Note 9 - Stock-based Compensation

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 9 – Stock-Based Compensation

Under the Company’s 2012 Long-Term Incentive Plan, as amended (the 2012 Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the 2012 Plan have a maximum term of ten years from the date of grant. The compensation committee may provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the 2012 Plan generally may not be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

The Company’s 2012 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of the Company’s common stock each offering period at a discount through payroll deductions of up to 15 percent of their eligible compensation, subject to plan limitations. The ESPP provides for six-month offering periods with a single purchase period ending May 15 and November 15, respectively. At the end of each offering period, employees are able to purchase shares at 85 percent of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation expense was $5.0 million and $3.9 million for the three months ended  September 30, 2021 and 2020, respectively, and $15.5 million and $10.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2021:

				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2020		229,531		$	86.46
Granted		57,901			128.14
Exercised		(28,991	)		58.78
Forfeited		(9,893	)		100.58
Options outstanding at September 30, 2021		248,548		$	98.84
Exercisable at September 30, 2021		116,088		$	81.47

The outstanding options generally have a term of ten years. For employees, options granted become exercisable ratably over the vesting period, which is generally a period of four to five years, beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For the board of directors, options generally become exercisable in full on the first anniversary of the grant date.

The weighted-average grant date fair value of options that were granted during the nine months ended September 30, 2021 was $57.26.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30,
	2021		2020
Risk-free interest rate		0.80 - 1.12%		0.50 - 1.47%
Expected life (years)		6.25		6.25
Expected volatility		45.28 - 45.53%		42.40 - 43.83%
Expected dividend yield		0%		0%

As of September 30, 2021, there was $5.4 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock

Restricted stock awards are share-settled awards and restrictions lapse ratably over the vesting period, which is generally a period from three to five years, beginning on the first anniversary of the grant date, subject to the employee's continuing service to the Company. For the board of directors, restrictions generally lapse in full on the first anniversary of the grant date. 

The following table summarizes restricted stock activity during the nine months ended September 30, 2021:

				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2020		307,199		$	98.87
Granted		180,798			132.84
Restrictions lapsed		(113,315	)		91.10
Forfeited		(22,908	)		120.01
Restricted stock at September 30, 2021		351,774		$	117.51

As of September 30, 2021, there was $31.7 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.6 years. 

Performance Stock

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between 0 percent and 150 percent of that target number capable of being earned and vesting at the end of a three-year performance period depending on the Company’s performance in the final year of the performance period and the award recipient’s continued employment. The Company’s PSUs granted from 2017 to 2019 and certain PSUs granted in 2021 are based on performance conditions and the related compensation cost is based on the probability that the performance conditions will be achieved. The Company’s PSUs granted in 2020 and certain PSUs granted in 2021 are based on market conditions and the related compensation cost is based on the fair value at grant date calculated using a Monte Carlo pricing model.

The following table summarizes performance stock activity during the nine months ended September 30, 2021:

				Weighted-
				Average
				Grant Date
	Performance			Fair Value
	Stock			Per Share
Performance stock at December 31, 2020		19,956		$	118.66
Granted		15,078			203.64
Restrictions lapsed		-			-
Performance change		(8,226	)		192.95
Forfeited		(4,184	)		99.59
Performance stock at September 30, 2021		22,624		$	148.28

The following table provides the assumptions used in the Monte Carlo pricing model valuation of PSUs during the nine months ended September 30, 2021 and 2020: 

	Nine Months Ended September 30,
	2021		2020
Risk-free interest rate		0.22%		1.41%
Expected life (years)		2.87		2.88
Expected volatility		51.40%		38.70%
Expected dividend yield		0%		0%

As of September 30, 2021, there was $2.0 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of 2.0 years. 

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the nine months ended September 30, 2021 and 2020: 

	Nine Months Ended September 30,
	2021		2020
Risk-free interest rate		0.06 - 0.12%		0.17 - 1.59%
Expected life (months)		6.00		6.00
Expected volatility		50.85 - 65.53%		42.63 - 59.99%
Expected dividend yield		0%		0%