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Stockholder's Equity (Tables)
 9 Months Ended
Sep. 30, 2023
Summary of Issued Shares of Common Stock 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.
Schedule of Share Authorized to be Issue and Available for Grant 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.
Schedule of Stock-based Compensation Expense

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

 
Summary of Performance Hurdles The performance hurdles are as follows:

 

SARs Stock Price Performance Hurdle

 

Portion of SARs Subject to Performance Hurdle

$

133.58

 

1/3

$

166.98

 

1/3

$

200.37

 

1/3
Summary of Weighted Average Assumptions Used in Black-Sholes Option-pricing Model

The following weighted-average assumptions were used in the Black-Sholes option-pricing model calculation:

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

Common stock value (per share)

 

$

32.41

 

 

$

43.72

 

Expected volatility

 

 

33.55

%

 

 

33.45

%

Risk-free interest rate

 

 

3.77

%

 

 

1.94

%

Expected life (years)

 

 

7.00

 

 

 

6.45

 

Forfeiture rate

 

None

 

 

None

 

Dividend rate

 

None

 

 

None

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

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Montrose 2013 Stock Incentive Plan

 

 

810,966

 

 

 

861,514

 

Montrose 2017 Stock Incentive Plan(1)

 

 

8,651,455

 

 

 

7,757,995

 

Total

 

 

9,462,421

 

 

 

8,619,509

 

 

 

(1) In January 2023 and 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. The Company expects to have sufficient shares available under the 2017 Plan to satisfy the future settlement of outstanding awards. Shares reserved for future issuance include 3,000,000 shares underlying the 3,000,000 performance SARs granted in December 2021 that are subject to vesting based on the achievement of certain market conditions. Assuming achievement at the highest price performance hurdle, approximately 2,000,000 shares of common stock would be issued upon vesting of these performance SARs. To date, none of the market conditions have been achieved.
Montrose Amended & Restated 2017 Stock Incentive Plan  
Schedule of Restricted Stock Activity

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

 
Summary of Stock Option Activity 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 and Restated 2013 Stock Option Plan  
Summary of Stock Option Activity 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