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Share-Based Compensation | 3 Months Ended
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Mar. 31, 2024
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, 2024, 435,135 shares underlying options and 726,367 shares of restricted stock units were outstanding under the 2015 Plan. At March 31, 2024, there were 126,565 additional shares underlying options, shares of restricted stock and other share-based awards available for grant 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, |  |
| 2024 |  | 2023 |  |  |  |
Direct costs | $ | 61 |  |  | $ | 76 |  |  |  |  |
Sales and marketing | 758 |  |  | 924 |  |  |  |  |
Research, development, and engineering | 1,090 |  |  | 783 |  |  |  |  |
General, administrative, and other related costs | 6,963 |  |  | 6,619 |  |  |  |  |
Total share-based compensation expense | $ | 8,872 |  |  | $ | 8,402 |  |  |  |  |
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, generally three to four years for senior staff (excluding market-based awards discussed below) and three to eight years for the Chief Executive Officer. The Company granted 347,275 and 271,614 shares of restricted stock units (excluding awards with market conditions below) (“RSUs”) during the three months ended March 31, 2024 and 2023, respectively. The Company has awarded certain key employees market-based restricted stock (“PSAs”) and market-based restricted stock units (“PSUs”) pursuant to the 2015 Plan. Market-based awards granted prior to 2024 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 look back (trading days). During the three months ended March 31, 2023, the Company awarded 167,606 PSUs at stock price targets ranging from $83.61 to $103.76 per share. During the three months ended March 31, 2024, the Company awarded 308,970 equity classified PSUs that vest in shares of the Company’s stock ranging from 0% to 200% of the award based on the Company’s attainment of a relative Total Shareholder Return (“TSR”) target compared to the TSR of all listed companies in a market index over the respective one, two, and three-year performance periods. 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 and all listed companies in a market index achieving the relative TSR targets. 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. The per share weighted average grant-date fair value for the PSUs granted during the three months ended March 31, 2024 and 2023 were $87.17 and $70.07, respectively. The assumptions used in determining the weighted-average fair values of PSUs granted are as follows:
| Three months ended March 31,
| 2024 |  | 2023
Underlying stock price at valuation date | $ | 66.88 |  |  | $ | 77.80 |
Expected volatility | 32.9 | % |  | 32.0 | %
Risk-free interest rate | 4.3 | % |  | 4.1 | %
Restricted stock award activity for the three months ended March 31, 2024 is set forth below:
|  | RSAs |  | PSAs
|  | Number of Shares |  | Weighted Average Grant Date Fair Value |  | Number of Shares |  | Weighted Average Grant Date Fair Value
Nonvested at January 1, 2024 |  | 95,718 |  | $ | 70.17 |  |  | 163,181 |  | $ | 36.27 |
Vested |  | (36,330) |  |  | 70.92 |  |  | — |  |  | — |
Forfeited |  | (154) |  |  | 77.75 |  |  | — |  |  | — |
Nonvested at March 31, 2024 |  | 59,234 |  |  | $ | 69.69 |  |  | 163,181 |  |  | $ | 36.27 |
Restricted stock unit activity for the three months ended March 31, 2024 is set forth below:
| RSUs |  | PSUs
| Number of Shares |  | Weighted Average Grant Date Fair Value |  | Number of Shares (1) |  | Weighted Average Grant Date Fair Value
Outstanding at January 1, 2024 | 506,425 |  |  | $ | 88.36 |  |  | 270,772 |  |  | $ | 77.09 |
Granted | 347,275 |  |  | 66.87 |  | 308,970 |  |  | 87.17
Vested | (114,635) |  |  | 86.29 |  | — |  |  | — |
Forfeited | (12,698) |  |  | 82.28 |  | (6,015) |  |  | 75.96
Outstanding at March 31, 2024 | 726,367 |  |  | $ | 78.49 |  |  | 573,727 |  |  | $ | 82.53 |
(1)Represents the number of shares at 100% achievement. As of March 31, 2024, the Company had unrecognized share-based compensation cost of approximately $84.1 million associated with these restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.8 years for RSAs and PSAs and 2.6 years for RSUs and PSUs.

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