The Company issues stock-based awards, including stock options, restricted stock and restricted stock units, to certain officers, employees and non-employee directors under the Acadia Healthcare Company, Inc. Incentive Compensation Plan (the “Equity Incentive Plan”). At March 31, 2023, a maximum of 12,700,000 shares of the Company’s common stock were authorized for issuance as stock options, restricted stock and restricted stock units or other share-based compensation under the Equity Incentive Plan, of which 2,885,024 were available for future grant. Stock options may be granted for terms of up to ten years. The Company recognizes expense on all share-based awards on a straight-line basis over the requisite service period of the entire award. Grants to employees generally vest in annual increments of 25% each year, commencing one year after the date of grant. The exercise prices of stock

options are equal to the most recent closing price of the Company’s common stock on the most recent trading date prior to the date of grant.

The Company recognized $7.6 million and $7.9 million in equity-based compensation expense for the three months ended March 31, 2023 and 2022, respectively. Stock compensation expense for the three months ended March 31, 2023 and 2022 is impacted by forfeiture adjustments and restricted stock unit adjustments based on actual performance compared to vesting targets. At March 31, 2023, there was $78.1 million of unrecognized compensation expense related to unvested options, restricted stock and restricted stock units, which is expected to be recognized over the remaining weighted average vesting period of 1.5 years.

The Company recognized a deferred income tax benefit of $2.1 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively, related to equity-based compensation expense.

Stock option activity during 2022 and 2023 was as follows:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Options outstanding at January 1, 2022		1,106,069		$	42.07
Options granted		334,260			55.73
Options exercised		(285,577	)		40.66
Options cancelled		(175,475	)		46.98
Options outstanding at December 31, 2022		979,277			46.27
Options granted		226,940			80.40
Options exercised		(32,491	)		37.01
Options cancelled		(19,945	)		50.32
Options outstanding at March 31, 2023		1,153,781		$	53.17		7.71	$	24,007
Options exercisable at March 31, 2023		507,616		$	42.08		6.27	$	15,315

Fair values are estimated using the Black-Scholes option pricing model. The following table summarizes the grant-date fair value of options and the assumptions used to develop the fair value estimates for options granted during the three months ended March 31, 2023 and year ended December 31, 2022:


	March 31, 2023			December 31, 2022
Weighted average grant-date fair value of options	$	31.80		$	20.72
Risk-free interest rate		4.2	%		2.0	%
Expected volatility		37	%		39	%
Expected life (in years)		5.0			5.0

The Company’s estimate of expected volatility for stock options is based upon the volatility of its stock price over the expected life of the award. The risk-free interest rate is the approximate yield on U.S. Treasury Strips having a life equal to the expected option life on the date of grant. The expected life is an estimate of the number of years an option will be held before it is exercised.

Restricted stock activity during 2022 and 2023 was as follows:


	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2022		926,627		$	37.84
Granted		650,396			64.65
Cancelled		(145,205	)		49.03
Vested		(386,616	)		32.64
Unvested at December 31, 2022		1,045,202		$	54.89
Granted		275,280			79.25
Cancelled		(29,456	)		59.21
Vested		(218,330	)		41.11
Unvested at March 31, 2023		1,072,696		$	63.83

Restricted stock unit activity during 2022 and 2023 was as follows:


	Number of Units			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2022		1,504,420		$	23.20
Granted		105,311			73.96
Performance adjustment		182,543			33.05
Cancelled		—			—
Vested		(518,474	)		43.16
Unvested at December 31, 2022		1,273,800		$	20.69
Granted		—			—
Performance adjustment		355,010			11.21
Cancelled		—			—
Vested		(1,408,195	)		10.60
Unvested at March 31, 2023		220,615		$	68.11

Restricted stock awards are time-based vesting awards that vest over a period of three or four years and are subject to continuing service of the employee or non-employee director over the ratable vesting periods. The fair values of the restricted stock awards were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

Restricted stock units are granted to employees and are subject to Company performance compared to pre-established targets. In addition to Company performance, these performance-based restricted stock units are subject to the continuing service of the employee during the three-year period covered by the awards. The performance condition for the restricted stock units is based on the Company’s achievement of annually established targets for diluted earnings per share. The number of shares issuable at the end of the applicable vesting period of restricted stock units ranges from 0% to 200% of the targeted units based on the Company’s actual performance compared to the targets.

The fair values of restricted stock units were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date for units subject to performance conditions.