Equity Incentive and Employee Stock Purchase Plan

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Equity Incentive and Employee Stock Purchase Plan

The Company’s share-based compensation plans include the 2021 Equity Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below.

(a) 2021 Equity Incentive Plan

In December 2021, Consensus’ Board of Directors adopted the 2021 Plan, which 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. As of March 31, 2023, 2,735,286 shares were available to be used under the 2021 Plan.

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 stock 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 granted 41,754 shares of restricted stock units during the three months ended March 31, 2023.

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 is recognized over the requisite service period using the graded-vesting method unless the market condition has been met and requisite service period has been completed, then the expense will be accelerated and recognized in the period that the marketing condition and service period requirement have been met. During the three months ended March 31, 2023, the Company awarded zero market-based restricted stock awards and restricted stock units.

Restricted stock activity for the three months ended March 31, 2023 is set forth below:


	Shares	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023	35,416	$	38.42
Granted	—	—
Vested	(9,615)	37.97
Canceled	—	—
Nonvested at March 31, 2023	25,801	$	38.59

As of March 31, 2023, the Company had unrecognized share-based compensation cost related to its restricted stock

awards of $0.3 million, which is expected to be recognized over a weighted-average period of 0.9 years.

Restricted stock unit activity for the three months ended March 31, 2023 is set forth below:


	Number of Shares	Weighted-Average Grant-Date Fair Value		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2023	1,082,451	$	51.63
Granted	41,754	59.50
Vested	(24,840)	48.85
Canceled	(8,177)	56.53
Outstanding at March 31, 2023	1,091,188	$	51.95	3.6	$	37,198,599
Vested and expected to vest at March 31, 2023	727,674	$	53.10	3.1	$	24,806,395

As of March 31, 2023, the Company had unrecognized share-based compensation cost related to its restricted stock units of $36.1 million, which is expected to be recognized over a weighted-average period of 2.7 years.

The Company capitalized $0.5 million and zero, respectively, of share-based compensation cost within property and equipment, net on our Condensed Consolidated Balance Sheets during the three months ended March 31, 2023 and 2022.

(b) Employee Stock Purchase Plan

In October 2021, Consensus established the Purchase Plan, which provides for 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 on 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 that allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature, to be used in the purchase price calculation. 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, 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 the Company’s Board of Directors. Estimated forfeiture rates were 6.73% as of March 31, 2023.

For the three months ended March 31, 2023, zero shares were purchased under the Purchase Plan. Cash received upon the issuance of Consensus common stock under the Purchase Plan during the three months ended March 31, 2023 was zero. As of March 31, 2023, 957,483 shares were available under the Purchase Plan for future issuance.

The compensation expense related to the current offering period of the Purchase Plan has been estimated utilizing the following assumptions:


			March 31, 2023
Risk-free interest rate			4.54%
Expected term (in years)			0.5
Dividend yield			0.00%
Expected volatility			48.19%
Weighted average volatility			48.19%