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Share-Based Compensation | 3 Months Ended
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Mar. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation The Company’s share-based compensation plans include the 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below. The 2015 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units, and other share-based awards. 4,200,000 shares of the Company’s common stock are authorized to be used for 2015 Plan purposes. Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100% of the fair market value of the Company’s common stock subject to the option on the date the option is granted. As of March 31, 2023, 435,135 shares underlying options and 848,874 shares of restricted stock units were outstanding under the 2015 Plan. Share-Based Compensation Expense The following table presents the effects of share-based compensation expense in the Condensed Consolidated Statements of Operations during the periods presented (in thousands):
| Three months ended March 31,
| 2023 |  | 2022
Cost of revenues | $ | 76 |  |  | $ | 84 |
Sales and marketing | 924 |  |  | 569 |
Research, development and engineering | 783 |  |  | 629 |
General and administrative | 6,619 |  |  | 5,435 |
Total share-based compensation | $ | 8,402 |  |  | $ | 6,717 |
As of March 31, 2023, the Company had unrecognized share-based compensation cost of approximately $66.2 million associated with these restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average period of 2.6 for restricted stock awards and 4.2 for restricted stock units. Restricted Stock The Company has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans. Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four or five years for senior staff (excluding market-based awards discussed below) and four to eight years for the Chief Executive Officer. The Company granted 271,614 and 112,324 shares of restricted stock and restricted units (excluding awards with market conditions below) during the three months ended March 31, 2023 and 2022, respectively. The Company has awarded certain key employees market-based restricted stock and market-based restricted stock units pursuant to the 2015 Plan. The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets with a 20-days and 30-day lookback (trading days). Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. During the three months ended March 31, 2023, the Company awarded 167,606 market-based restricted stock units at stock price targets ranging from $83.61 to $103.76 per share. During the three months ended March 31, 2022, the Company awarded 100,193 market-based restricted stock units at stock price targets ranging from $107.97 to $138.73 per share. The per share weighted average grant-date fair values of the market-based restricted stock units granted during the three months ended March 31, 2023 and 2022 were $70.07 and $87.11, respectively. The weighted-average fair values of market-based restricted stock units granted have been estimated utilizing the following assumptions:
| March 31, 2023 |  | March 31, 2022
Underlying stock price at valuation date | $ | 77.80 |  |  | $ | 99.32 |
Expected volatility | 32.0 | % |  | 36.7 | %
Risk-free interest rate | 4.1 | % |  | 1.8 | %
Restricted stock award activity for the three months ended March 31, 2023 is set forth below:
| Shares |  | Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023 | 311,281 |  |  | $ | 59.90 |
Vested | (36,380) |  |  | $ | 100.41 |
Nonvested at March 31, 2023 | 274,901 |  |  | $ | 58.43 |
Restricted stock unit activity for the three months ended March 31, 2023 is set forth below:
| Number of Shares |  | Weighted-Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value
Outstanding at January 1, 2023 | 464,354 |  |  |  |  |
Granted | 439,220 |  |  |  |  |
Vested | (53,299) |  |  |  |  |
Canceled | (1,401) |  |  |  |  |
Outstanding at March 31, 2023 | 848,874 |  |  | 3.4 |  | $ | 66,508,434 |
Vested and expected to vest at March 31, 2023 | 705,218 |  |  | 3.2 |  | $ | 54,788,467 |

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