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Share-Based Compensation | 12 Months Ended
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Dec. 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 December 31, 2023, 435,135 shares underlying options and 777,197 shares of restricted stock units were outstanding under the 2015 Plan. As of December 31, 2023, there were 1,072,913 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan. In connection with the Separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09, which was intended to preserve the intrinsic value of the awards prior to the Separation. Further, the price targets for the Company’s market-based restricted stock units were reduced by $21.41. These adjustments to the Company’s equity compensation awards did not result in additional compensation expense. Stock based compensation awards that were held by Consensus employees were terminated and replaced with awards issued under the Consensus stock compensation plan (including under the Purchase Plan). Stock-based compensation expense through the Separation date for Consensus employees is included in results from discontinued operations. Share-Based Compensation Expense The following table presents the effects of share-based compensation expense in the Consolidated Statements of Operations during the periods presented (in thousands):
| Year ended December 31,
| 2023 |  | 2022 |  | 2021
Direct costs | $ | 262 |  |  | $ | 341 |  |  | $ | 306 |
Sales and marketing | 2,686 |  |  | 3,083 |  |  | 1,288 |
Research, development, and engineering | 3,245 |  |  | 2,503 |  |  | 1,984 |
General, administrative, and other related costs | 25,727 |  |  | 20,674 |  |  | 20,551 |
Total share-based compensation expense | $ | 31,920 |  |  | $ | 26,601 |  |  | $ | 24,129 |
Stock Options As of December 31, 2023, 2022, and 2021, options to purchase 271,959, 217,567, and 168,614 shares of common stock were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of $68.97, $68.97, $67.62, respectively. Stock options generally expire after 10 years and vest over a 5 to 8 year period. All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m). Stock option activity for the years ended December 31, 2023, 2022, and 2021 is summarized as follows:
| Number of Shares |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Life (In Years) |  | Aggregate Intrinsic Value
Options outstanding at January 1, 2021 | 475,601 |  |  | $ | 69.61 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | (70,776) |  |  | 41.63 |  |  |  |  |
Canceled | — |  |  | — |  |  |  |  |
Adjustment due to Consensus Separation (1) | 35,749 |  |  | $ | 68.25 |  |  |  |  |
Options outstanding at December 31, 2021 | 440,574 |  |  | $ | 68.45 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | (5,439) |  |  | 27.15 |  |  |  |  |
Canceled | — |  |  | — |  |  |  |  |
Options outstanding at December 31, 2022 | 435,135 |  |  | $ | 68.97 |  |  |  |  |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | — |  |  | $ | — |  |  |  |  |
Canceled | — |  |  | $ | — |  |  |  |  |
Options outstanding at December 31, 2023 | 435,135 |  |  | $ | 68.97 |  |  | 4.0 |  | $ | — |
Exercisable at December 31, 2023 | 271,959 |  |  | $ | 68.97 |  |  | 4.0 |  | $ | — |
Vested and expected to vest at December 31, 2023 | 144,040 |  |  | $ | 68.97 |  |  | 4.0 |  | $ | — |
(1)As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each stock option outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09, which was intended to preserve the intrinsic value of the awards prior to the Separation. There were no stock option exercises in 2023. The total intrinsic values of options exercised during the years ended December 31, 2022 and 2021 was $0.4 million and $5.8 million, respectively. The total fair value of options vested during the years ended December 31, 2023, 2022, and 2021 was $1.0 million, $1.1 million, and $1.0 million, respectively. Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2022 and 2021 was $0.1 million, and $2.9 million, respectively. The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements totaled $0.3 million and $1.9 million, respectively, for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2023, there was $1.9 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan. That expense is expected to be recognized ratably over a weighted average period of 2.0 years (i.e., the remaining requisite service period). Fair Value Disclosure The Company uses the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility is based on historical volatility of the Company’s common stock. The Company estimates the expected term based upon the historical exercise behavior of its employees. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Restricted Stock and Restricted Stock Units 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 305,549, 154,022, and 246,251 shares of restricted stock units (excluding awards with market conditions below) during the years ended December 31, 2023, 2022, and 2021, 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-day and 30-day lookback (trading days). Share-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 years ended December 31, 2023, 2022, and 2021 the Company awarded 167,606, 100,193, and 73,094 market-based restricted stock units at stock price targets ranging from $83.61 to $103.76 per share. The per share weighted average grant-date fair values of the market-based restricted stock units granted during the years ended December 31, 2023, 2022, and 2021 were $70.06, $87.11, and $94.40, respectively. The weighted-average fair values of market-based restricted stock units granted have been estimated utilizing the following assumptions:
| December 31,
| 2023 |  | 2022 |  | 2021
Underlying stock price at valuation date | $ | 77.8 |  |  | $ | 99.32 |  |  | $ | 113.27 |
Expected volatility | 32.0 | % |  | 36.7 | % |  | 30.3 | %
Risk-free interest rate | 4.1 | % |  | 1.8 | % |  | 1.3 | %
Restricted stock award activity for the years ended December 31, 2023, 2022 and 2021 is set forth below:
| Shares |  | Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2021 | 820,566 |  |  | $ | 62.66 |
Granted | — |  |  | — |
Vested | (435,529) |  |  | 60.52 |
Canceled | (33,194) |  |  | 83.23 |
Adjustment due to Consensus Separation (1) | 32,120 |  |  | 74.62 |
Nonvested at December 31, 2021 | 383,963 |  |  | $ | 62.66 |
Granted | — |  |  | — |
Vested | (67,762) |  |  | 80.64 |
Canceled | (4,920) |  |  | 84.77 |
Nonvested at December 31, 2022 | 311,281 |  |  | $ | 59.90 |
Granted | — |  |  | — |
Vested | (52,060) |  |  | 72.29 |
Canceled | (322) |  |  | 77.75 |
Nonvested at December 31, 2023 | 258,899 |  |  | $ | 48.76 |
(1)As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each restricted stock award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock awards was also adjusted. Restricted stock unit activity for the years ended December 31, 2023, 2022 and 2021 is set forth below:
| Number of Shares |  | Aggregate Intrinsic Value
Outstanding at January 1, 2021 | 209,784 |  |  |
Granted | 319,345 |  |  |
Vested | (124,761) |  |  |
Canceled | (60,201) |  |  |
Adjustment due to Consensus Separation (1) | 16,576 |  |  |
Outstanding at December 31, 2021 | 360,743 |  |  |
Granted | 254,215 |  |  |
Vested | (115,523) |  |  |
Canceled | (35,081) |  |  |
Outstanding at December 31, 2022 | 464,354 |  |  |
Granted | 473,155 |  |  |
Vested | (111,185) |  |  |
Canceled | (49,127) |  |  |
Outstanding at December 31, 2023 | 777,197 |  |  | $ | 52,219,866 |
Vested and expected to vest at December 31, 2023 | 721,572 |  |  | $ | 48,482,422 |
(1)As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each restricted stock unit outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock units was also adjusted. As of December 31, 2023, the Company had unrecognized share-based compensation cost of approximately $43.4 million associated with these restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.9 years for restricted stock awards and 2.4 years for restricted stock units. The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2023, 2022, and 2021 was $11.3 million, $12.4 million, and $68.1 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted stock and restricted stock units totaled $1.9 million, $2.8 million, and $9.5 million, respectively, for the years ended December 31, 2023, 2022, and 2021. Employee Stock Purchase Plan The Purchase Plan provides for the issuance of a maximum of two million shares of the Company’s common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earnings withheld, up to certain maximums, to be used to purchase shares of the Company’s common stock at certain plan-defined dates. The price of the Company’s common stock purchased under the Purchase Plan for the six-month offering periods is equal to 85% of the lesser of the fair market value of a share of the common stock of the Company on the beginning or the end of the offering period. Employees are immediately vested in the shares purchased at the purchase date. During 2023, 2022, and 2021, 74,390, 139,992, and 109,248 shares were purchased under the Purchase Plan, respectively, at a price ranging from $53.80 to $54.24 per share during 2023. Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $8.7 million, $9.4 million, and $9.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, 994,221 shares were available under the Purchase Plan for future issuance. The Company determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature. The purchase price discount and the look-back feature cause the Purchase Plan to be compensatory and the Company to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite service period, or the six-month offering period. The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the Purchase Plan. The expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 12.54%, 11.83%, and 11.15% as of December 31, 2023, 2022, and 2021, respectively. The share-based compensation expense related to the Purchase Plan has been estimated utilizing the following weighted average assumptions:
|  | December 31,
|  | 2023 |  | 2022 |  | 2021
Risk-free interest rate |  | 3.35% |  | 1.17% |  | 0.05%
Expected term (in years) |  | 0.5 |  | 0.5 |  | 0.5
Expected volatility |  | 38.3% |  | 40.7% |  | 35.0%

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