Authorized Capital Stock—The Company was authorized to issue 190,000,000 shares of common stock, with a par value of $0.000004 per share as of June 30, 2023 and December 31, 2022.

Common Stock Issuances—The Company issued the following shares of common stock:


	Three Months Ended June 30,
	2023						2022
	Shares		Average Price per Share		Total		Shares		Average Price per Share		Total
Acquisitions		86,577	$	30.01	$	2,598		—	$	—	$	—
Exercise of options		43,538		13.89		605		3,575		15.15		54
Total		130,115	$	24.61	$	3,203		3,575	$	15.15	$	54

	Six Months Ended June 30,
	2023						2022
	Shares		Average Price per Share		Total		Shares		Average Price per Share		Total
Acquisitions		86,577	$	30.01	$	2,598		—	$	—	$	—
Exercise of options		167,993		19.61		3,295		34,182		14.15		483
Restricted shares, net (1)		90,116		66.30		—		25,289		66.58		—
Total		344,686	$	34.43	$	5,893		59,471	$	36.44	$	483

(1) Represents the non-cash release of common shares due to the vesting of restricted stock.

Employee Equity Incentive Plans—The Company has two plans under which stock-based awards have been issued: (i) the Montrose Amended & Restated 2017 Stock Incentive Plan (“2017 Plan”) and (ii) the Montrose Amended & Restated 2013 Stock Option Plan (“2013 Plan”) (collectively the “Plans”).

As of June 30, 2023, and June 30, 2022, there was $141.5 million and $162.1 million, respectively, of total unrecognized stock-based compensation expense related to unvested options, restricted stock and stock appreciation rights granted under the Plans. Such unrecognized expense is expected to be recognized over a weighted-average three year period. The following number of shares were authorized to be issued and available for grant:


	June 30, 2023
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		6,330,588		2,036,344		8,366,932
Shares available for grant(1)		750,326		—		750,326

	June 30, 2022
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		8,139,987		2,037,144		10,177,131
Shares available for grant(1)		445,244		—		445,244

(1) In January 2023 and January 2022 the Board of Directors ratified the addition of 1,189,801 and 1,185,112 shares of common stock, respectively, to the number of shares available for issuance under the 2017 Plan pursuant to the annual increase provision of such plan. Unless the Board of Directors determines otherwise, additional annual increases will be effective on each January 1, through January 1, 2027. The 2017 Plan permits the company to settle awards, if and when vested, in cash at its discretion. Pursuant to the terms of the 2017 Plan, the number of shares authorized for issuance thereunder will only be reduced with respect to shares of common stock actually issued upon exercise or settlement of an award. Shares of common stock subject to awards that have been canceled, expired, forfeited or otherwise not issued under an award and shares of common stock subject to awards settled in cash do not count as shares of common stock issued under the 2017 Plan. Shares available for grant exclude awards of stock appreciation rights approved in December 2021 that are subject to vesting based on the achievement of certain market conditions, which have not yet been, and may not be, achieved. See footnote 1 to the table in Common Stock Reserved for Future Issuance below for additional information on stock appreciation rights.

Total stock-based compensation expense for the Plans was as follows:


	Three Months Ended June 30,
	2023										2022
	2017 plan						2013 plan				2017 plan						2013 plan
	Options		Restricted Stock		SARs		Options		Total		Options		Restricted Stock		SARs		Options		Total
Cost of revenue	$	466	$	243	$	—	$	—	$	709	$	371	$	—	$	—	$	—	$	371
Selling, general and administrative expense		1,070		7,021		2,290		—		10,381		2,254		6,017		2,290		—		10,561
Total	$	1,536	$	7,264	$	2,290	$	—	$	11,090	$	2,625	$	6,017	$	2,290	$	—	$	10,932

	Six Months Ended June 30,
	2023										2022
	2017 plan						2013 plan				2017 plan						2013 plan
	Options		Restricted Stock		SARs		Options		Total		Options		Restricted Stock		SARs		Options		Total
Cost of revenue	$	815	$	786	$	—	$	—	$	1,601	$	665	$	—	$	—	$	—	$	665
Selling, general and administrative expense		2,794		15,175		4,555		—		22,524		4,233		11,809		4,650		—		20,692
Total	$	3,609	$	15,961	$	4,555	$	—	$	24,125	$	4,898	$	11,809	$	4,650	$	—	$	21,357

Restricted Stock Awards and Restricted Stock Units—The Company issues restricted stock awards ("RSAs") to certain 2017 Plan participants as Director’s compensation. There were zero RSAs granted during the three months ended June 30, 2023 and June 30, 2022. There were 17,346 and 10,920 RSAs granted during the six months ended June 30, 2023 and June 30, 2022, respectively. These RSAs vest one year from the date of grant, or, in each case, in full upon a change in control, subject to the participant’s continued service as a Director throughout such date, or upon retirement. Members of the Board of Directors that receive stock-based compensation are treated as employees for accounting purposes.

During the three and six months ended June 30, 2023, the Board of Directors approved the grant of 53,164 and 253,587 restricted stock units (“RSUs”) to certain senior non-executive employees of the Company, in lieu of options. These RSUs represent the right to receive one share of the Company’s common stock upon vesting. These RSUs vest annually over a 4-year period from the date of grant, subject to continued service through each such date. No RSUs were issued to senior non-executive employees during the six months ended June 30, 2022.

During 2023 and 2022, the Board of Directors approved the grant of RSUs under certain supplemental incentive plans ("SI Plans"). There were 123,932 and zero RSUs issued under these SI Plans during the three months ended June 30, 2023 and June 30, 2022, respectively. There were 253,587 and 95,404 RSUs issued under these SI Plans during the six months ended June 30, 2023 and June 30, 2022, respectively. The majority of the RSUs issued during the six months ended June 30, 2023 vested 1/3 on the date of grant, and will vest 1/3 on the one-year anniversary of the grant, and 1/3 on the two-year anniversary of the grant, subject to continued service through each such date. The remaining RSUs vest annually over a 4-year period from the date of grant, subject to continued service through each such date.

RSAs and RSUs activity was as follows:


	Three Months Ended June 30,
	2023							2022
	Shares			Average Price per Share		Fair Value (in thousands)		Shares		Average Price per Share		Fair Value (in thousands)
Awards granted		177,096		$	37.27	$	6,600		—	$	—	$	—
Awards forfeited		(3,559	)		32.16		114		—		—		—

	Six Months Ended June 30,
	2023							2022
	Shares			Average Price per Share		Fair Value		Shares		Average Price per Share		Fair Value
Awards granted		641,282		$	33.90	$	21,740		106,324	$	46.82	$	4,978
Awards forfeited		(3,559	)		32.16		114		—		—		—
Awards vested		90,116			36.81		3,317		25,289		30.98		783

There were an aggregate of 2,701,920 and 2,064,197 shares underlying outstanding RSAs and RSUs awards as of June 30, 2023 and June 30, 2022, respectively.

Stock Appreciation Rights— As of June 30, 2023 , there were 3,000,000 units of stock appreciation rights (“SARs”) outstanding under the 2017 Plan. These SARs represent the right to receive, upon exercise, a payment equal to the excess of (a) the fair market value of one share of the Company’s common stock, over (b) an exercise price of $66.79, payable, at the Company’s election, in cash or shares of common stock. These SARs vest on the 5th anniversary of the date of grant based on achievement of performance hurdles over a five year period, subject to continued service on the vesting date. The performance hurdles are as follows:

The performance hurdles shall be deemed achieved if the average trading price per share of the Company’s common stock equals or exceeds the applicable stock price performance hurdle set forth above for the trading days falling in a consecutive 20-day period prior to the vesting date. None of the market conditions have been achieved as of June 30, 2023.

The SARs expire 10 years after the grant date. The fair value of these SARs at the grant date was $46.0 million. The weighted average remaining contract life of these SARs as of June 30, 2023 was 8.46 years.

Options—Options issued to all optionees under the 2017 Plan vest over 4-years from the date of issuance (or earlier vesting start date, as determined by the Board of Directors) as follows: one half on the second anniversary of date of grant and the remaining half on the fourth

anniversary of the date of grant, with the exception of certain annual grants to certain executive officers, which vest annually over a 3-year and 1-year period. The following summarizes the options activity of the 2017 Plan:


	Options to Purchase Common Stock			Weighted- Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contract Life (in Years)		Aggregate Intrinsic Value of In-The- Money Options (in Thousands)
Outstanding as of January 1, 2022		2,036,729		$	26	$	14		8.30	$	91,030
Granted		563,084			44		16		—		—
Forfeited/ cancelled		(38,887	)		35		—		—		—
Exercised		(14,197	)		25		—		—		393
Outstanding as of June 30, 2022		2,546,729			30		15		8.22		19,199

Outstanding as of January 1, 2023		2,579,566		$	31	$	15		7.76	$	37,292
Granted		233,955			32		14		—		—
Forfeited/ cancelled		(63,085	)		37		—		—		—
Expired		(1,200	)		25		—		—		—
Exercised		(125,229	)		24		—		—		2,794
Outstanding as of June 30, 2023		2,624,007		$	31	$	16		7.46	$	32,414
Exercisable at June 30, 2023		1,365,861			29		—		6.76		18,892

Montrose Amended & Restated 2013 Stock Option Plan—The following summarizes the activity of the 2013 Plan:


	Options to Purchase Common Stock			Weighted- Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contract Life (in Years)		Aggregate Intrinsic Value of In-The- Money Options (in Thousands)
Outstanding as of January 1, 2022		897,674		$	6	$	2		4.37	$	57,529
Exercised		(19,985	)		6		—		—		859
Outstanding as of June 30, 2022		877,689			6		2		3.88		23,991

Outstanding as of January 1, 2023		855,695		$	6	$	2		3.31	$	32,478
Expired		(675	)		6		—		—		—
Exercised		(42,764	)		7		—		—		1,514
Outstanding as of June 30, 2023		812,256		$	6	$	2		2.83	$	29,030
Exercisable at June 30, 2023		812,256			6		—		2.83		29,030

Total shares outstanding from exercised options were 1,478,423 shares and 1,243,272 shares as of June 30, 2023 and June 30, 2022, respectively.

Common Stock Reserved for Future Issuances—The Company has reserved certain stock of its authorized but unissued common stock for possible future issuance in connection with the following: