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Note 8 - Share-based Compensation

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(8)

Share-Based Compensation

Share-based compensation is measured on the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based awards through two plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2023. The compensation cost charged against income from those plans is included in selling, general & administrative expenses as follows (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
Share-based compensation related to:		2024				2023				2024				2023
Common stock grants		$	100			$	100			$	300			$	300
Stock option grants			127				112				357				320
Restricted Stock Unit Awards ("RSUs")			1,312				985				4,130				2,830
Total share-based compensation		$	1,539			$	1,197			$	4,787			$	3,450

The total income tax benefit recognized in the condensed consolidated statements of comprehensive income for share-based compensa‐tion arrangements was approximately $394 thousand and $1.9 million for the three-and-nine-month periods ended September 30, 2024, respectively, and approximately $310 thousand and $1.9 million for the three-and-nine-month periods ended September 30, 2023.

Common Stock Grants

The compensation expense for common stock granted during the nine-month period ended September 30, 2024, was determined based on the market price of the shares on the date of grant.

Stock Option Grants

The following is a summary of stock option activity under all plans for the nine-month period ended September 30, 2024:

		Shares Under Options				Weighted Average Exercise Price (per share)				Weighted Average Remaining Contractual Life (in years)				Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023			78,488			$	39.98
Granted			2,958				260.92
Exercised			(6,568	)			32.35
Outstanding at September 30, 2024			74,878			$	67.67				5.17			$	18,669
Exercisable at September 30, 2024			67,952			$	56.36				5.08			$	17,690
Vested and expected to vest at September 30, 2024			74,878			$	67.67				5.17			$	18,669

On June 6, 2024, the Company granted options to its directors for the purchase of 2,958 shares of the Company’s common stock at that day’s closing price of $260.92. The compensation expense related to these grants was determined as the fair value of the options using the Black-Scholes option pricing model based on the following assumptions:

Expected volatility			39.7	%
Expected dividends		None
Risk-free interest rate			4.3	%
Exercise price		$	260.92
Expected term			6.3
Weighted-average grant date fair value		$	121.61

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods correspond‐ing with the expected term of the option. The expected term is estimated based on historical option exercise activity.

During the nine-month periods ended September 30, 2024 and 2023, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid to exercise the options) was approximately $652 thousand and $3.0 million, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $212 thousand and $789 thousand, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the nine-month period ended September 30, 2024, 653 shares were surrendered at an average market price of $162.93. During the nine-month period ended September 30, 2023, 861 shares were surrendered at an average market price of $127.05.

Restricted Stock Unit awards

The following table summarizes information about RSU activity during the nine-month period ended September 30, 2024:

		Restricted Stock Units				Weighted Average Grant Date Fair Value
Outstanding at December 31, 2023			95,693			$	64.82
Awarded			31,663				175.30
Shares vested			(50,582	)			79.53
Shares forfeited			(559	)			135.81
Outstanding at September 30, 2024			76,215			$	95.82

At the Company’s discretion, upon vesting, RSU holders are given the option to net-share settle to cover the required minimum withholding tax and the remaining amount is converted into the equivalent number of common shares and issued to the RSU holder. During the nine-month periods ended September 30, 2024 and 2023, 21,914 shares and 20,457 shares were surrendered at an average market price of $216.80 and $117.95, respectively.

As of September 30, 2024, the Company had approximately $6.7 million of unrecognized compensation expense that is expected to be recognized over a period of 2.5 years.