Equity Awards

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

On November 6, 2018, the Company’s shareholders approved the Strategic Education, Inc. 2018 Equity Compensation Plan (the “2018 Plan”), which replaced the Strayer Education, Inc. 2015 Equity Compensation Plan (the “2015 Plan”). The 2018 Plan provides for the granting of restricted stock, restricted stock units, stock options intended to qualify as incentive stock options, options that do not qualify as incentive stock options, and other forms of equity compensation and performance-based awards to employees, officers, and directors of the Company, or to a consultant or advisor to the Company, at the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of Directors. Options may be granted at option prices based at or above the fair market value of the shares at the date of grant. The maximum term of the awards granted under the 2018 Plan is ten years. The number of shares of common stock authorized for issuance under the 2018 Plan is 700,000, plus the number of shares available for grant under the 2015 Plan at the time of stockholder approval of the 2018 Plan, plus the number of shares which may in the future become available under the 2015 Plan due to forfeitures of outstanding awards. As of December 31, 2021, 404,787 shares were available for issuance under the 2018 Plan.

In connection with the merger with Capella Education Company on August 1, 2018, the Capella Education Company 2014 Equity Incentive Plan (the “2014 Capella Plan”) and the Capella Education Company 2005 Stock Incentive Plan (collectively, the “Capella Plans”) were assumed by the Company. Under the Capella Plans, shares of the Company's common stock may be issued upon the exercise or settlement of equity awards that were granted prior to the merger date or pursuant to awards granted after the closing of the merger to legacy Capella Education Company employees under the 2014 Capella Plan. As of December 31, 2021, 1,020,818 shares were available for issuance to legacy Capella Education Company employees under the 2014 Capella Plan.

As of December 31, 2021, the Company has issued and outstanding awards under the 2018 Plan as well as the 2015 Plan, the Capella Education Company 2005 Stock Incentive Plan, and the Capella Education Company 2014 Equity Incentive Plan.

Dividends paid on unvested restricted stock are reimbursed to the Company, and dividend equivalents accumulated on unvested restricted stock units are forfeited, if the recipient forfeits his or her shares as a result of termination of employment prior to vesting in the award, other than as a result of the recipient’s death, disability, or certain qualifying terminations in connection with a change in control of the Company, or unless waived by the Company.

Restricted Stock and Restricted Stock Units

The table below sets forth the restricted stock and restricted stock units activity for each of the three years in the period ended December 31, 2021:


	Number of shares or units	Weighted- average grant price
Balance, December 31, 2018	737,950	$	114.43
Grants	158,748	128.87
Vested shares	(393,588)	141.75
Forfeitures	(34,160)	79.02
Balance, December 31, 2019	468,950	98.98
Grants	150,107	140.39
Vested shares	(116,724)	69.94
Forfeitures	(7,364)	130.68
Balance, December 31, 2020	494,969	117.91
Grants	321,965	88.02
Vested shares	(77,586)	92.38
Forfeitures	(31,807)	121.80
Balance, December 31, 2021	707,541	$	106.93

Stock Options

The table below sets forth the stock option activity and other stock option information for each of the three years in the period ended December 31, 2021:


	Number of shares	Weighted- average exercise price		Weighted- average remaining contractual life (years)	Aggregate intrinsic value(1) (in thousands)
Balance, December 31, 2018	256,246	$	66.80	7.0	$	11,947
Grants	—	—
Exercises	(208,114)	67.61
Forfeitures/Expirations	(2,036)	58.38
Balance, December 31, 2019	46,096	63.49		5.2	4,398
Grants	—	—
Exercises	(20,522)	60.62
Forfeitures/Expirations	—	—
Balance, December 31, 2020	25,574	65.80		5.0	755
Grants	—	—
Exercises	(1,632)	69.44
Forfeitures/Expirations	(266)	87.66
Balance, December 31, 2021	23,676	$	65.30	4.0	$	93
Exercisable, December 31, 2021	23,676	$	65.30	4.0	$	93

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(1)The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the respective trading day and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options been exercised on the respective trading day. The amount of intrinsic value will change based on the fair market value of the Company’s common stock.

The Company paid $1.8 million, and received $1.2 million and $0.1 million of net cash proceeds related to stock options exercised during the years ended December 31, 2019, 2020, and 2021, respectively. The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2019, 2020, and 2021 was $17.4 million, $2.0 million and $24 thousand, respectively.

Valuation and Expense Information under Stock Compensation Topic ASC 718

At December 31, 2021, total stock-based compensation cost which has not yet been recognized was $37.6 million for unvested restricted stock and restricted stock units. This cost is expected to be recognized over the next 2.0 years on a weighted-average basis. Approximately 443,000 shares of restricted stock awards are subject to performance conditions. The accrual for stock-based compensation for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods. Such a determination involves judgment surrounding the Company’s ability to maintain regulatory compliance. If the performance targets are not reached during the respective vesting period, or it is determined it is more likely than not that the performance criteria will not be achieved, related compensation expense is adjusted.

The following table reflects the amount of stock-based compensation expense recorded in each of the expense line items for the years ended December 31, 2019, 2020, and 2021 (in thousands):


	2019		2020		2021
Instructional and support costs	$	3,823	$	5,111	$	5,317
General and administration	7,970		9,499		13,535
Merger and integration costs	367		—		—
Restructuring costs	—		—		(703)
Stock-based compensation expense included in operating expense	12,160		14,610		18,149
Tax benefit	3,126		3,771		4,809
Stock-based compensation expense, net of tax	$	9,034	$	10,839	$	13,340

During the years ended December 31, 2019, 2020, and 2021, the Company recognized windfall tax benefits related to share-based payment arrangements of approximately $4.0 million, $2.8 million, and $18,000, respectively, which were adjustments to the provision for income taxes.