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 March 31, 2024 and December 31, 2023.

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


	Three Months Ended March 31,
	2024						2023
	Shares		Average Price per Share		Total		Shares		Average Price per Share		Total
Acquisitions		220,734	$	29.81	$	6,580		—	$	—	$	—
Exercise of options		27,396		17.80		487		124,455		21.61		2,690
Restricted shares, net (1)		144,251		37.58		—		90,116		36.81	—
Payment of earn-out liability		35,250		30.84		1,087		—		—		—
Total		427,631	$	31.75	$	8,154		214,571	$	27.99	$	2,690

(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 March 31, 2024 and March 31, 2023, there was $113.8 million and $146.6 million, respectively, of total unrecognized stock-based compensation expense related to unvested options, restricted stock units ("RSUs") and stock appreciation rights ("SARs") 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:


	March 31, 2024
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		7,538,276		2,036,219		9,574,495
Shares available for grant(1)		1,674,558	—			1,674,558

	March 31, 2023
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		6,329,913		2,037,019		8,366,932
Shares available for grant(1)		893,522	—			893,522

(1) In January 2024 and January 2023 the Board of Directors ratified the addition of 1,207,563 and 1,189,801 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.

There were no stock-based compensation expenses related to the 2013 Plan in the three months ended March 31, 2024 and 2023. Total stock-based compensation expense for the 2017 Plans was as follows:


	Three Months Ended March 31,
	2024								2023
	Options		RSUs		SARs		Total		Options		RSUs		SARs		Total
Cost of revenue	$	274	$	637	$	—	$	911	$	349	$	543	$	—	$	892
Selling, general and administrative expense		789		7,282		2,290		10,361		1,724		8,154		2,265		12,143
Total	$	1,063	$	7,919	$	2,290	$	11,272	$	2,073	$	8,697	$	2,265	$	13,035

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 no RSAs granted during the three months ended March 31, 2024 and 2023. 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.

The Board of Directors approved the grant of RSUs under certain supplemental incentive plans ("SI Plans"). There were zero and 246,417 RSUs issued under these SI Plans during the three months ended March 31, 2024 and March 31, 2023, respectively. The majority of the RSUs issued under these SI Plans during the three months ended March 31, 2024 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 March 31,
	2024							2023
	Shares			Average Price per Share		Fair Value		Shares		Average Price per Share		Fair Value
Awards granted		259,118		$	39.65	$	10,273		464,186	$	32.62	$	15,140
Awards forfeited		(14,336	)		37.04		531		—		—		—

There were an aggregate of 3,090,801 and 2,528,383 shares underlying outstanding RSAs and RSUs awards as of March 31, 2024 and March 31, 2023, respectively.

Stock Appreciation Rights— As of March 31, 2024, there were 3,000,000 units of 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 March 31, 2024.

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 March 31, 2024 was 7.71 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 grant date and the remaining half on the fourth anniversary of the grant date, 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 December 31, 2022		2,579,566		$	30.58	$	14.96		7.8	$	37,292
Granted		233,955			32.16		13.90	—		—
Forfeited/ cancelled		(34,619	)		35.16	—		—		—
Exercised		(101,279	)		24.55	—		—			2,467
Outstanding as of March 31, 2023		2,677,623		$	30.89	$	15.47		7.8	$	21,127

Outstanding as of December 31, 2023		2,516,272		$	30.92	$	15.95		7.0	$	13,825
Forfeited/ cancelled		(36,105	)		38.78		—		—		—
Expired		(13,010	)		44.16		—		—		—
Exercised		(18,746	)		23.26		—		—		200
Outstanding as of March 31, 2024		2,448,411		$	30.80	$	16.00		6.8	$	25,468
Exercisable at March 31, 2024		1,513,438		$	31.13	$	—		6.4	$	15,380

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 December 31, 2022		855,695		$	6.43	$	2.10		3.3	$	32,478
Exercised		(23,176	)		8.78	—		—			963
Outstanding as of March 31, 2023		832,519			6.37		2.06		3.0		24,393

Outstanding as of December 31, 2023		792,191		$	6.40	$	2.16		2.4	$	20,380
Exercised		(8,650	)		5.95		—		—		289
Outstanding as of March 31, 2024		783,541		$	6.41	$	2.18		2.2	$	25,669
Exercisable at March 31, 2024		783,541			6.41				2.2		25,669

Total shares outstanding from exercised options were 1,577,184 shares and 1,434,885 shares as of March 31, 2024 and March 31, 2023, 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:


	March 31,
	2024		2023
Montrose 2013 Stock Incentive Plan		783,541		832,519
Montrose 2017 Stock Incentive Plan(1)		9,692,222		8,722,930
Total		10,475,763		9,555,449

(1) In January 2024 and 2023, the Board of Directors ratified the addition of 1,207,563 and 1,189,801 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.