SHAREHOLDERS’ EQUITY

12 Months Ended

Dec. 31, 2023

Stock-Based Compensation

2016 Incentive Award Plan

On August 11, 2016 in connection with the Company's IPO, the Board approved the 2016 Incentive Award Plan (the “2016 Plan”). The 2016 Plan provides for long-term equity incentive compensation for key employees, officers and non-employee directors. A variety of discretionary awards (collectively, the “Awards”) for employees and non-employee directors are authorized under the 2016 Plan, including vested shares, stock options, stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units (RSUs), or other cash based or stock dividend equivalent awards, which are all equity-classified instruments under the 2016 Plan. The number of shares registered and available for grant under the 2016 Plan is 6,000,000. The vesting of such awards may be conditioned upon either a specified period of time or the attainment of specific performance goals as determined by the administrator of the 2016 Plan. The option price and term are also subject to determination by the administrator with respect to each grant. Option prices are generally expected to be set at the market price of the Company’s common stock at the date of grant and option terms are not expected to exceed ten years.

The Company granted 47,238 awards to employees under the 2016 Incentive Award Plan during the year ended December 31, 2023, consisting of 45,988 RSU and 1,250 stock option awards having four year vesting schedules. The Company granted an additional 848 RSU that vest in four approximately equal installments on March 31, 2024, June 30, 2024, September 30, 2024 and December 31, 2024, and 11,187 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2023. These stock option awards will vest on the earlier of (a) the day immediately preceding the date of the first annual meeting following the date of grant and (b) the first anniversary of the date of grant, subject to the non-employee director continuing in service through the applicable vesting date.

The Company granted 405,550 awards to employees under the 2016 Incentive Award Plan during the year ended December 31, 2022, consisting of 164,478 RSU and 113,838 stock option awards having four year vesting schedules and 127,234 stock option awards having two year vesting schedules. The Company granted an additional 1,117 RSU that vest in four approximately equal installments on March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023, and 11,418 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2022. These stock option awards will vest on the earlier of (a) the day immediately preceding the date of the first annual meeting following the date of grant and (b) the first anniversary of the date of grant, subject to the non-employee director continuing in service through the applicable vesting date.

The Company granted 374,235 awards to employees under the 2016 Incentive Award Plan during the year ended December 31, 2021, consisting of 74,725 RSU and 205,086 stock option awards vesting after 4 years and six months, 27,854 RSU and 9,000 stock option awards vesting after four years, and 57,570 stock option awards vesting after two years. The Company granted an additional 10,932 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the year ended December 31, 2021. These awards will vest on the earlier of (a) the day immediately preceding the date of the first annual meeting following the date of grant and (b) the first anniversary of the date of grant, subject to the non-employee director continuing in service through the applicable vesting date.

The 2016 Plan expires in 2026, except for awards then outstanding, and is administered by the Board. All Awards granted at the IPO or thereafter were or will be issued under the 2016 Plan.

The Company satisfies stock option exercises and vested stock awards with treasury shares or newly issued shares. Shares available for future stock compensation grants under the 2016 Plan totaled 2.3 million at December 31, 2023 and 2022, respectively.

Equity Awards

Valuation Assumptions

The Company determines the fair value of stock options using the Black-Scholes-Merton option pricing model (the “BSM Model”). The BSM Model is primarily affected by the fair value of the Company’s common stock (see restricted share valuation discussion below), the expected holding period for the option, expected stock price volatility over the term of the awards, the risk-free interest rate, and expected dividends.

The following table sets forth the key weighted-average assumptions used in the BSM Model to calculate the fair value of options:


	Year Ended December 31,
	2023	2022	2021
Expected holding period - years	4.1	4.7	5.0
Expected volatility	45.4%	36.5%	34.3%
Risk-free interest rate	3.8%	1.9%	0.9%
Expected dividend yield	0.0%	0.0%	0.0%

The assumptions used in the table above reflect grant date inputs to arrive at the grant date fair values for stock options subject to equity-classified stock compensation accounting.

The expected holding period represents the period of time the grants are expected to be outstanding. The Company uses the simplified method, as prescribed by accounting guidance governing such awards, to calculate the expected holding period for options granted to employees as we do not have sufficient historical evidence data to provide a reasonable basis upon which to estimate the expected holding period. For options valued by the Company for the years ended December 31, 2023, 2022 and 2021, respectively, the expected holding period is based on an average between the midpoint of the vesting date and the expiration date of the options.

Due to the lack of Company specific historical and implied volatility data, our estimate of expected volatility is based upon a blended approach that utilizes the historical volatility of the Company's common stock for periods in which the Company has sufficient information and the historical volatility of a group of peer companies that are most representative of our company.

The risk-free interest rate is based on the yield on U.S. Treasury obligations with remaining durations equal to the expected holding period of the options. The expected dividend yield is assumed to be zero based on recent and anticipated dividend activity.

The fair value of restricted shares is based upon the market price of the Company’s common stock on the date of grant as listed on the NASDAQ.

The following table summarizes the grant date fair values of stock options and restricted shares issued during the period as well as the allocation of stock-based compensation expense to Total direct costs, and Selling, general and administrative reported in the consolidated statements of operations:


	Year Ended December 31,
	2023		2022		2021
Weighted average, grant date fair value
Stock options	$	85.30	$	47.57	$	52.70
Restricted shares (RSAs and RSUs)	$	225.69	$	149.87	$	174.94

Stock-based compensation expense allocated to:
Total direct costs	$	11,099	$	11,801	$	9,345
Selling, general, and administrative	9,417		9,611		5,124
Total stock-based compensation expense	$	20,516	$	21,412	$	14,469

Award Activity

The following table sets forth the Company’s stock option activity:


	Year Ended December 31,
	2023			2022			2021
	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding - beginning of Period	1,629,148	$	89.71	1,992,915	$	68.39	2,500,727	$	43.26
Granted	12,437	$	211.25	252,490	$	138.91	282,588	$	168.34
Exercised	(287,048)	$	39.64	(579,407)	$	38.10	(745,572)	$	23.67
Cancelled/Forfeited/Expired	(11,250)	$	183.04	(36,850)	$	85.40	(44,828)	$	40.50
Outstanding - end of period	1,343,287	$	100.75	1,629,148	$	89.71	1,992,915	$	68.39

Exercisable - end of period	901,865	$	74.79	1,116,255	$	60.52	1,290,627	$	56.43

The following table sets forth the Company’s Restricted Share activity:


	Year Ended December 31,
	2023	2022	2021
	Shares/Units	Shares/Units	Shares/Units
Outstanding and unvested - beginning of period	523,377	602,187	695,562
Granted	46,836	165,595	102,579
Vested	(154,618)	(197,000)	(119,000)
Forfeited	(24,597)	(47,405)	(76,954)
Outstanding and unvested - end of period	390,998	523,377	602,187

The following table summarizes information about stock options expected to vest, stock options exercisable, and unvested restricted share awards expected to vest at December 31, 2023:


	Weighted Average Exercise Price		Stock Options		Restricted Shares/Units		Weighted Average Remaining Life (Years)
Number of stock options expected to vest	$	100.75	1,343,287		—		2.7
Number of restricted shares/units expected to vest					390,998
Total expected to vest			1,343,287		390,998
Total stock options exercisable	$	74.79	901,865		—		2.1
Unrecognized compensation cost (in thousands)			$	7,727	$	27,058
Weighted average years over which unrecognized compensation cost will be recognized			1.8		2.5

The following table sets forth the aggregate intrinsic value of stock options exercised, the fair values of awards vested, and share based liabilities settled during the respective periods (in thousands):


	Year Ended December 31,
	2023		2022		2021
Total intrinsic value of stock options exercised	$	56,548	$	77,527	$	104,695
Total grant-date fair value of stock options vested	$	3,591	$	5,228	$	5,185
Total grant-date fair value of restricted shares vested	$	9,306	$	9,248	$	3,796
Total settlement date fair value of restricted shares vested	$	31,842	$	32,802	$	22,321

The actual tax benefits recognized related to stock-based compensation totaled $18.9 million, $23.2 million and $20.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.