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Stock-Based Compensation
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
Stock-based compensation expense is recognized in cost of revenues, corporate technology and production systems, and selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss as follows:
 Three Months Ended
March 31,
(in thousands)20242023
Stock-based compensation expense
Cost of revenues$359 $428 
Corporate technology and production systems819 612 
Selling, general and administrative8,164 7,003 
Total stock-based compensation expense$9,342 $8,043 
Prior to the IPO, all share-based awards were issued to employees under the Company’s 2015 Long-Term Equity Incentive Plan (the “2015 Plan”). Upon the adoption of the Sterling Check Corp. 2021 Omnibus Incentive Plan (the “2021 Equity Plan”) on August 4, 2021 and as of September 22, 2021, all newly granted share-based awards have been issued under the 2021 Equity Plan.
As of March 31, 2024, the Company had approximately $93.3 million of unrecognized pre-tax non-cash stock-based compensation expense related to awards granted under the 2021 Equity Plan, consisting of approximately $18.8 million related to non-qualified stock options (“NQSOs”), $73.6 million related to restricted stock, and approximately $0.9 million related to restricted stock units (“RSUs”), all of which the Company expects to recognize over a weighted average period of 2.3 years.
2015 Long-Term Equity Incentive Plan
Pursuant to the Company’s 2015 Plan, the Company granted performance-based stock options (“PSOs”) and service-based vesting stock options (“SVOs”). On August 4, 2021, the Company amended each option outstanding under the 2015 Plan to (i) accelerate vesting upon an initial public offering and (ii) permit each option to be exercised following termination for any reason for the period set forth in the applicable award agreement or, if longer, an extended post-termination exercise period that would end on the date that is six months following the second anniversary of the effective date of the initial public offering, provided that if such date falls during a blackout period, the post-termination exercise period will be extended until the date that is thirty days after the commencement of the Company’s next open trading window.
The table below provides a summary of SVOs and PSOs currently outstanding under the 2015 Plan for the three months ended March 31, 2024:
Outstanding SVOsOutstanding PSOs
Number of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Life
(years)		Aggregate
Intrinsic
Value		Number of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Life
(years)		Aggregate
Intrinsic
Value
(in thousands, except shares and per share amounts)
Balances as of December 31, 20235,635,742 $9.60 3.68$24,349 3,036,930 $10.05 2.14$11,732 
Granted— — — — 
Forfeited / Expired(17,970)9.68 112 — — 
Exercised(1,555,977)9.63 8,503 (1,841,326)10.30 10,482 
Balances as of March 31, 2024(1)
4,061,795 $9.59 4.33$26,373 1,195,604 $9.68 4.85$7,648 
_________________________
(1)    All SVOs and PSOs are exercisable as of March 31, 2024.
2021 Omnibus Incentive Plan
On August 4, 2021, the Company’s board of directors adopted, and on August 13, 2021 the Company’s stockholders approved, the 2021 Equity Plan. Equity awards under the 2021 Equity Plan are intended to retain and motivate the Company’s officers and employees, consultants and non-employee directors and to promote the success of the Company’s business by providing such participating individuals with a proprietary interest in the performance of the Company. The 2021 Equity Plan will terminate on the tenth anniversary thereof, unless earlier terminated by the board of directors. Under the 2021 Equity Plan, the following types of awards can be granted to an eligible individual (as defined by the plan and to the extent permitted by applicable law): incentive stock options (“ISOs”) and NQSOs; stock appreciation rights (“SARs”); restricted stock; RSUs; performance awards; cash-based awards and other share-based awards. Upon its adoption, the 2021 Equity Plan provided that up to 9,433,000 shares may be issued pursuant to awards granted under the 2021 Equity Plan (the “Share Limit”); provided, that, the Share Limit shall be automatically increased on the first day of each calendar year commencing on January 1, 2022 and ending on January 1, 2030 in an amount equal to the lesser of (x) 5% of the total number of shares outstanding on the last day of the immediately preceding calendar year, and (y) such number of shares as determined by the board of directors, and no more than 9,433,000 shares may be issued upon the exercise of ISOs. As of March 31, 2024, 12,154,861 shares were available for issuance pursuant to future granted awards under the 2021 Equity Plan.
Stock Options
Options issued under the 2021 Equity Plan generally vest on various schedules over one to four-year periods on the anniversary of the grant date, subject to continued employment with the Company through the applicable vesting date. Options issued under the 2021 Equity Plan generally expire ten years after the grant date.
The table below provides a summary of stock option activity under the 2021 Equity Plan for the three months ended March 31, 2024:
Number of SharesWeighted Average Exercise PriceWeighted Average Contractual Term (in years)Aggregate Intrinsic Value
Outstanding as of December 31, 20234,558,199 $21.14 8.06$904 
Granted— — 
Forfeited / Expired(11,724)23.00 
Exercised — — 
Outstanding as of March 31, 20244,546,475 $21.09 7.79$2,629 
Exercisable as of March 31, 20241,974,043 $22.01 7.63$593 
Of the $53.6 million of proceeds from the exercise of employee stock options less $19.2 million of cash paid for tax withholding on those exercises included on the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2024, $0.5 million relates to options exercised prior to, but settled during the three months ended March 31, 2024. As of December 31, 2023, these options were unsettled, but exercised, and were included in the additional paid-in capital balance as of December 31, 2023.
Restricted Stock
Restricted stock issued under the 2021 Equity Plan in connection with the Company’s initial public offering vests 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date, subject to continued employment with the Company through the applicable vesting date. Other restricted stock grants issued under the 2021 Equity Plan vest on various schedules over one to four-year periods on the anniversary of the grant date, subject to the continued employment with the Company through the applicable vesting date. Holders of restricted stock are entitled to all rights of a common stockholder of the Company and are subject to restrictions on transfer.
The table below provides a summary of restricted stock activity under the 2021 Equity Plan for the three months ended March 31, 2024:
Number of SharesWeighted Average Fair Value
(per share)
Unvested as of December 31, 20233,796,203 $16.40 
Granted1,958,874 15.92 
Forfeited / Cancelled(74,354)17.45 
Vested(591,611)10.92 
Unvested as of March 31, 20245,089,112 $16.39 
Restricted Stock Units
Restricted stock units issued under the 2021 Equity Plan in connection with the Company’s initial public offering vest 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date, subject to continued employment with the Company through the applicable vesting date. Additional grants of RSUs vest on various schedules over a one to four-year period on the anniversary of the grant date, subject to the continued employment with the Company through the applicable vesting date. Upon vesting, employees will receive shares of common stock in settlement of the units.
The table below provides a summary of RSU activity under the 2021 Equity Plan for the three months ended March 31, 2024:
Number of SharesWeighted Average Fair Value
(per share)
Unvested as of December 31, 2023120,555 $15.82 
Granted6,347 15.92 
Forfeited / Cancelled(18,925)13.30 
Vested(5,268)9.82 
Unvested as of March 31, 2024102,709 $16.33 
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “ESPP”) was launched on July 1, 2023. The ESPP allowed eligible employees to voluntarily make after-tax contributions of up to 15% of such employee’s cash compensation for the purchase of the Company’s stock. Consecutive offering periods of six months in duration were established, with the first one commencing on July 1, 2023. During each offering period, such contributions accumulated and applied to purchase shares at the end of the offering period. The purchase price for shares purchased in the initial offering period were, and for subsequent offering periods were not be less than, 85% of the lesser of the closing price of the shares on the first day of the offering period or the last day of the offering period. During the three months ended March 31, 2024, the amount the Company recorded for stock-based compensation expense associated with the ESPP was immaterial. The ESPP was suspended on February 29, 2024 as part of the Merger discussed in Note 1, “Description of Business.”