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STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 9. STOCK-BASED COMPENSATION

On May 21, 2014, we adopted the 2014 Equity Incentive Plan (as amended, the “2014 Plan”). The purposes of the 2014 Plan are to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of the Company’s business. In 2024 by proxy to the Monarch shareholders the 2014 Plan was extended for additional 10 years. The 2014 Plan, as amended, is an “omnibus plan” under which stock options, stock appreciation rights, performance awards, dividend equivalents, restricted stock, and restricted stock units can be awarded to employees, directors and consultants of the Company.

The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, the Amendment No. 1, Amendment No. 2 and Amendment No. 3 to the 2014 Plan is 4,400,000 shares plus the shares available for grant or subject to outstanding awards under the predecessor plans. The share reserve as of December 31, 2024 is 1,219,040. By its terms, the 2014 Plan will expire in May 2024 after which no options may be granted unless the 2014 Plan is amended or replaced.

Pursuant to the terms of the 2014 Plan, either the Board of Directors or a committee designated by the Board of Directors is authorized to administer the plan. The administrator has the authority, in its discretion, to select employees, consultants and directors to whom awards under the 2014 Plan may be granted from time to time, to determine whether and to what extent awards are granted, to determine the number of shares or the amount of other consideration to be covered by each award (subject to certain limitations), to approve award agreements for use under the 2014 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the award), to amend the terms of any outstanding award granted under the 2014 Plan (subject to certain limitations), to construe and interpret the terms of the 2014 Plan and awards granted, and to take such other action not inconsistent with the terms of the 2014 Plan as the administrator deems appropriate.

A summary of the stock option activity as of and for the year ended December 31, 2024 is presented below:


				Weighted Average
							Remaining		Aggregate
				Exercise			Contractual		Intrinsic
Stock Options		Shares		Price			Term		Value
Stock Option Shares outstanding at beginning of period		1,773,570		$	55.07		—			—
Stock Option Shares granted		401,634			75.46		—			—
Stock Option Shares exercised		(275,464)			41.00		—			—
Stock Option Shares forfeited		(118,000)			69.41		—			—
Stock Option Shares expired		—			—		—			—
Stock Option Shares outstanding at end of period		1,781,740			60.89		6.7	yrs.	$	31,699,676
Stock Option Shares exercisable at end of period		826,744		$	48.08		4.6	yrs.	$	25,482,628

A summary of the status of the Company’s nonvested stock option shares as of, and for the year ended, December 31, 2024 is presented below:


				Weighted-Average
				Grant Date Fair
Nonvested Stock Option Shares		Shares		Value
Nonvested at January 1, 2024		922,995		$	29.96
Granted		401,634			35.17
Vested		(251,633)			26.96
Forfeited		(118,000)			28.82
Nonvested at December 31, 2024		954,996		$	33.09

Expense Measurement and Recognition

The Company recognizes stock-based compensation expense for all current stock option award grants and for the unvested portion of previous stock option award grants based on grant date fair values. Unrecognized costs related to all stock option awards outstanding at December 31, 2024 totaled approximately $22.9 million and is expected to be recognized over a weighted average period of 2.85 years.

The Company uses historical data and projections to estimate expected employee, executive and director behaviors related to stock option exercises and forfeitures.

The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for options granted during each year were as follows (dollars in thousands, except weighted average grant date fair value per share):


		Year ended December 31,
		2024			2023			2022
Weighted average expected volatility for options granted			48.92	%		49.08	%		48.54	%
Expected dividends			1.64	%		1.72			—
Expected life (in years)
Directors’ plan			5.91			5.18			4.15
Executives plan			6.00			5.63			5.63
Employees plan			4.29			4.26			4.22
Weighted average risk-free rate			4.29	%		4.08	%		3.62	%

Weighted average grant date fair value per share of options granted		$	35.17		$	31.60		$	31.86
Total fair value of shares vested		$	6,784		$	5,367		$	3,452
Total intrinsic value of options exercised		$	10,011		$	3,113		$	28,156
Cash received for all stock option exercises		$	8,221		$	3,365		$	18,846
Tax benefit realized from stock awards exercised		$	2,102		$	654		$	5,913

The risk-free interest rate is based on the U.S. Treasury security rate in effect as of the date of grant. The expected lives of options and expected volatility are based on Company’s historical data.

Reported stock-based compensation expense was classified as follows (in thousands) and it is included in the Operating expenses in the Consolidated Statement of Income:



		For the Year ended December 31,
		2024			2023			2022
Casino		$	546		$	354		$	273
Food and beverage			172			163			142
Hotel			337			268			214
Selling, general and administrative			6,809			6,691			4,466
Total stock-based compensation, before taxes			7,864			7,476			5,095
Tax benefit			(1,651)			(1,570)			(1,070)
Total stock-based compensation, net of tax		$	6,213		$	5,906		$	4,025