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Equity Incentive and Employee Stock Purchase Plan | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Equity Incentive and Employee Stock Purchase Plan | Equity Incentive and Employee Stock Purchase Plan Prior to the Separation from Ziff Davis, the Company recorded share-based compensation expense for share-based awards granted to its employees and non-employees for services provided based on expense that was allocated from the Former Parent to the Company for each relevant employee on a monthly basis. The Former Parents’ plans included their 2015 Stock Plan and the 2001 Employee Stock Purchase Plan. In connection with the Separation, the Former Parent terminated awards that were held by Consensus employees. Each award held by a Consensus employee under the Former Parent’s compensation plans was converted into 2.21 Consensus awards under the 2021 Equity Incentive Plan, which resulted in 86,460 Ziff Davis awards converted into 191,076 Consensus awards. This modification resulted in no incremental compensation cost. Consensus Equity Incentive Plans (a) The 2021 Equity Incentive Plan In December 2021, Consensus’ Board of Directors adopted the Consensus Cloud Solutions, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and share units, and other share-based awards. 4,000,000 shares of common stock are authorized to be used for 2021 Plan purposes. Restricted Stock and Restricted Stock Units The Company has awarded restricted stock and restricted stock units to its Board of Directors and certain employees pursuant to the 2021 Plan. 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 years for employees and five years for the Chief Executive Officer and Chief Operating Officer. The Company issued 884 and 59,175 shares of restricted stock during the years ended December 31, 2022 and 2021, respectively. All of the restricted stock issued in 2021 were exchanged in the Separation. The Company granted 216,959 and 510,128 restricted stock units, which includes 91,203 shares exchanged in the Separation in 2021, during the years ended December 31, 2022 and 2021, respectively. Restricted Stock and Restricted Stock Units with Market Conditions The Company has awarded certain key employees market-based restricted stock and restricted stock units pursuant to the 2021 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 for 20 out of 30 trading days or 20 out of 25 trading days (look-back period). Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method unless the market condition has been met and the requisite service period has been completed, then the expense will be accelerated and recognized in the period that the market condition and service period requirement have been met. During the year ended December 31, 2021, the Company issued 6,060 shares of market-based restricted stock, all of which were exchanged in the Separation. The Company granted 503,144 market-based restricted stock units, which includes 34,638 shares exchanged in the Separation, during the year ended December 31, 2021. During the year ended December 31, 2022, the Company granted 42,586 shares of market-based restricted stock units. The per share weighted-average grant-date fair values of the market-based awards granted during the years ended December 31, 2022 and 2021 was $55.47 and $46.07, respectively, as determined by the Monte Carlo valuation. Notwithstanding the valuation, for the underlying stock price assumption, all market-based stock awards utilize the market value at the close of business on the date the grant is awarded. The Monte Carlo valuation model used to estimate the fair value of the market-based awards granted utilized the following weighted-average assumptions:
| December 31, 2022 |  | December 31, 2021
Underlying stock price at valuation date | $ | 59.66 |  |  | $ | 57.06 |
Expected volatility | 43.8 | % |  | 35.1 | %
Risk-free interest rate | 3.6 | % |  | 1.3 | %
Contractual term | 8 years |  | 6.1 years
Restricted stock activity for the years ended December 31, 2022 and 2021 is set forth below:
| Number of Shares |  | Weighted-Average Grant-Date Fair Value (1)
Nonvested at January 1, 2021 | — |  |  | $ | — |
Exchanged in Separation | 65,235 |  |  | 38.46 |
Granted | — |  |  | — |
Vested | — |  |  | — |
Canceled | — |  |  | — |
Nonvested at December 31, 2021 | 65,235 |  |  | $ | 38.46 |
Granted | 884 |  |  | 37.67 |
Vested | (30,703) |  |  | 38.50 |
Canceled | — |  |  | — |
Nonvested at December 31, 2022 | 35,416 |  |  | $ | 38.42 |
(1) The Company revised the grant date fair value of certain awards which were inaccurately disclosed related to the prior period. The Company determined that the update of this disclosure did not have a material impact to the current or prior period financial statements. As of December 31, 2022, the Company had unrecognized share-based compensation cost related to its restricted stock awards of $0.5 million, which is expected to be recognized over a weighted-average period of 1.0 years. Restricted stock unit activity for the years ended December 31, 2022 and 2021 is set forth below:
| Number of Shares |  | Weighted-Average Grant-Date Fair Value (1) |  | Weighted-Average Remaining Contractual Life (in Years) |  | Aggregate Intrinsic Value
Outstanding at January 1, 2021 | — |  |  | $ | — |  |  |  |  |
Exchanged in Separation | 125,841 |  |  | 47.15 |  |  |  |  |
Granted | 887,431 |  |  | 51.22 |  |  |  |  |
Vested | — |  |  | — |  |  |  |  |
Canceled | (175) |  |  | 57.15 |  |  |  |  |
Outstanding at December 31, 2021 | 1,013,097 |  |  | $ | 50.71 |  |  |  |  |
Granted | 259,545 |  |  | 57.61 |  |  |  |  |
Vested | (165,494) |  |  | 54.72 |  |  |  |  |
Canceled | (24,697) |  |  | 56.20 |  |  |  |  |
Outstanding at December 31, 2022 | 1,082,451 |  |  | $ | 51.63 |  |  | 3.9 |  | $ | 58,192,566 |
Vested and expected to vest at December 31, 2022 | 710,764 |  |  | $ | 52.68 |  |  | 3.3 |  | $ | 38,210,673 |
(1) The Company revised the grant date fair value of certain awards which were inaccurately disclosed related to the prior period. The Company determined that the update of this disclosure did not have a material impact to the current or prior period financial statements. As of December 31, 2022, the Company had unrecognized share-based compensation cost related to its restricted stock units of $39.8 million, which is expected to be recognized over a weighted-average period of 4.6 years. The Company recognized $1.3 million and $0.2 million, respectively, of tax benefits related to the share-based compensation costs for the years ending December 31, 2022 and 2021 related to the 2021 Plan. (b) Employee Stock Purchase Plan (“ESPP”) In October of 2021, Consensus established the Consensus Cloud Solutions, Inc. 2021 Employee Stock Purchase Plan (the “Purchase Plan”), which provides the issuance of a maximum of 1,000,000 shares of 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 Consensus’ common stock at certain plan-defined dates. The purchase price for each offering period is 85% of the lesser of the fair market value of a share of common stock of the Company (a “Share”) on the first or last day of the offering period, with each offering period being six months. The plan includes a provision 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 therefore, the Company is required to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite service period, which is the same as the offering period of the Purchase Plan. 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 6.73% and 10.34% as of December 31, 2022 and 2021, respectively. During 2022 and 2021, 32,096 and 10,421 Consensus shares were purchased under the Purchase Plan for a weighted average purchase price of $40.39 and $49.67 per share, respectively. Cash received upon issuance of the Company’s common stock under the Purchase plan was $1.3 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, there are 957,483 shares available under the Purchase Plan for future issuance. The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:
| December 31, 2022 |  | December 31, 2021
Risk-free interest rate | 4.54% |  | 0.05%
Expected term (in years) | 0.5 |  | 0.5
Dividend yield | 0.00% |  | 0.00%
Expected volatility | 48.19% |  | 17.89%
Weighted average volatility | 48.19% |  | 17.89%
Historical Cloud Services (a) The 2015 Stock Option Plan In May 2015, the Former Parent’s Board of Directors adopted the Ziff Davis 2015 Stock Option Plan (the “2015 Plan”). The 2015 Plan provided for the grant 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. Options under the 2015 Plan may be granted at exercise prices determined by the Former Parent’s 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 Ziff Davis’ common stock subject to the option on the date the option is granted. At December 31, 2021 and 2020, options to purchase were zero and 250 shares, respectively, of common stock that were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of zero and $29.53, respectively. Stock options generally expire after 10 years and vest over a 5-year period. All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m). Stock Options The stock option activity attributable to Consensus employees for the years ended December, 2021 and 2020 is summarized as follows:
| Number of Shares |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Life (In Years) |  | Intrinsic Value
Options outstanding at January 1, 2020 | 8,710 |  |  | $ | 29.53 |  |  |  |  |
Granted | — |  |  | — |  |  |  |
Exercised | (250) |  |  | $ | 29.53 |  |  |  |  |
Canceled | — |  |  | — |  |  |  |
Options outstanding at December 31, 2020 | 8,460 |  |  | $ | 29.53 |  |  |  |  |
Granted | — |  |  |  |  |  |  |
Exercised | (250) |  |  | 29.53 |  |  |  |
Canceled | — |  |  |  |  |  |  |
Adjustment due to Separation | (8,210) |  |  |  |  |  |  |
Options outstanding at December 31, 2021 | — |  |  | $ | — |  |  | 0.0 |  | $ | — |
Exercisable at December 31, 2021 | — |  |  | $ | — |  |  | 0.0 |  | $ | — |
Vested and expected to vest at December 31, 2021 | — |  |  | $ | — |  |  | 0.0 |  | $ | — |
For the years ended December 31, 2021 and 2020, the Former Parent granted no options to Consensus employees, respectively, to purchase shares of common stock pursuant to the 2015 Plan. Stock options granted under the 2015 plan vested 20% per year and expired 10 years from the date of grant. The total intrinsic values of options exercised attributable to Consensus employees during the years ended December 31, 2021 and 2020 was zero. The total fair value of options vested during the period prior the Separation attributable to Consensus employees was zero for the years ended December 31, 2021 and 2020. Cash received by the Former Parent from options exercised under all share-based payment arrangements for the years ended December 31, 2021 and 2020 was zero. The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements was zero for the years ended December 31, 2021 and 2020. As of December 31, 2021, there was no unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan. Fair Value Disclosure The Former Parent used the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility was based on historical volatility of the Former Parent’s common stock. The Former Parent estimated the expected term based upon the historical exercise behavior of its employees. The risk-free interest rate was 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 Former Parent used an annualized dividend yield based upon the per share dividends declared by the Former Parent’s Board of Directors. Estimated forfeiture rates were 12.4% and 13.0% as of December 31, 2021 and 2020, respectively. Restricted Stock and Restricted Stock Units The Former Parent has awarded restricted stock and restricted stock units to the Former Parent’s Board of Directors and senior staff pursuant to the 2015 Plan. 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 Former Parent’s Board of Directors, five years for senior staff (excluding market-based awards discussed below) and eight years for the Chief Executive Officer. The Former Parent granted 2,207 and 2,961 shares of restricted stock and restricted units the years ended December 31, 2021 and 2020, respectively. Restricted Stock Awards with Market Conditions The Former Parent awarded certain key employees market-based restricted stock awards pursuant to the 2015 Plan. The market-based awards had vesting conditions that were based on specified stock price targets of the Former Parent’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 Former Parent achieving the specified stock price targets with a 20-day and 30-day lookback (trading days). Stock-based compensation expense related awards with a market condition were recognized over the requisite service period using the graded-vesting method, regardless of whether the market condition was satisfied, provided that the requisite service period had been completed. During the nine months ended September 30, 2021 and the year ended December 31, 2020, the Former Parent awarded 73,094 and 82,112 market-based restricted stock awards, respectively. The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the years ended December 31, 2021, 2020 were $113.27 and $91.17, respectively. The Monte Carlo valuation model used by the Former Parent to estimate the fair value of market-based restricted stock awards granted utilized the following weighted-average assumptions:
| December 31, |  | December 31, |  |
2021 |  | 2020 |  |
Underlying stock price at valuation | $ | 113.27 |  |  | $ | 91.17 |  |  |
Expected volatility | 30.3 | % |  | 27.0 | % |  |
Risk-free interest rate | 1.3 | % |  | 0.7 | % |  |
Contractual term | 8 years |  | 8 years |  |
The restricted stock award activity for the years ended December 31, 2021 and 2020 is set forth below:
| Shares |  | Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2020 | 37,674 |  |  | $ | 75.03 |
Granted | — |  |  | — |
Vested | (7,785) |  |  | 76.43
Canceled | (3,020) |  |  | 77.37
Nonvested at December 31, 2020 | 26,869 |  |  | $ | 57.21 |
Granted | — |  |  | — |
Vested | (6,189) |  |  | 74.52 |
Canceled | (6,850) |  |  | 83.14 |
Adjustment due to Separation | (13,830) |  |  | 53.72 |
Nonvested at December 31, 2021 | — |  |  | $ | — |
The restricted stock unit activity attributable to Consensus employees for the years ended December 31, 2021 and 2020 is set forth below:
| Number of Shares |  | Weighted-Average Remaining Contractual Life (in Years) |  | Aggregate Intrinsic Value
Outstanding at January 1, 2020 | 10,357 |  |  |  |  |
Granted | 5,431 |  |  |  |  |
Vested | (1,734) |  |  |  |  |
Canceled | (360) |  |  |  |  |
Outstanding at December 31, 2020 | 13,694 |  |  |  |  |
Granted | 4,416 |  |  |  |  |
Vested | (2,470) |  |  |  |  |
Canceled | (8,856) |  |  |  |  |
Adjustment due to Separation | (6,784) |  |  |  |  |
Outstanding at December 31, 2021 | — |  |  | 0.0 |  | $ | — |
Vested and expected to vest at December 31, 2021 | — |  |  | 0.0 |  | $ | — |
The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2021 and 2020 was $1.3 million and $0.7 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled zero, respectively, for the years ended December 31, 2021 and 2020. (b) Employee Stock Purchase Plan (“ESPP”) In May of 2001, the Former Parent established the J2 Global, Inc. 2001 Employee Stock Purchase Plan, as amended (the “Purchase Plan”), which provided for the issuance of a maximum of 2,000,000 shares of common stock. Under the Purchase Plan, eligible employees could have up to 15% of their earnings withheld, up to certain maximums, to be used to purchase shares of Ziff Davis’ common stock at certain plan-defined dates. The price of the common stock purchased under the Purchase Plan for the offering periods is equal to 95% of the fair market value of the common stock at the end of the offering period. On February 2, 2018, the Former Parent approved an amendment to the Former Parent’s Amended and Restated 2001 Employee Stock Purchase Plan, to be effective May 1, 2018, such that (i) the purchase price for each offering period shall be 85% of the lesser of the fair market value of a share of common stock of the Parent (a “Share”) on the beginning or the end of the offering period, and (ii) each offering period will be six months. The Former Parent performed an analysis of the Amendment terms and 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 Former Parent’s Purchase Plan to be compensatory and the Former Parent to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite service period. The Former Parent used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP. The expected volatility was based on historical volatility of the Former Parent’s common stock. The risk-free interest rate was 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 Former Parent used an annualized dividend yield based upon the per share dividends declared by the Former Parent’s Board of Directors. Estimated forfeiture rates were 11.15% and 11.15% as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, 503 and 1,413 shares were purchased under the Purchase Plan, respectively. Shares purchased under the Purchase Plan were priced at $72.92 per share during 2021. As of December 31, 2021, zero shares were available under the Purchase Plan for future issuance.

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