Share-based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement, Noncash Expense [Abstract]

Note 10. Share-based Compensation

The Company’s share-based compensation plan under which it may grant future awards, the Donnelley Financial Solutions, Inc. Amended and Restated 2016 Performance Incentive Plan (as amended, the “2016 PIP”), was approved by the Company's Board of Directors (the “Board”) and the Company’s stockholders and provides incentives to key employees of the Company. Awards under the 2016 PIP may include cash or stock bonuses, stock options, stock appreciation rights, restricted stock, PSUs, performance cash awards or RSUs. In addition, non-employee members of the Board may receive awards under the 2016 PIP. At March 31, 2023, there were 2.9 million remaining shares of common stock authorized and available for grant under the 2016 PIP. Increases to the shares of common stock available for issuance under the 2016 PIP requires stockholder approval.

The Company recognizes compensation expense for share-based awards based on estimated grant date fair values as well as certain assumptions, as further disclosed in Note 12, Share-based Compensation, of the Annual Report.

Total share-based compensation expense was $4.3 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively. The income tax benefit related to share-based compensation expense was $4.1 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, $40.9 million of total unrecognized compensation expense related to share-based compensation awards is expected to be recognized over a weighted-average period of 2.0 years.

Stock Options

There were no stock options granted during the three months ended March 31, 2023. A summary of activity and weighted-average exercise prices related to the stock options were as follows:


	Shares Under Option (thousands)			Weighted-Average Exercise Price
Outstanding at December 31, 2022		524		$	18.19
Exercised		(61	)		18.93
Outstanding at March 31, 2023		463		$	18.09
Vested and expected to vest at March 31, 2023		463		$	18.09
Vested and exercisable at March 31, 2023		463		$	18.09

Restricted Stock Units

RSUs outstanding as of March 31, 2023 and December 31, 2022, and changes during the three months ended March 31, 2023, were as follows:


	Shares (thousands)			Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2022		989		$	23.91
Granted		296			41.85
Vested		(455	)		18.71
Forfeited		(3	)		29.62
Nonvested at March 31, 2023		827		$	33.16

As of March 31, 2023, $22.6 million of unrecognized share-based compensation expense related to RSUs is expected to be recognized over a weighted-average period of 2.3 years.

Performance Share Units

PSUs outstanding as of March 31, 2023 and December 31, 2022, and changes during the three months ended March 31, 2023, were as follows:


	Shares (thousands)			Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2022		903		$	22.31
Granted		412			30.13
Vested		(443	)		8.97
Forfeited		(25	)		8.98
Nonvested at March 31, 2023		847		$	33.47

During the three months ended March 31, 2023, 412 thousand PSUs were granted to certain executive officers and senior management, 265 thousand of which related to the 2023 performance grant and 147 thousand of which related to additional shares issued during the three months ended March 31, 2023 due to the achievement of certain targets for the year ended December 31, 2022. The total potential payout for 2023 awards granted during the three months ended March 31, 2023 is payable upon the achievement of certain established performance targets and ranges from zero to 530 thousand shares.

PSU awards consist of four performance periods, including three annual performance periods and one three-year cumulative performance period.


Year Granted	Performance/ Service Period	Estimated or Actual Attainment	PSUs Outstanding as of March 31, 2023 (Thousands)		Estimated PSU Attainment or Actual PSUs Earned (Thousands)
2023	2023	146% (a)		66		96
2023	2024	(b)		66		—
2023	2025	(b)		66		—
2023	2023-2025	100% (c)		67		67
				265		163

2022	2022	140% (d)		68		95
2022	2023	43% (a)		68		29
2022	2024	(b)		69		—
2022	2022-2024	100% (c)		69		69
				274		193

2021	2021	200% (d)		77		154
2021	2022	87% (d)		77		67
2021	2023	72% (a)		77		56
2021	2021-2023	172% (a)		77		133
				308		410

(a)

Amounts represent estimated attainment and estimated PSUs.

(b)

As the performance period has not yet commenced, expense is not being recognized.

(c)

Expense for the cumulative performance/service period is recognized at 100% of the estimated attainment until the end of the second service year.

(d)

Amounts represent actual attainment and actual PSUs earned as the performance period is complete.

As of March 31, 2023, $18.3 million of unrecognized share-based compensation expense related to PSUs is expected to be recognized over a weighted-average period of 1.7 years.