Share-based Payments

12 Months Ended

Dec. 31, 2022

Share-based Payments

Share-based Payments

25.   Share-based Payments

Share-based payments consist of the following compensation costs:

Year ended December 31,	2022		2021		2020
Selling, general and administrative:
Stock option compensation expense	$	12,145	$	8,365	$	5,853
Equity-classified share units		22,027		12,574		9,897
Liability-classified share units		3		(580)		3,635
Employee share purchase plan - employer contributions		2,786		2,747		2,497
		36,961		23,106		21,882
Acquisition-related costs:
Share-based continuing employment costs		7,500		10,771		802
		7,500		10,771		802
	$	44,461	$	33,877	$	22,684

Stock Option Plans

The Company has the following three stock option plans that provide for the award of stock options and premium-priced stock options to selected employees, directors, and officers of the Company: (i) Amended and Restated Stock Option Plan, (ii) IronPlanet 1999 Stock Plan, and (iii) IronPlanet 2015 Stock Plan.

25.   Share-based Payments (continued)

Stock Option Plans (continued)

Stock option activity is presented below:

	Stock options							Premium-priced stock options
				WA							WA
	Common	WA		remaining		Aggregate		Common	WA		remaining		Aggregate
	shares under	exercise		contractual		intrinsic		shares under	exercise		contractual		intrinsic
	option	price		life (in years)		value		option	price		life (in years)		value
Outstanding, December 31, 2019	2,797,189	$	29.05		7.1	$	38,874	—	$	—		—	$	—
Granted	822,626		41.94		—		—	—		—		—		—
Exercised	(1,563,941)		28.22		—		37,062	—		—		—		—
Forfeited	(68,056)		34.30		—		—	—		—		—		—
Expired	(2,064)		20.74		—		—	—		—		—		—
Outstanding, December 31, 2020	1,985,754	$	34.95		7.7	$	68,717	—	$	—		—	$	—
Granted	758,256		56.29		—		—	1,017,064		91.24		—		—
Exercised	(495,021)		32.83		—		14,147	—		—		—		—
Forfeited	(40,932)		45.86		—		—	—		—		—		—
Outstanding, December 31, 2021	2,208,057	$	42.55		7.7	$	41,884	1,017,064	$	91.24		5.7	$	—
Granted	710,847		58.08		—		—	119,157		91.37		—		—
Exercised	(159,920)		36.72		—		4,494	—		—		—		—
Forfeited	(28,689)		48.09		—		—	(17,789)		90.93		—		—
Outstanding, December 31, 2022	2,730,295	$	46.88		7.3	$	31,151	1,118,432	$	91.26		4.7	$	—
Exercisable, December 31, 2022	1,308,853	$	38.36		5.9	$	25,815	—	$	—		—	$	—

Stock options

The Company uses the Black Scholes option pricing model to fair value stock options. Stock options are granted with an exercise price equal to the fair market value of the Company’s common shares at the grant date, with a three year vesting period and terms not exceeding 10 years. At December 31, 2022, there were 3,919,069 (December 31, 2021: 4,705,117) shares authorized and available for grants of options under the stock option plans. The options outstanding at December 31, 2022 expire on dates ranging to December 16, 2032. The weighted average grant date fair value of options granted during the year ended December 31, 2022 was $14.35 per option (2021: $12.72; 2020: $8.69). The weighted average share price of options exercised during the year ended December 31, 2022 was $64.82 (2021: $61.40; 2020: $51.92).

The significant assumptions used to estimate the fair value of stock options granted are presented in the following table on a weighted average basis:

Year ended December 31,	2022		2021		2020
Risk free interest rate	2.2	%	0.5	%	0.7	%
Expected dividend yield	1.74	%	1.64	%	1.96	%
Expected lives of the stock options	4	years	4	years	5	years
Expected volatility	31.8	%	32.3	%	28.0	%

At December 31, 2022, the unrecognized stock-based compensation cost related to non-vested stock options was $7.1 million, which is expected to be recognized over a weighted average period of 2.0 years. Cash received from stock-based award exercises for the year ended December 31, 2022 was $5.9 million (2021: $16.3 million; 2020: $44.1 million). The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled $0.4 million for the year ended December 31, 2022 (2021: $1.8 million; 2020: $4.6 million).

25.   Share-based Payments (continued)

Stock Option Plans (continued)

Premium-priced Stock Options

The Company also grants premium-priced stock options to the senior executives with exercise prices above the fair market value of the Company’s common shares on grant dates. The premium-priced stock options vest and become exercisable upon the third anniversary of their grant date. The premium-priced stock options granted in August and November 2021 expire on the sixth anniversary of their grant date, and those granted in June 2022 expire in August 2027 to coincide with the expiry of the August 2021 grant. The fair values of the premium-priced stock options were calculated on the grant date using a Monte Carlo simulation model. The weighted average estimated grant date fair value of premium-priced options for the year ended December 31, 2022 was $8.00 per option (2021: $8.59).

The significant assumptions used to estimate the fair values were as follows:

Year ended December 31,	2022		2021
Risk free interest rate	3.0	%	1.1	%
Expected dividend yield	1.63	%	1.59	%
Expected lives of the stock options	4	years	5	years
Expected volatility	30.2	%	30.6	%

In addition, the estimated fair value of a premium priced stock option is a function of the expected stock option exercise behaviour assumption. The Company estimated that vested premium priced stock options will be exercised at the midpoint between (i) the later of the date that the premium priced stock options are expected to vest and the date that the exercise price is achieved, and (ii) the end of the premium priced options contractual term.

At December 31, 2022, the unrecognized stock-based compensation cost related to the premium-priced stock options was $5.6 million, which is expected to be recognized over a weighted average period of 1.9 years.

Share Unit Plans

Share unit activity is presented below:

	Equity-classified awards									Liability-classified awards
	PSUs			PSUs with Market Conditions			RSUs			DSUs
		WA grant			WA grant			WA grant				WA grant
		date fair			date fair			date fair				date fair
	Number	value		Number	value		Number	value			Number	value
Outstanding, December 31, 2019	428,724	$	32.89	—	$	—	237,420	$	29.72		118,368	$	29.64
Granted	303,829		42.09	—		—	45,781		51.36		19,146		47.01
Vested and settled	(156,238)		31.94	—		—	(98,542)		27.68		—		—
Forfeited	(33,639)		36.60	—		—	(49,722)		28.14		—		—
Outstanding, December 31, 2020	542,676	$	38.09	—	$	—	134,937	$	39.14		137,514	$	32.06
Granted	160,713		57.67	88,305		65.45	46,675		60.98		19,075		58.48
Vested and settled	(161,248)		31.14	—		—	(93,426)		35.04		—		—
Forfeited	(18,523)		47.58	—		—	(9,074)		55.81		—		—
Outstanding at December 31, 2021	523,618	$	45.90	88,305	$	65.45	79,112	$	54.96		156,589	$	35.28
Granted	236,855		58.53	14,574		69.92	34,495		57.71		21,824		58.24
Vested and settled	(93,241)		36.42	—		—	(37,714)		50.29		(70,048)		36.13
Forfeited	(4,598)		51.76	—		—	(7,869)		60.30		—		—
Outstanding at December 31, 2022	662,634	$	51.71	102,879	$	66.08	68,024	$	58.32		108,365	$	39.35

The total market value of liability-classified share units vested and released during the year ended December 31, 2022 was $4.9 million (2021: $nil; 2020: $nil).

25.   Share-based Payments (continued)

Share Unit Plans (continued)

Senior Executive and Employee PSU Plans

The Company grants PSUs under a senior executive PSU plan and an employee PSU plan (the “PSU Plans”). Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, and/or performance vesting conditions being met. The PSU Plans allow the Company to choose whether to settle the awards in cash or in shares. The Company intends to settle by issuance of shares. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) to issue a number of shares equal to the number of units that vest.

The fair value of the equity-classified PSUs awarded in 2022, 2021 and 2020 is estimated on grant date using the market close price of the Company’s common shares listed on the NYSE, as these awards are not subject to market vesting conditions.

At December 31, 2022, the unrecognized share unit expense related to equity-classified PSUs was $14.6 million, which is expected to be recognized over a weighted average period of 1.8 years.

PSUs with Market Conditions

The Company also grants PSUs to senior executives with a market condition where vesting is conditional upon the total stockholder return performance of the Company’s stock relative to the performance of a peer group over a three year performance period from the date of grant. The PSUs granted in August and November 2021 have a three year performance period and the PSUs granted in June 2022 have approximately a two year performance period to coincide with the remaining performance period of the August 2021 grant. The fair value per PSU granted during the year ended December 31, 2022 of $69.92 was calculated on the grant date using the Monte Carlo simulation model which takes into consideration a required post-vesting holding period of one year with a discount value of $5.34 per PSU. The discount was calculated using the Chaffe Protective Put Method and an effective tax rate of 35%.

The significant assumptions used to estimate the fair value are presented in the following table:

Year ended December 31,	2022		2021
Risk free interest rate	2.7	%	0.5	%
Expected dividend yield	1.63	%	1.63	%
Expected lives of the PSUs	2	years	3	years
Expected volatility	33.4	%	31.0	%
Average expected volatility of comparable companies	34.4	%	38.6	%

At December 31, 2022, the unrecognized share unit expense related to equity-classified PSUs with market conditions was $3.9 million, which is expected to be recognized over a weighted average period of 1.6 years.

RSUs

The Company has restricted share unit plans (RSU plans) that are equity-settled and not subject to market vesting conditions.

Fair values of RSUs are estimated on grant date using the market close price of the Company's common shares listed on the NYSE.

At December 31, 2022, the unrecognized share unit expense related to equity-classified RSUs was $1.6 million, which is expected to be recognized over a weighted average period of 1.4 years.

25.   Share-based Payments (continued)

Share Unit Plans (continued)

DSUs

The Company has deferred share unit plans (DSU plans) that are cash-settled and not subject to market vesting conditions.

Fair values of deferred share units (“DSUs”) are estimated on grant date and at each reporting date using the market close price of the Company's common shares listed on the NYSE. DSUs are granted under the DSU plan to members of the Board of Directors. There is no unrecognized share unit expense related to liability-classified DSUs as they vest immediately and are expensed upon grant.

At December 31, 2022, the Company had a total share unit liability of $6.3 million (2021: $10.1 million) in respect of share units under the DSU plans presented in trade and other liabilities.

Employee Share Purchase Plan

The Company has an employee share purchase plan that allows all employees that have completed two months of service to contribute funds to purchase common shares at the current market value at the time of share purchase. Employees may contribute up to 4% of their salary. The Company will match between 50% and 100% of the employee’s contributions, depending on the employee’s length of service with the Company.