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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation The Company’s share-based compensation plans include the Ziff Davis, Inc. 2024 Equity Incentive Plan (the “2024 Plan”), the 2015 Stock Option Plan (the “2015 Plan”), and 2001 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below. On May 7, 2024, the 2024 Plan was approved by the stockholders of the Company and replaced the 2015 Stock Option Plan. The 2024 Plan permits the Company to issue shares of common stock to or for the benefit of employees, consultants, and non-employee directors of the Company and its subsidiaries as part of their compensation. The 2024 Plan provides for the grant of stock options, restricted stock, stock appreciation rights, restricted stock units, performance-based awards, and other incentive awards. Shares authorized but unissued under the 2015 Plan that were not subject to outstanding awards under the 2015 Plan as of May 7, 2024 were canceled. The total number of shares of the Company’s common stock that may be issued under the 2024 Plan shall not exceed 3,500,000 shares, plus any Returned Shares, as defined in the 2024 Plan, under the 2015 Plan and any shares under the 2024 Plan that are subsequently forfeited, canceled, reacquired by the Company, satisfied or are otherwise terminated (other than by exercise) or used to pay tax withholding obligations with respect to outstanding awards issued under the 2024 Plan. The 2024 Plan will expire on March 21, 2034, unless earlier terminated by the Board. Awards outstanding under the 2015 Plan were not impacted by the approval of the 2024 Plan. Collectively, the 2015 Plan and 2024 Plan are referred to herein as “Plans.” As of September 30, 2024, 435,135 shares underlying options and 694,769 shares of restricted stock units were outstanding under the Plans. As of September 30, 2024, there were 3,582,306 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2024 Plan. Share-Based Compensation Expense The following table presents share-based compensation expense recorded in the Condensed Consolidated Statements of Operations during the periods presented (in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Direct costs | $ | 68 |  |  | $ | 76 |  |  | $ | 191 |  |  | $ | 246 |
Sales and marketing | 1,014 |  |  | 323 |  |  | 2,865 |  |  | 2,285 |
Research, development, and engineering | 769 |  |  | 840 |  |  | 2,930 |  |  | 2,581 |
General, administrative, and other related costs | 8,310 |  |  | 5,535 |  |  | 24,647 |  |  | 19,281 |
Total share-based compensation expense | $ | 10,161 |  |  | $ | 6,774 |  |  | $ | 30,633 |  |  | $ | 24,393 |
Restricted Stock and Restricted Stock Units The Company has awarded restricted stock and restricted stock units to its Board and senior staff pursuant to the 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, 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 394,994 and 296,705 shares of restricted stock units (excluding awards with market conditions below) (“RSUs”) during the nine months ended September 30, 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 Plans. 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 nine months ended September 30, 2023, the Company awarded 167,606 PSUs at stock price targets ranging from $83.61 to $103.76 per share. During the nine months ended September 30, 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 is 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 nine months ended September 30, 2024 and 2023 were $87.17 and $70.07, respectively. The assumptions used in determining the weighted-average fair values of PSUs granted during the periods presented are as follows:
| Nine months ended September 30,
| 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 (“RSA”) and PSA activity for the nine months ended September 30, 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 |
Granted |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Vested |  | (41,170) |  |  | 71.73 |  |  | — |  |  | — |
Forfeited |  | (154) |  |  | 77.75 |  |  | — |  |  | — |
Nonvested at September 30, 2024 |  | 54,394 |  |  | $ | 68.97 |  |  | 163,181 |  |  | $ | 36.27 |
Restricted stock unit activity for the nine months ended September 30, 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 | 394,994 |  |  | 65.24 |  | 308,970 |  |  | 87.17
Vested | (132,003) |  |  | 83.91 |  | — |  |  | — |
Forfeited | (74,647) |  |  | 75.63 |  | (47,015) |  |  | 79.49 |
Outstanding at September 30, 2024 | 694,769 |  |  | $ | 77.40 |  |  | 532,727 |  |  | $ | 82.71 |
(1)Represents the number of shares at 100% achievement. As of September 30, 2024, the Company had unrecognized share-based compensation cost of approximately $61.4 million associated with these restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.3 years for RSAs and PSAs and 2.2 years for RSUs and PSUs.

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