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Stock-Based Compensation and Stock Options | 3 Months Ended
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Jun. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation and Stock Options | Note 3 — Stock-Based Compensation and Stock Options Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (the “ Plan”) as in effect at June 30, 2024, options exercisable for up to 20,615,000 shares of the Company’s common stock (the "common stock") may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant. Options granted under the Plan are non-statutory stock options and generally vest 25% one year from the date of grant with the remaining 75% vesting ratably each month over the next 36 months. The options granted to employees and the Company’s Board of Directors (the "Board") expire at the end of five years and ten years from the date of grant, respectively. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses historical data, among other factors, to estimate the expected volatility, the expected dividend yield and the expected option life. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option. No options were granted during the three months ended June 30, 2023. The following assumptions were used to estimate the fair value of options granted during the three months ended June 30, 2024 using the Black-Scholes option-pricing model:
|  | Three Months Ended
|  | June 30, 2024
Risk-free interest rate |  | 4.40%
Expected volatility |  | 32%
Expected dividend yield |  | 0.00%
Expected weighted average life of option in years |  | 4.0 years
For the three months ended June 30, 2024 and 2023, the Company recorded stock-based compensation expense of $1,070,000 and $1,312,000, respectively. The table below shows the amounts recognized in the unaudited consolidated financial statements for stock-based compensation expense for time-based options and performance-based options during the three months ended June 30, 2024 and 2023, respectively.
|  | Three Months Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |
Cost of revenues |  | $ | 715,000 |  |  | $ | 668,000 |
General and administrative |  |  | 355,000 |  |  |  | 644,000 |
Total cost of stock-based compensation included in income before income tax provision |  |  | 1,070,000 |  |  |  | 1,312,000 |
Amount of income tax benefit recognized |  |  | (246,000 | ) |  |  | (290,000 | )
Amount charged against net income |  | $ | 824,000 |  |  | $ | 1,022,000 |
Effect on basic earnings per share |  | $ | (0.05 | ) |  | $ | (0.06 | )
Effect on diluted earnings per share |  | $ | (0.05 | ) |  | $ | (0.06 | )
The following table summarizes information for all stock options for the three months ended June 30, 2024 and 2023:
|  | Three Months Ended June 30, 2024 |  |  | Three Months Ended June 30, 2023 |
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Shares |  |  | Weighted Average Exercise Price |
Options outstanding, beginning |  |  | 489,727 |  |  | $ | 129.39 |  |  |  | 651,857 |  |  | $ | 108.10 |
Options granted |  |  | 14,750 |  |  |  | 270.25 |  |  |  | — |  |  |  | — |
Options exercised |  |  | (32,945 | ) |  |  | 95.37 |  |  |  | (39,471 | ) |  |  | 75.79 |
Options cancelled/forfeited |  |  | (2,365 | ) |  |  | 165.39 |  |  |  | (485 | ) |  |  | 149.26 |
Options outstanding, ending |  |  | 469,167 |  |  | $ | 136.02 |  |  |  | 611,901 |  |  | $ | 110.10 |
The following table summarizes the status of stock options outstanding and exercisable at June 30, 2024:
Range of Exercise Price |  | Number of Outstanding Options |  |  | Weighted Average Remaining Contractual Life |  |  | Outstanding Options – Weighted Average Exercise Price |  |  | Exercisable Options – Number of Exercisable Options |  |  | Exercisable Options – Weighted Average Exercise Price |
$33.16 to $87.69 |  |  | 159,616 |  |  |  | 2.25 |  |  | $ | 68.87 |  |  |  | 153,912 |  |  | $ | 68.39 |
$87.70 to $155.99 |  |  | 152,606 |  |  |  | 3.03 |  |  |  | 142.01 |  |  |  | 65,992 |  |  |  | 132.74 |
$156.00 to $200.55 |  |  | 125,295 |  |  |  | 3.91 |  |  |  | 186.80 |  |  |  | 31,641 |  |  |  | 180.83 |
$200.56 to $270.25 |  |  | 31,650 |  |  |  | 4.99 |  |  |  | 244.79 |  |  |  | — |  |  |  | — |
Total |  |  | 469,167 |  |  |  | 3.13 |  |  | $ | 136.02 |  |  |  | 251,545 |  |  | $ | 99.42 |
The following table summarizes the status of all outstanding options at June 30, 2024, and changes during the three months then ended:
|  | Number of Options |  |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Life (Years) |  |  | Aggregate Intrinsic Value as of June 30, 2024 |
Options outstanding at April 1, 2024 |  |  | 489,727 |  |  | $ | 129.39 |  |  |  |  |  |  |
Granted |  |  | 14,750 |  |  |  | 270.25 |  |  |  |  |  |  |
Exercised |  |  | (32,945 | ) |  |  | 95.37 |  |  |  |  |  |  |
Cancelled – forfeited |  |  | (2,365 | ) |  |  | 165.39 |  |  |  |  |  |  |
Cancelled – expired |  |  | — |  |  |  | — |  |  |  |  |  |  |
Ending outstanding |  |  | 469,167 |  |  | $ | 136.02 |  |  |  | 3.13 |  |  | $ | 55,713,513 |
Ending vested and expected to vest |  |  | 405,530 |  |  | $ | 129.54 |  |  |  | 3.11 |  |  | $ | 50,816,052 |
Ending exercisable at June 30, 2024 |  |  | 251,545 |  |  | $ | 99.42 |  |  |  | 2.45 |  |  | $ | 38,952,201 |
The weighted-average grant-date fair value of options granted during the three months ended June 30, 2024 was $80.83. Included in the above-noted stock option grants and stock-based compensation expense are performance-based stock options that vest only upon the Company’s achievement of certain earnings per share targets that are assessed on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in the same manner as the time-based options. However, the Company only recognizes stock-based compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. The Company recognized $80,000 and $363,000 of stock-based compensation expense for the three months ended June 30, 2024 and 2023, respectively, for performance-based stock options.

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