |  | 7,590 |  |  | 6,248 |
Research and development | 7,200 |  |  | 5,634 |  |  | 4,384 |
General and administrative | 18,365 |  |  | 11,491 |  |  | 10,182 |
| $ | 45,508 |  |  | $ | 33,399 |  |  | $ | 27,574 |
Stock-based compensation expense by grant type or plan was as follows:
| Year Ended December 31,
(in thousands) | 2023 |  | 2022 |  | 2021
Stock options | $ | 1,947 |  |  | $ | 1,903 |  |  | $ | 2,057 |
PSUs | 11,886 |  |  | 7,509 |  |  | 6,417 |
RSUs & DSUs | 26,185 |  |  | 19,282 |  |  | 15,388 |
RSAs | 472 |  |  | 437 |  |  | 434 |
ESPP | 2,488 |  |  | 2,144 |  |  | 1,391 |
401(k) stock match | 2,530 |  |  | 2,124 |  |  | 1,887 |
| $ | 45,508 |  |  | $ | 33,399 |  |  | $ | 27,574 |
As of December 31, 2023, there was $52.0 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a primarily straight-line basis over a weighted-average period of 2.4 years. Stock Options Options generally vest over four years and, upon vesting, the holder is given the option to purchase shares of common stock at a specific strike price until expiration, which is generally seven years from the grant date. Our stock option activity was as follows:
| Options (#) |  | Weighted Average Exercise Price ($/share)
Outstanding at December 31, 2020 | 944,886 |  | 36.71 |
Granted | 53,223 |  | 105.53 |
Exercised | (311,378) |  | 30.10 |
Forfeited | (8,081) |  | 68.62 |
Outstanding at December 31, 2021 | 678,650 |  | 44.76 |
Granted | 56,430 |  | 122.59 |
Exercised | (164,393) |  | 29.86 |
Forfeited | (7,990) |  | 92.48 |
Outstanding at December 31, 2022 | 562,697 |  | 56.24 |
Granted | 42,215 |  | 152.68 |
Exercised | (254,353) |  | 38.75 |
Forfeited | (3,737) |  | 129.43 |
Outstanding at December 31, 2023 | 346,822 |  | 80.02 |
Of the total outstanding options at December 31, 2023, 0.3 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $67.07 per share and a weighted average remaining contractual life of 3.1 years. The table below presents additional information related to our stock options:
| Year Ended December 31,
(in thousands, except per share data) | 2023 |  | 2022 |  | 2021
Fair value of options vested | $ | 1,966 |  |  | $ | 1,996 |  |  | $ | 2,509 |
Intrinsic value of options exercised | 31,227 |  |  | 16,705 |  |  | 27,713 |
Intrinsic value of options outstanding | 39,474 |  |  | 40,692 |  |  | 66,235 |
Weighted-average fair value per share of options granted | 56.47 |  |  | 41.34 |  |  | 31.31 |
The fair values of the options granted were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Life (in years) | 4.2 |  | 4.3 |  | 4.4
Volatility | 39 | % |  | 38 | % |  | 35 | %
Dividend yield | — |  |  | — |  |  | — |
Risk-free interest rate | 4.00 | % |  | 2.50 | % |  | 0.59 | %
Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units In 2023, 2022, and 2021 we granted PSU awards with certain target performance levels. These awards are earned based upon our Company’s total shareholder return as compared to an indexed total shareholder return over the course of a fiscal based three-year performance period, starting in the year of grant. Earned awards vest in the quarter following the conclusion of the performance period. Expense is recognized on a straight-line basis over the performance period, regardless of whether the market condition is satisfied as the likelihood of the market condition being met is included in the fair-value measurement of the award. In 2023, PSU awards granted in 2020 were earned and vested at the maximum performance level and less than 0.2 million shares of common stock were issued. RSUs generally vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock. RSAs vest over one year and, upon vesting, the holder is entitled to receive shares of our common stock. In lieu of RSAs, a participant may elect to receive DSUs with one year vesting, but the participant directs delayed receipt of common shares of up to ten years after the end of service to us. Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:
| # |  | Weighted Average Grant Date Fair Value ($/share)
Outstanding at December 31, 2020 | 738,422 |  | 52.37 |
Granted | 314,290 |  | 101.85 |
Vested and common stock issued | (331,669) |  | 44.14 |
Forfeited | (18,883) |  | 66.35 |
Outstanding at December 31, 2021 | 702,160 |  | 78.03 |
Granted | 312,880 |  | 126.44 |
Vested and common stock issued | (276,872) |  | 64.12 |
Forfeited | (26,010) |  | 99.37 |
Outstanding at December 31, 2022 | 712,158 |  | 103.93 |
Granted | 416,377 |  | 163.55 |
Vested and common stock issued | (344,087) |  | 77.52 |
Forfeited | (11,034) |  | 122.97 |
Outstanding at December 31, 2023 | 773,414 |  | 147.50 |
The number of PSUs, RSUs, RSAs, and DSUs outstanding at December 31, 2023 included less than 0.1 million units that have vested, but the shares of common stock have not yet been issued, pursuant to the terms of the agreements. Employee Stock Purchase Plan Our ESPP activity was as follows:
| Year Ended December 31,
(in thousands, except share data) | 2023 |  | 2022 |  | 2021
Amounts for shares purchased | $ | 8,114 |  |  | $ | 6,676 |  |  | $ | 4,737 |
Shares purchased | 63,641 |  |  | 70,107 |  |  | 55,726 |
A total of 1.7 million shares of common stock are remaining for issuance under the plan at December 31, 2023. The fair value was estimated based on the market price of our common stock at the beginning of the offering period using the following assumptions:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Life (in years) | 0.5 |  | 0.5 |  | 0.5
Volatility | 36 | % |  | 42 | % |  | 32 | %
Dividend yield | — |  | — |  | —
Risk-free interest rate | 4.92 | % |  | 1.27 | % |  | 0.07 | %

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