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Share-Based Compensation | 12 Months Ended
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Dec. 31, 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 December 31, 2024, 435,135 shares underlying options and 1,173,213 shares of restricted stock units were outstanding under the Plans. As of December 31, 2024, there were 3,617,530 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 the effects of share-based compensation expense in the Consolidated Statements of Operations during the periods presented (in thousands):
| Year ended December 31,
| 2024 |  | 2023 |  | 2022
Direct costs | $ | 248 |  |  | $ | 262 |  |  | $ | 341 |
Sales and marketing | 3,756 |  |  | 2,686 |  |  | 3,083 |
Research, development, and engineering | 3,665 |  |  | 3,245 |  |  | 2,503 |
General, administrative, and other related costs | 33,246 |  |  | 25,727 |  |  | 20,674 |
Total share-based compensation expense | $ | 40,915 |  |  | $ | 31,920 |  |  | $ | 26,601 |
Stock Options As of December 31, 2024, 2023, and 2022, options to purchase 326,351, 271,959, and 217,567 shares of common stock were exercisable under and outside of the Plans, at weighted average exercise prices of $68.97, $68.97, $68.97, 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, 2024, 2023, and 2022 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, 2022 | 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 |  |  |  |  |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | — |  |  | $ | — |  |  |  |  |
Canceled | — |  |  | $ | — |  |  |  |  |
Options outstanding at December 31, 2024 | 435,135 |  |  | $ | 68.97 |  |  | 3.0 |  | $ | 0 |
Exercisable at December 31, 2024 | 326,351 |  |  | $ | 68.97 |  |  | 3.0 |  | $ | 0 |
Vested and expected to vest at December 31, 2024 | 102,128 |  |  | $ | 68.97 |  |  | 3.0 |  | $ | 0 |
There were no stock option exercises in 2024 and 2023. The total intrinsic values of options exercised during the year ended December 31, 2022 was $0.4 million. The total fair value of options vested during the years ended December 31, 2024, 2023, and 2022 was $1.0 million, $1.0 million, and $1.1 million, respectively. Cash received from options exercised under all share-based payment arrangements for the year ended December 31, 2022 was $0.1 million. The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements totaled $0.3 million for the year ended December 31, 2022. As of December 31, 2024, there was $1.0 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the Plans. That expense is expected to be recognized ratably over a weighted average period of 1.1 years (i.e., the remaining requisite service period). 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 or four years for senior staff (excluding market-based awards discussed below), and three to eight years for the Chief Executive Officer. The Company granted 413,053, 305,549, and 154,022 shares of restricted stock units (excluding awards with market conditions below) during the years ended December 31, 2024, 2023, and 2022, 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 specific 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 years ended December 31, 2023 and 2022 the Company awarded 167,606 and 100,193, respectively, PSUs at stock price targets ranging from $83.61 to $103.76 per share. During the year ended December 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 the 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 values of PSUs granted during the years ended December 31, 2024, 2023, and 2022 were $87.17, $70.06, and $87.11, respectively. The assumptions used in determining the weighted-average fair values of PSUs granted during the periods presented are as follows:
| December 31,
| 2024 |  | 2023 |  | 2022
Underlying stock price at valuation date | $ | 66.88 |  |  | $ | 77.80 |  |  | $ | 99.32 |
Expected volatility | 32.9 | % |  | 32.0 | % |  | 36.7 | %
Risk-free interest rate | 4.3 | % |  | 4.1 | % |  | 1.8 | %
Restricted stock award (“RSA”) and PSA activity for the years ended December 31, 2024, 2023 and 2022 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, 2022 | 220,782 |  |  | $ | 72.07 |  |  | 163,181 |  |  | $ | 36.27 |
Granted | — |  |  | — |  |  | — |  |  | — |
Vested | (67,762) |  |  | 74.13 |  |  | — |  |  | — |
Canceled | (4,920) |  |  | 77.92 |  |  | — |  |  | — |
Nonvested at December 31, 2022 | 148,100 |  |  | $ | 70.93 |  |  | 163,181 |  |  | $ | 36.27 |
Granted | — |  |  | — |  |  | — |  |  | — |
Vested | (52,060) |  |  | 72.29 |  |  | — |  |  | — |
Canceled | (322) |  |  | 77.75 |  |  | — |  |  | — |
Nonvested at December 31, 2023 | 95,718 |  |  | $ | 70.17 |  |  | 163,181 |  |  | $ | 36.27 |
Granted | — |  |  | — |  |  | — |  |  | — |
Vested | (40,735) |  |  | 71.73 |  |  | — |  |  | — |
Canceled | (154) |  |  | 77.75 |  |  | — |  |  | — |
Nonvested at December 31, 2024 | 54,829 |  |  | $ | 68.97 |  |  | 163,181 |  |  | $ | 36.27 |
Restricted stock unit activity for the years ended December 31, 2024, 2023 and 2022 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, 2022 | 299,023 |  |  | $ | 107.52 |  |  | 60,891 |  |  | $ | 86.78 |
Granted | 154,022 |  |  | 94.47 |  |  | 100,193 |  |  | 87.11 |
Vested | (84,259) |  |  | 108.04 |  |  | (30,435) |  |  | 91.23 |
Canceled | (24,831) |  |  | 94.02 |  |  | (10,250) |  |  | 89.73 |
Outstanding at December 31, 2022 | 343,955 |  |  | $ | 102.53 |  |  | 120,399 |  |  | $ | 87.04 |
Granted | 305,549 |  |  | 76.80 |  |  | 167,606 |  |  | 70.06 |
Vested | (111,185) |  |  | 101.41 |  |  | — |  |  | — |
Canceled | (31,894) |  |  | 83.82 |  |  | (17,233) |  |  | 77.98 |
Outstanding at December 31, 2023 | 506,425 |  |  | $ | 88.36 |  |  | 270,772 |  |  | $ | 77.09 |
Granted | 413,053 |  |  | 64.60 |  |  | 308,970 |  |  | 87.17 |
Vested | (175,564) |  |  | 90.68 |  |  | — |  |  | — |
Canceled | (91,687) |  |  | 74.44 |  |  | (58,756) |  |  | 79.88 |
Outstanding at December 31, 2024 | 652,227 |  |  | 74.59 |  |  | 520,986 |  |  | 82.73 |
Vested and expected to vest at December 31, 2024 | 610,299 |  |  | $ | 74.53 |  |  | 499,185 |  |  | $ | 82.54 |
(1)Represents the number of shares at 100% achievement. Aggregate intrinsic value of shares outstanding as of December 31, 2024 was $35.4 million and $28.3 million for RSUs and PSUs, respectively. Aggregate intrinsic value for shares vested and expected to vest was $33.2 million and $27.1 million for RSUs and PSUs, respectively. As of December 31, 2024, the Company had unrecognized share-based compensation cost of approximately $50.8 million associated with these restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.1 years for restricted stock awards and 2.0 years for restricted stock units. The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2024, 2023, and 2022 was $15.9 million, $11.3 million, and $12.4 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted stock and restricted stock units totaled $2.3 million, $1.9 million, and $2.8 million, respectively, for the years ended December 31, 2024, 2023, and 2022. 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 2024, 2023, and 2022, 174,706, 74,390, and 139,992 shares were purchased under the Purchase Plan, respectively, at a price ranging from $46.84 to $48.88 per share during 2024. Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $8.4 million, $8.7 million, and $9.4 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, 819,505 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 12.1%, 12.5%, and 11.8% as of December 31, 2024, 2023, and 2022, respectively. The share-based compensation expense related to the Purchase Plan has been estimated utilizing the following weighted average assumptions:
| December 31,
| 2024 |  | 2023 |  | 2022
Risk-free interest rate | 5.3% |  | 3.4% |  | 1.2%
Expected term (in years) | 0.5 |  | 0.5 |  | 0.5
Expected volatility | 31.4% |  | 38.3% |  | 40.7%

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