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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2024
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Stock-Based Compensation |
10. | Stock-Based Compensation
Effective October 1, 2008, the Company adopted a Stock Incentive Plan which, as amended and restated (the “Plan”), provides that up to 5,400,000 shares of the Company’s common stock shall be allocated for issuance to directors, executive management and key personnel. Grants under the Plan can be made in the form of stock options, stock appreciation rights, performance shares or stock awards. As of December 31, 2024, the Company had 4,405,000 outstanding and/or exercised stock options, 260,000 vested performance shares and 333,000 outstanding and/or released restricted stock units that were issued under the Plan. Thus, as of December 31, 2024, the Company has 402,000 shares available for future grants under the Plan. The Plan is administered by the Compensation Committee of the Board of Directors. All grants awarded under the Plan are recommended by the Committee to the Board of Directors for approval. The exercise price of stock options is set on the grant date and is not to be less than the fair market value per share of our closing stock price on that date. Grants of stock options and restricted stock awards generally vest over a three to five-year period and options expire after ten years from the grant date. Performance shares vest upon the achievement of the performance criteria and approval by the Compensation Committee of the Board of Directors. Following is a summary of the Company’s stock option activity under the Plan for the three years ended December 31, 2024:
|  | Number of Options |  |  | Weighted Average Exercise Price |
Outstanding at December 31, 2021 |  |  | 2,041,000 |  |  | $ | 10.66 |
Granted |  |  | 1,200,000 |  |  |  | 15.76 |
Exercised |  |  | (113,000 | ) |  |  | 11.73 |
Cancelled / forfeited |  |  | (802,000 | ) |  |  | 15.85 |
Outstanding at December 31, 2022 |  |  | 2,326,000 |  |  |  | 11.38 |
Granted |  |  | 205,000 |  |  |  | 10.14 |
Exercised |  |  | — |  |  |  | — |
Cancelled / forfeited |  |  | (434,000 | ) |  |  | 13.62 |
Outstanding at December 31, 2023 |  |  | 2,097,000 |  |  |  | 10.80 |
Granted |  |  | 525,000 |  |  |  | 8.41 |
Exercised |  |  | (77,000 | ) |  |  | 6.59 |
Cancelled / forfeited |  |  | (125,000 | ) |  |  | 13.89 |
Outstanding at December 31, 2024 |  |  | 2,420,000 |  |  | $ | 10.25 |
As of December 31, 2024, the Company’s outstanding “in the money” stock options under the Plan, using the year-end share price of $14.90 had an aggregate intrinsic value of $12.0 million. As of December 31, 2024, the intrinsic value of vested stock options under the Plan totaled $8.1 million. The total intrinsic value of options exercised under the Plan during 2024, 2023 and 2022 totaled $281,000, $0 and $777,000, respectively. The measurement date fair value of stock options vested under the Plan during 2024, 2023 and 2022 totaled $866,000, $245,000 and $653,000, respectively. The table below summarizes information regarding the Company’s outstanding and exercisable stock options under the Plan as of December 31, 2024:
Range of Exercise Prices: |  | Options Outstanding |  |  | Weighted Average Remaining Contractual Life (in years) |  |  | Weighted Average Exercise Price |
$0.01 to $4.00 |  |  | 355,000 |  |  |  | 1.3 |  |  | $ | 3.56 |
$4.01 to $8.00 |  |  | 488,000 |  |  |  | 3.8 |  |  |  | 6.87 |
$8.01 to $12.00 |  |  | 605,000 |  |  |  | 9.2 |  |  |  | 8.41 |
$12.01 to $16.00 |  |  | 751,000 |  |  |  | 6.5 |  |  |  | 14.96 |
$16.01 to $20.00 |  |  | 221,000 |  |  |  | 6.8 |  |  |  | 17.51 |
|  |  | 2,420,000 |  |  |  | 5.9 |  |  | $ | 10.25 |
Range of Exercise Prices: |  | Options Exercisable |  |  | Weighted Average Remaining Contractual Life (in years) |  |  | Weighted Average Exercise Price |
$0.01 to $4.00 |  |  | 355,000 |  |  |  | 1.3 |  |  | $ | 3.56 |
$4.01 to $8.00 |  |  | 488,000 |  |  |  | 3.8 |  |  |  | 6.87 |
$8.01 to $12.00 |  |  | 20,000 |  |  |  | 9.0 |  |  |  | 8.43 |
$12.01 to $16.00 |  |  | 514,000 |  |  |  | 5.9 |  |  |  | 15.21 |
$16.01 to $20.00 |  |  | 168,000 |  |  |  | 6.8 |  |  |  | 17.51 |
|  |  | 1,545,000 |  |  |  | 4.3 |  |  | $ | 10.07 |
Stock options of 525,000 units were issued under the Plan during the year ended December 31, 2024, of which 140,000 vest over a four-year period and 385,000 vest over a three-year period. Stock options of 205,000 units were issued under the Plan during the year ended December 31, 2023, of which 180,000 vest over a four-year period and 25,000 vest over a three-year period. Stock options of 1.2 million units were issued under the Plan during the year ended December 31, 2022, of which 900,000 vest over a four-year period and 300,000 vest over a three-year period. The Company used the following average assumptions with respect to the Black-Scholes option pricing model for Mastech Digital stock options issued under the Plan during 2024, 2023 and 2022.
|  | Years Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Stock option grants: |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average risk-free interest rate |  |  | 4.1 | % |  |  | 4.0 | % |  |  | 2.7 | %
Weighted-average dividend yield |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %
Expected volatility |  |  | 47.7 | % |  |  | 63.0 | % |  |  | 66.1 | %
Expected term (in years) |  |  | 3.1 |  |  |  | 3.7 |  |  |  | 3.6 |
Weighted-average fair value |  | $ | 3.08 |  |  | $ | 5.01 |  |  | $ | 7.83 |
Risk-free interest rate — The risk-free rate for stock options granted during the period was determined by using a U.S. Treasury rate for the period that coincided with the expected term of the options. Expected dividend yield — The Company did not contemplate a recurring dividend program. Accordingly, the dividend yield assumption used was 0.0%. Expected volatility — Expected volatility was determined based on the historical volatility of Mastech Digital’s common stock. Expected term — Mastech Digital’s expected term was based on the exercise history of our employees and the vesting term of our stock options. Following is a summary of Mastech’s restricted stock activity under the Plan for the three years ended December 31, 2024:
|  | Years Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Beginning outstanding balance |  |  | 19,924 |  |  |  | 17,804 |  |  |  | 25,059 |
Awarded |  |  | 40,130 |  |  |  | 19,924 |  |  |  | 13,979 |
Released |  |  | (34,730 | ) |  |  | (17,804 | ) |  |  | (21,234 | )
Forfeited |  |  | (7,403 | ) |  |  | — |  |  |  | — |
Ending outstanding balance |  |  | 17,921 |  |  |  | 19,924 |  |  |  | 17,804 |
The aggregate intrinsic value of restricted stock units outstanding under the Plan at December 31, 2024 was $267,000. The total intrinsic value of restricted shares released under the Plan during 2024 totaled $396,000. On December 10, 2024, the Board approved and adopted the 2024 Inducement Stock Incentive Plan, and subject to the adjustment provisions of the 2024 Inducement Stock Incentive Plan, reserved 1,500,000 shares of Common Stock for issuance of awards under the 2024 Inducement Stock Incentive Plan. The 2024 Inducement Stock Incentive Plan was approved and adopted without shareholder approval pursuant to NYSE American Company Guide Rule 711. The 2024 Inducement Stock Incentive Plan provides for grants of non-qualified stock options, restricted stock awards, stock awards, performance share awards and other stock-based awards (each, an “Inducement Award”). Each Inducement Award is intended to qualify as an employment inducement award under NYSE American Company Guide Rule 711(a). In accordance with NYSE American Company Guide Rule 711(a), the 2024 Inducement Stock Incentive Plan will be used exclusively for the grant of equity awards to individuals who were not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to entering into employment with the Company. During 2024, no grants were made under the 2024 Inducement Stock Incentive Plan. The Company granted 702,358 stock options in January 2025 under the 2024 Inducement Stock Incentive Plan. In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and had to be approved by the Company’s shareholders to be qualified. On May 15, 2019, the Company’s shareholders approved the Stock Purchase Plan. Under the Stock Purchase Plan, 600,000 shares of common stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of common stock on the first day of the offering period, or (ii) the fair market value per share of common stock on the last day of the offering period. During the year ended December 31, 2024 and December 31, 2023, the Company issued 34,860 and 25,646 shares under the Stock Purchase Plan at an average share of $6.40 and $8.03, respectively. At December 31, 2024, there were 432,059 shares available for purchases under the Plan. The Company’s eligible full-time employees are able to contribute up to 15% of their base compensation into the employee stock purchase plan, subject to an annual limit of $25,000 per person. Employees are able to purchase Company common stock at a 15% discount to the lower of the fair market value of the Company’s common stock on the initial or final trading dates of each six-month offering period. Offering periods begin on January 1 and July 1 of each year. The Company uses the Black-Scholes option pricing model to determine the fair value of employee stock purchase plan share-based payments. The fair value of the six-month “look-back” option in the Company’s employee stock purchase plans is estimated by adding the fair value of 15% of one share of stock to the fair value of 85% of an option on one share of stock. The Company utilized U.S. Treasury yields as of the grant date for its risk-free interest rate assumption, matching the Treasury yield terms to the six-month offering period. The Company utilized historical company data to develop its dividend yield and expected volatility assumptions. Stock-based compensation expense of $2.2 million, $3.1 million and $2.2 million was recognized in the Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022, respectively. The Company has recognized related tax benefits associated with its stock-based compensation arrangements for the years ended December 31, 2024, 2023, and 2022 of $528,000, $721,000, and $663,000, respectively. As of December 31, 2024, the total remaining unrecognized compensation expense related to non-vested stock options totaled $3.1 million which will be amortized over the weighted-average remaining requisite service period of 1.6 years. The total remaining unrecognized compensation expense related to restricted stock units amounted to $22,000 which will be amortized over the weighted-average remaining requisite service period of 0.1 years.

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