Stock-based Compensation Expense

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based compensation expense, which includes awards settled in shares and in cash, was $2.2 million and $6.0 million in the third quarter and first nine months of 2022, respectively, compared to $1.5 million and $5.3 million, respectively, in the same periods of 2021.

The Company granted 45,016 stock appreciation rights (SARs) to certain employees during the first nine months of 2022. The weighted-average exercise price per share and weighted-average fair value per share of the SARs granted during the nine months ended September 30, 2022 were $80.85 and $25.87, respectively. The Company estimated the fair value of the SARs using the following weighted-average assumptions in the Black-Scholes model:


Risk-free interest rate	1.56	%
Dividend yield	0.59	%
Volatility	38.5	%
Expected term (in years)	4.4

The Company granted 61,145 stock-settled restricted stock units (RSUs) to certain employees during the first nine months of 2022. The Company measures the fair value of stock-settled RSUs based on the closing market price of a share of Materion common stock on the date of the grant. The weighted-average fair value per share was $80.88 for stock-settled RSUs granted to employees during the nine months ended September, 2022. RSUs are generally expensed over the vesting period of three years for employees.

The Company granted stock-settled performance-based restricted stock units (PRSUs) to certain employees in the first nine months of 2022. The weighted-average fair value of the stock-settled PRSUs was $97.79 per share and will be expensed over the vesting period of three years. The final payout to the employees for all PRSUs will be based upon the Company’s return on invested capital and its total return to shareholders over the vesting period relative to a peer group’s performance over the same period.

At September 30, 2022, unrecognized compensation cost related to the unvested portion of all stock-based awards was approximately $13.0 million, and is expected to be recognized over the remaining vesting period of the respective grants.