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Stock-based compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-based compensation | Stock-based compensation Service-based vesting stock options The following is a summary of service-based vesting stock option activity for the September 30, 2024, and the status of service-based vesting stock options outstanding as of September 30, 2024:
| Nine Months Ended September 30, 2024
| Options |  | Wtd. Avg. Exercise Price
Outstanding as of beginning of period | 217,250 |  |  | $ | 2.21 |
Exercised | (58,750) |  |  | 2.33 |
Outstanding as of September 30, 2024 | 158,500 |  |  | $ | 2.16 |
Stock options exercisable as of September 30, 2024 | 158,500 |  |  | $ | 2.16 |
As of September 30, 2024, there was $3.6 million of aggregate intrinsic value of outstanding and exercisable service-based vesting stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the reporting period and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on September 30, 2024. This amount will change based on the fair market value of the Company’s stock. We did not recognize stock compensation expense related to service-based options during the three and nine months ended September 30, 2024. The intrinsic value of service vesting-based awards exercised was $0.5 million and $1.1 million during the three and nine months ended September 30, 2024, respectively. There were no service-based vesting options granted during the three and nine months ended September 30, 2024. The weighted average remaining contractual life of service-based vesting stock options outstanding and exercisable as of September 30, 2024 is 1.5 years. There were no unrecognized compensation costs for service-based vesting stock options as of September 30, 2024. Restricted stock Service-based vesting restricted stock The following is a summary of service-based vesting restricted stock activity for the nine months ended September 30, 2024, and the status of unvested service-based vesting restricted stock outstanding as of September 30, 2024:
| Nine Months Ended September 30, 2024
| Shares |  | Wtd. Avg. Grant Date Fair Value
Outstanding as of beginning of period | 2,312,898 |  |  | $ | 18.32 |
Granted | 484,886 |  |  | 20.53 |
Vested | (701,436) |  |  | 25.83 |
Forfeited | (116,386) |  |  | 17.33 |
Non-vested as of September 30, 2024 | 1,979,962 |  |  | $ | 16.22 |
The aggregate fair value of the service-based vesting awards granted was $6.7 million and $10.0 million during the three and nine months ended September 30, 2024, respectively. The aggregate fair value of the service-based vesting awards that vested was $2.3 million and $8.0 million during the three and nine months ended September 30, 2024, respectively. We recognized stock compensation expense related to service-based vesting awards of $3.8 million and $11.7 million during the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, there was $26.8 million in unrecognized compensation costs related to service-based vesting awards. We expect to recognize those costs over 2.7 years. Performance-based restricted stock On March 8, 2024, the Company granted 109,512 shares of performance-based stock to an executive in the form of restricted stock. The shares granted contain performance conditions based on Company metrics related to future performance. The grant date fair value of this award was $17.36 per share. The fair value of this award is being expensed on a straight-line basis over the requisite service period ending on December 31, 2025. We recognized stock compensation expense of $0.2 million and $0.7 million related to performance-based restricted stock awards for the three and nine months ended September 30, 2024, respectively. As of September 30, 2024, there was $1.2 million in unrecognized non-cash compensation costs related to performance-based restricted stock awards expected to vest. We expect to recognize those costs over 1.2 years. Non-cash compensation costs are expensed over the period for which performance was measured. The aggregate fair value of the performance-based awards granted during the three and nine months ended September 30, 2024 was $1.9 million. No performance-based awards vested during the three and nine months ended September 30, 2024. No performance-based restricted stock awards were granted or vested during the three and nine months ended September 30, 2023. Market-based restricted stock The following is a summary of market-based restricted stock activity under our stock option plan for the nine months ended September 30, 2024 and the status of market-based restricted stock outstanding as of September 30, 2024:
| Nine Months Ended September 30, 2024
| Shares |  | Wtd. Avg. Grant
Outstanding as of beginning of period | 509,166 |  |  | $ | 26.50 |
Granted | 299,565 |  |  | 27.12 |
Vested | (300,529) |  |  | 27.97 |
Non-vested as of September 30, 2024 | 508,202 |  |  | $ | 25.70 |
On February 24, 2022, the Company granted 240,428 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on total shareholder return ("TSR"). The TSR market condition measures the Company’s performance against a peer group. On March 8, 2024, the Company’s Compensation Committee determined the TSR attainment was 125% of the targeted shares and 300,529 shares were granted and immediately vested to the executives of the Company based on our TSR during the period beginning on January 1, 2022 through December 31, 2023 as compared to the TSR of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 63%, 0% dividend yield and a risk-free interest rate of 1.5%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest rate is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $6.7 million was expensed on a straight-line basis over the grant date to the vesting date of December 31, 2023. On January 3, 2023, the Company granted 268,738 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our TSR during the period beginning on January 1, 2023 through December 31, 2024 as compared to the TSR of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 78%, 0% dividend yield and a risk-free interest rate of 4.4%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest rate is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $6.8 million is being expensed on a straight-line basis over the grant date to the vesting date of December 31, 2024, excluding $1.6 million of expense recognized in 2023 to reflect accelerations in the vesting period of certain awards. On March 8, 2024, the Company granted 239,464 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our TSR during the period beginning on January 1, 2024 through December 31, 2025 as compared to the TSR of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 80%, 0% dividend yield and a risk-free interest rate of 4.6%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest rate is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award of $6.3 million is being expensed on a straight-line basis over the grant date to the vesting date of December 31, 2025. We recognized stock compensation expense of $1.3 million and $3.7 million related to market-based restricted stock awards for the three and nine months ended September 30, 2024, respectively, and $1.6 million and $4.9 million during the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, there was $4.4 million in unrecognized non-cash compensation costs related to market-based restricted stock awards expected to vest. We expect to recognize those costs over 1.1 years. The aggregate fair value of the market-based awards granted was zero and $6.3 million during the three and nine months ended September 30, 2024, respectively, and zero and $6.5 million during the three and nine months ended September 30, 2023, respectively. The aggregate fair value of the market-based awards that vested was zero and $5.1 million during the three and nine months ended September 30, 2024, respectively, and zero and $0.7 million during the three and nine months ended September 30, 2023, respectively. Total stock compensation expense Compensation expense associated with equity-based awards is recognized on a straight-line basis over the requisite service period, with awards generally vesting over a 4-year period, and forfeitures recognized as incurred. We recorded total stock compensation expense for the three and nine months ended September 30, 2024 and 2023, as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Cost of revenue | $ | 826 |  |  | $ | 1,031 |  |  | $ | 2,482 |  |  | $ | 2,991 |
General and administrative costs | 2,873 |  |  | 3,349 |  |  | 8,648 |  |  | 9,497 |
Sales and marketing costs | 1,001 |  |  | 1,920 |  |  | 2,909 |  |  | 3,575 |
Research and development costs | 624 |  |  | 1,684 |  |  | 1,983 |  |  | 3,652 |
Total | $ | 5,324 |  |  | $ | 7,984 |  |  | $ | 16,022 |  |  | $ | 19,715 |

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