Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 3. Stock-based Compensation

The Company recognizes compensation expense for stock options in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Stock Based Compensation”. The expense of the option is generally measured at fair value at the grant date with compensation expense recognized over the service period, which is typically the vesting period. For grants subject to a service condition, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of each option on the date of grant. The Black-Scholes model takes into consideration the exercise price and expected life of the options, the current price of the underlying stock and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. The Company’s estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when fully vested. In accordance with ASC 718, the Company estimates the number of options for which the requisite service is expected to be rendered. At September 30, 2022, the Company had three active stock-based compensation plans.

During the nine months ended September 30, 2022, the Company granted 100,000 stock options with a vesting period of four years and a weighted average grant-date fair value of $14.01. During the nine months ended September 30, 2021, the Company granted 100,000 stock options with a vesting period of four years and a weighted average grant-date fair value of $8.51. There were 35,318 common stock options exercised in the nine month period ended September 30, 2022. There were 657,500 common stock options exercised in the nine month period ended September 30, 2021.

A summary of the Company’s stock options is presented below.

				Weighted average
				remaining
		Weighted average		contractual	Aggregate
	Options	exercise price		term (years)	intrinsic value
Outstanding at January 1, 2022	550,104	$	9.67	7.17	$	8,603,191
Granted	100,000		30.32	9.37		—
Exercised	(35,318)		8.84	—		808,850
Expired	—		—	—		—
Forfeited	(7,182)		—	—		—
Outstanding at September 30, 2022	607,604	$	13.13	7.40	$	6,213,070
Exercisable at September 30, 2022	266,328	$	8.87	6.31	$	3,490,558

The Company granted 260,693 restricted stock units (“RSUs”) in the first nine months of 2022, of which 219,311 have a vesting period of three years and 41,382 have a vesting period of one year. At issuance, the 260,693 RSUs granted in the first nine months of 2022 had a weighted average fair value of $28.61 per unit. In the first nine months of 2021, the Company granted 313,697 RSUs of which 261,073 have a vesting period of three years and 52,624 have a vesting period of one year. At issuance, the 313,697 RSUs granted in the first nine months of 2021 had a weighted average fair value of $18.81 per unit.

A summary of the status of the Company’s RSUs is presented below.

		Weighted average		Average remaining
		grant date		contractual
	RSUs	fair value		term (years)
Outstanding at January 1, 2022	1,030,124	$	10.49	1.17
Granted	260,693		28.61	2.09
Vested	(564,932)		10.21	—
Forfeited	(23,220)		13.29	—
Outstanding at September 30, 2022	702,665	$	17.52	1.22

As of September 30, 2022, there was a total of $10.3 million of unrecognized compensation cost related to unvested awards under share-based plans. This cost is expected to be recognized over a weighted average period of approximately 1.3 years. Related compensation expense for the three months ended September 30, 2022 and 2021 was $2.1 million and $2.1 million, respectively. Related compensation expense for the nine months ended September 30, 2022 and 2021 was $5.6 million and $6.5 million, respectively. The total issuance date fair value of RSUs vested and options exercised during the nine months ended September 30, 2022 and 2021 was $6.0 million and $7.6 million, respectively. The total intrinsic value of the options exercised and RSUs vested in those respective periods was $14.7 million and $25.3 million, respectively.

For the periods ended September 30, 2022 and 2021, the Company estimated the fair value of each stock option grant on the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions:  

	September 30,
	2022	2021
Risk-free interest rate	1.94%	1.19%
Expected dividend yield	—	—
Expected volatility	45.10%	45.61%
Expected lives (years)	6.3	6.3

Expected volatility is based on the historical volatility of the Company’s stock and peer group comparisons over the expected life of the grant. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury strip rate in effect at the time of the grant. The life of the option is based on historical factors which include the contractual term, vesting period, exercise behavior and employee terminations. In accordance with ASC 718, Stock Based Compensation, stock based compensation expense for the period ended September 30, 2022 is based on awards that are ultimately expected to vest and has been reduced for estimated forfeitures. The Company estimated forfeitures using historical data based upon the groups identified by management.