Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

13.STOCK-BASED COMPENSATION

On February 25, 2020, the Company’s 2010 Plan expired by its terms. On May 14, 2020, the Company’s shareholders approved the 2020 Plan which provides for the issuance of up to 3.0 million shares of the Company’s Class A common stock (of which approximately 2.2 million shares remain available for future issuance as of December 31, 2023), plus additional shares of Class A common stock (a) subject to awards granted under the 2010 Plan that may become available for issuance or reissuance, as applicable, under the 2020 Plan if such awards are forfeited or are settled in cash or otherwise expire or terminate without the delivery of the shares or (b) which become issuable under the 2020 Plan by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of outstanding shares of Class A common stock.

Commencing with the 2020 equity award, the Company modified the type of equity granted to certain employees to align long-term compensation with Company performance. Under the new structure, the Company continued to issue RSUs; however, RSUs will now vest ratably over three years rather than four years. The Company further replaced stock options with PSUs which will cliff vest at the end of three years. PSUs have performance metrics for which threshold, target, and maximum parameters are established at the time of the grant. The performance metrics are used to calculate the number of shares that will be issuable when the

awards vest, which may range from zero to 200% of the target amounts. At the end of each three year performance period, the number of shares that vest will depend on the results achieved against the pre-established performance metrics. Furthermore, effective with the 2020 grant, RSUs and PSUs will accrue dividend equivalents prior to vesting, which will be paid out only in respect to shares that actually vest.

Stock Options

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses a combination of historical data and historical volatility to establish the expected volatility, as well as to estimate the expected option life. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The following assumptions were used to estimate the fair value of options granted using the Black-Scholes option-pricing model:


	For the year ended December 31,
	2023		2022
Risk free interest rate		3.96%		2.53%
Dividend yield		1.50%		0.9%
Expected volatility		30.0%		27.2%
Expected lives		4.4 years		4.3 years

There were no options granted during the year ended December 31, 2021.

The following table summarizes the Company’s activities with respect to its stock option plans for the years ended December 31, 2023, 2022 and 2021 as follows (dollars and shares in thousands, except for per share data):



		Weighted-		Weighted-Average
		Average		Remaining
	Number	Exercise Price		Contractual	Aggregate
	of Shares	Per Share		Life (in years)	Intrinsic Value
Outstanding at December 31, 2020	3,202	$	143.01
Exercised	(1,290)	$	120.90
Forfeited/canceled	(13)	$	179.67
Outstanding at December 31, 2021	1,899	$	157.76
Granted	10	$	328.99
Exercised	(233)	$	141.41
Forfeited/canceled	(3)	$	179.16
Outstanding at December 31, 2022	1,673	$	161.02
Granted	20	$	224.24
Exercised	(339)	$	132.70
Forfeited/canceled	(14)	$	238.10
Outstanding at December 31, 2023	1,340	$	168.32	1.8	$	115,071
Exercisable at December 31, 2023	1,312	$	166.49	1.6	$	114,482
Unvested at December 31, 2023	28	$	254.17	9.1	$	589

The weighted-average per share fair value of options granted during the years ended December 31, 2023 and 2022 was $58.95 and $82.28, respectively.

The total intrinsic value for options exercised during the years ended December 31, 2023, 2022, and 2021 was $40.0 million, $45.2 million, and $287.8 million, respectively. Cash received from option exercises under all plans for the years ended December 31, 2023, 2022, and 2021 was approximately $38.6 million, $31.6 million, and $80.3 million, respectively. The tax benefit realized for the tax deductions from option exercises under all plans was $4.9 million, $18.4 million, and $11.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The aggregate intrinsic value for stock options in the preceding table represents the total intrinsic value based on the Company’s closing stock price of $253.69 as of December 31, 2023. The amount represents the total intrinsic value that would have been received by the holders of the stock-based awards had these awards been exercised and sold as of that date.

Additional information regarding options outstanding and exercisable at December 31, 2023 is as follows:



	Options Outstanding				Options Exercisable
		Weighted-Average	Weighted-			Weighted-
		Remaining	Average			Average
Range	Outstanding	Contractual Life	Exercise Price		Exercisable	Exercise Price
	(in thousands)	(in years)			(in thousands)
$100.01 - $140.00	130	0.2	$	116.19	130	$	116.19
$140.01 - $180.00	496	1.2	$	156.52	496	$	156.52
$180.01 - $230.00	702	2.4	$	183.88	682	$	182.70
$230.01 - $330.00	12	7.5	$	320.14	4	$	300.25
	1,340				1,312

The following table summarizes the activity of options outstanding that had not yet vested:



		Weighted-
		Average
	Number	Fair Value
	of Shares	Per Share
	(in thousands)
Unvested as of December 31, 2022	266	$	35.91
Options granted	20	$	58.95
Vested	(252)	$	34.33
Forfeited	(6)	$	40.45
Unvested as of December 31, 2023	28	$	65.61

As of December 31, 2023, the total unrecognized compensation expense related to unvested stock options outstanding under the Plans is $1.6 million. That cost is expected to be recognized over a weighted-average period of 4.0 years.

The total fair value of options vested during 2023, 2022, and 2021 was $8.7 million, $15.9 million, and $22.7 million, respectively.

Restricted Stock Units and Performance-Based Restricted Stock Units

The following table summarizes the Company’s RSU and PSU activity for the year ended December 31, 2023:



	RSUs			PSUs ⁽¹⁾
		Weighted-Average			Weighted-Average
	Number of	Grant Date Fair		Number of	Grant Date Fair
	Shares	Value per Share		Shares	Value per Share
	(in thousands)			(in thousands)
Outstanding at December 31, 2022	222	$	280.66	429	$	332.18
Granted	181	$	253.11	97	$	263.17
PSU adjustment ⁽²⁾	—	$	—	65	$	302.96
Vested	(119)	$	264.41	(207)	$	345.08
Forfeited/canceled	(17)	$	274.69	(16)	$	299.23
Outstanding at December 31, 2023	267	$	269.08	368	$	298.46

(1)PSUs represent the target number of shares granted that are issuable at the end of the three year performance period. Fair value for a portion of the PSUs was calculated using a Monte Carlo simulation model.

(2)PSU adjustment represents the net PSUs awarded above or below their target grants resulting from the achievement of performance targets established at the grant date.

Employee Stock Purchase Plan

The Board of Directors of the Company adopted the 2018 Employee Stock Purchase Plan (“2018 Purchase Plan”) which reserved 300,000 shares of Class A common stock for purchase. The 2018 Purchase Plan permits eligible employee participants to purchase Class A common stock at a price per share which is equal to 85% of the fair market value of Class A common stock on the last day of an offering period. For the years ended December 31, 2023 and 2022, 27,280 shares and 24,754 shares, respectively, of

Class A common stock were issued under the 2018 Purchase Plan, which resulted in cash proceeds to the Company of approximately $5.6 million and $6.7 million, respectively. At December 31, 2023, 157,697 shares remained available for issuance under the 2018 Purchase Plan.

In addition, the Company recorded $1.0 million, $1.2 million, and $1.1 million of non-cash compensation expense relating to the shares issued under the 2018 Purchase Plan for each of the years ended December 31, 2023, 2022, and 2021, respectively.

Non-Cash Compensation Expense

The table below reflects a breakout by category of the non-cash compensation expense amounts recognized on the Company’s Statements of Operations for the years ended December 31, 2023, 2022, and 2021, respectively:



		For the year ended December 31,
	2023		2022		2021
	(in thousands)
Cost of revenues	$	2,869	$	2,490	$	2,483
Selling, general and administrative		85,050		97,419		81,919
Total cost of non-cash compensation included
in income before provision for income taxes	$	87,919	$	99,909	$	84,402

In addition, the Company capitalized $1.7 million, $1.9 million, and $1.4 million of non-cash compensation for the years ended December 31, 2023, 2022, and 2021, respectively, to fixed assets.