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 September 30, 2023 and December 31, 2022.

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


	Three Months Ended September 30,
	2023						2022
	Shares		Average Price per Share		Total		Shares		Average Price per Share		Total
Exercise of options		49,490	$	24.93	$	1,234		28,111	$	11.70	$	329
Payment of earn-out liability		26,688		37.47		1,000		—		—		—
Total		76,178	$	29.32	$	2,234		28,111	$	11.70	$	329

	Nine Months Ended September 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		217,483		20.82		4,529		62,293		13.04		812
Restricted shares, net (1)		90,116		36.81		—		25,289		66.58		—
Payment of earn-out liability		26,688		37.47		1,000		—		—		—
Total		420,864	$	27.19	$	8,127		87,582	$	28.50	$	812

(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 September 30, 2023 and September 30, 2022, there was $132.8 million and $152.5 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:


	September 30, 2023
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		6,330,713		2,036,219		8,366,932
Shares available for grant(1)		703,380		—		703,380

	September 30, 2022
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		5,140,112		2,037,019		7,177,131
Shares available for grant(1)		364,949		—		364,949

(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 September 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	$	399	$	409	$	—	$	—	$	808	$	404	$	—	$	—	$	—	$	404
Selling, general and administrative expense		1,050		7,311		2,315		—		10,676		2,216		6,083		2,315		—		10,614
Total	$	1,449	$	7,720	$	2,315	$	—	$	11,484	$	2,620	$	6,083	$	2,315	$	—	$	11,018

	Nine Months Ended September 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	$	1,214	$	1,195	$	—	$	—	$	2,409	$	1,069	$	—	$	—	$	—	$	1,069
Selling, general and administrative expense		3,844		22,486		6,870		—		33,200		6,449		17,892		6,965		—		31,306
Total	$	5,058	$	23,681	$	6,870	$	—	$	35,609	$	7,518	$	17,892	$	6,965	$	—	$	32,375

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 September 30, 2023 and September 30, 2022. There were 17,346 and 10,920 RSAs granted during the nine months ended September 30, 2023 and September 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 nine months ended September 30, 2023, the Board of Directors approved the grant of 90,384 and 343,971 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 weighted-average 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 nine months ended September 30, 2022.

During 2023 and 2022, the Board of Directors approved the grant of RSUs under certain supplemental incentive plans ("SI Plans"). There were zero RSUs issued under these SI Plans during the three months ended September 30, 2023 and September 30, 2022, respectively. There were 370,349 and 95,404 RSUs issued under these SI Plans during the nine months ended September 30, 2023 and September 30, 2022, respectively. The majority of the RSUs issued under these SI Plans during the nine months ended September 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 September 30,
	2023							2022
	Shares			Average Price per Share		Fair Value		Shares		Average Price per Share		Fair Value
Awards granted		90,384		$	38.49	$	3,479		—	$	—	$	—
Awards forfeited		(5,343	)		32.19		172		—		—		—

	Nine Months Ended September 30,
	2023							2022
	Shares			Average Price per Share		Fair Value		Shares		Average Price per Share		Fair Value
Awards granted		731,666		$	34.47	$	25,219		106,324	$	46.82	$	4,978
Awards forfeited		(8,902	)		32.18		286		—		—		—
Awards vested		90,116			36.81		3,317		25,289		30.98		783

There were an aggregate of 2,786,961 and 2,064,197 shares underlying outstanding RSAs and RSUs awards as of September 30, 2023 and September 30, 2022, respectively.

Stock Appreciation Rights— As of September 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 the 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 September 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 September 30, 2023 was 8.21 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 the 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		664,784			44		16		—		—
Forfeited/ cancelled		(60,167	)		36		—		—		—
Exercised		(26,258	)		22		—		—		671
Outstanding as of September 30, 2022		2,615,088			30		15		8.04		18,784

Outstanding as of January 1, 2023		2,579,566		$	31	$	15		7.76	$	37,295
Granted		253,980			32		14		—		—
Forfeited/ cancelled		(119,330	)		36		—		—		—
Expired		(2,950	)		29		—		—		—
Exercised		(173,554	)		24		—		—		3,701
Outstanding as of September 30, 2023		2,537,712		$	31	$	16		7.32	$	10,427
Exercisable at September 30, 2023		1,351,428			29		—		6.74		6,037

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
Expired		(125	)		6		—		—		—
Exercised		(36,035	)		6		—		—		1,425
Outstanding as of September 30, 2022		861,514			6		2		3.61		23,448

Outstanding as of January 1, 2023		855,695		$	6	$	2		3.31	$	32,478
Expired		(800	)		6		—		—		—
Exercised		(43,929	)		7		—		—		1,557
Outstanding as of September 30, 2023		810,966		$	6	$	2		2.58	$	18,554
Exercisable at September 30, 2023		810,966			6		—		2.58		18,554

Total shares outstanding from exercised options were 1,527,913 shares and 1,271,383 shares as of September 30, 2023 and September 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: