STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Summary of Stock-Based Compensation Plans—The Company maintains equity incentive plans that provide for the grant of stock-based awards to its directors, officers and employees. The Company’s 2007 Equity Incentive Plan, as amended (the “2007 Plan”), provides for the grant of non-qualified and incentive stock options, as well as restricted stock units, restricted stock and other stock-based awards. Exercise prices for non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant. Equity awards typically vest ratably. Awards granted prior to March 10, 2023 generally vest over four years for time-based restricted stock units (“RSUs”) and stock options. In December 2022, the Company’s Compensation Committee changed the terms of its awards to generally vest over three years. The change in vesting terms is applicable for new awards granted beginning on March 10, 2023 and does not change the vesting terms applicable to grants awarded prior to March 10, 2023. Performance-based restricted stock units (“PSUs”) generally vest over three years. Stock options generally expire ten years from the date of grant. As of March 31, 2024, the Company had the ability to grant stock-based awards with respect to an aggregate of 3.3 million shares of common stock under the 2007 Plan. In addition, the Company maintains an employee stock purchase plan (the “ESPP”) pursuant to which eligible employees may purchase shares of the Company’s common stock on the last day of each bi-annual offering period at a 15% discount from the lower of the closing market value on the first or last day of such offering period. The offering periods run from June 1 through November 30 and from December 1 through May 31 of each year.

During the three months ended March 31, 2024 and 2023, the Company recorded the following stock-based compensation expense in selling, general, administrative and development expense:


	Three Months Ended March 31,
	2024		2023
Stock-based compensation expense	$	64.9	$	65.5

Stock Options—As of March 31, 2024, there was no unrecognized compensation expense related to unvested stock options.

The Company’s option activity for the three months ended March 31, 2024 was as follows (shares disclosed in full amounts):


						Number of Options
Outstanding as of January 1, 2024						766,955

Exercised						(166,886)
Forfeited						—
Expired						—
Outstanding as of March 31, 2024						600,069

Restricted Stock Units—As of March 31, 2024, total unrecognized compensation expense related to unvested RSUs granted under the 2007 Plan was $258.1 million and is expected to be recognized over a weighted average period of approximately two years. Vesting of RSUs is subject generally to the employee’s continued employment or death, disability or qualified retirement (each as defined in the applicable RSU award agreement).

Performance-Based Restricted Stock Units—During the three months ended March 31, 2024, the Company’s Compensation Committee (the “Compensation Committee”) granted an aggregate of 87,550 PSUs (the “2024 PSUs”) to its executive officers and established the performance and market metrics for these awards. During the years ended December 31, 2023 and 2022, the Compensation Committee granted an aggregate of 118,684 PSUs (the “2023 PSUs”) and 98,542 PSUs (the “2022 PSUs”), respectively, to its executive officers and established the performance metrics for these awards. Threshold, target and maximum parameters were established for the metrics for a three-year performance period with respect to each of the 2024 PSUs, the 2023 PSUs and the 2022 PSUs and will be used to calculate the number of shares that will be issuable when each award vests, 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 degree of achievement against the pre-established goals. PSUs will be paid out in common stock at the end of each performance period, subject generally to the executive’s continued employment or death, disability or qualified retirement (each as defined in the applicable PSU award agreement). PSUs will accrue dividend equivalents prior to vesting, which will be paid out only in respect of shares that actually vest.

The 2024 PSUs include a market condition component based on relative total shareholder return as measured against the REIT constituents included in the S&P 500 Index. For the component of the 2024 PSUs subject to a market condition, fair value is determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements. The grant date fair value of the market condition component of the 2024 PSUs is $216.11.

Key assumptions used to apply this pricing model were as follows:


	Three Months Ended March 31, 2024

Expected term (years)	2.81
Risk-free interest rate	4.31	%
Annualized volatility	26.75	%

Restricted Stock Units and Performance-Based Restricted Stock Units—The Company’s RSU and PSU activity for the three months ended March 31, 2024 was as follows (shares disclosed in full amounts):


	RSUs	PSUs
Outstanding as of January 1, 2024 (1)	1,638,711	363,488
Granted (2)	688,313	87,550
Vested and Released (3)	(639,358)	(97,124)
Forfeited	(8,510)	(1,337)
Outstanding as of March 31, 2024	1,679,156	352,577
Vested and deferred as of March 31, 2024 (4)	8,502	21,961

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(1)PSUs consist of the target number of shares issuable at the end of the three-year performance period for the outstanding 2023 PSUs and the outstanding 2022 PSUs, or 118,684 shares and 98,542 shares, respectively, the shares issuable at the end of the three-year performance period for the PSUs granted in 2021 (the “2021 PSUs”) based on achievement against the performance metrics for the three-year performance period, or 127,318 shares and the target remaining number of shares issuable at the end of the one-year performance period for PSUs granted to certain non-executive employees during the year ended December 31, 2023, net of forfeitures, or 18,944 shares.

(2)PSUs consist of the target number of shares issuable at the end of the three-year performance period for the 2024 PSUs, or 87,550 shares.

(3)PSUs consist of shares vested pursuant to the 2021 PSUs. There are no additional shares to be earned related to the 2021 PSUs. As of March 31, 2024, 8,233 earned shares remain outstanding and will vest in June 2024.

(4)Vested and deferred RSUs and PSUs are related to deferred compensation for certain former employees.

During the three months ended March 31, 2024, the Company recorded $9.1 million in stock-based compensation expense for equity awards in which the performance goals have been established and were probable of being achieved. The remaining unrecognized compensation expense related to these awards at March 31, 2024 was $22.7 million based on the Company’s current assessment of the probability of achieving the performance goals. The weighted average period over which the cost will be recognized is approximately two years.