(19)Stock Compensation Plans and Share-Based Compensation Awards

The Company provides share-based compensation awards to its employees under the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”), which the Company adopted in conjunction with its IPO. The 2018 Plan became effective on May 22, 2018. A total of 7,792,162 shares of the Company’s Class A common stock are reserved for issuance under the 2018 Plan. The 2018 Plan provides for accelerated vesting under certain conditions.

The following table summarizes share-based compensation expense, and the related income tax benefit recognized for share-based compensation awards. Share-based compensation expense is presented within selling, general, and administrative expenses within the unaudited condensed consolidated statements of operations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)

Share-based compensation expense	$	3,019	$	1,758	$	7,841	$	53,893
Income tax benefit	$	289	$	68	$	688	$	3,914

Unit appreciation rights/Restricted stock awards

The Company assumed EVO, LLC’s obligations under the EVO, LLC Unit Appreciation Rights Plan (“UAR Plan”) and converted all of the outstanding UARs held by members of management and current and former employees at the consummation of the IPO to restricted Class A common stock (“RSAs”). In connection with the Company’s assumption of EVO, LLC’s obligation under the UAR Plan and the issuance of the RSAs, on the IPO date, the Company recorded share-based compensation expense based on the modification date fair value of the RSAs of $16.00 per share. The Company recognized share-based compensation expense related to RSAs of less than $0.1 million and $0.3 million for the three months ended September 30, 2019 and 2018, respectively. The Company recognized share-based compensation expense related to RSAs of $0.2 million and $9.0 million, respectively, for the nine months ended September 30, 2019 and 2018, respectively. Prior to the consummation of the IPO, no liquidity event was probable and, as such, no share-based compensation expense had been recognized for these awards. On the modification date, there were 35 members of management and current and former employees who held UARs.

A summary of RSA activity is as follows (in thousands, except per share data):


	Number of RSAs	Weighted average grant date fair value

Balance at December 31, 2018	42	$	16.00
Granted	—		—
Vested	(25)		16.00
Forfeited	(2)		16.00
Balance at September 30, 2019	15	$	16.00

Restricted stock units

The Company recognized share-based compensation expense for unvested restricted stock units (“RSUs”) of $1.3 million and $0.6 million for the three months ended September 30, 2019 and 2018, respectively. The Company recognized share-based compensation expense for unvested RSUs of $3.4 million and $0.8 million, respectively, for the nine months ended September 30, 2019 and 2018.

A summary of RSU activity is as follows (in thousands, except per share data):


	Number of RSUs	Weighted average grant date fair value

Balance at December 31, 2018	506	$	16.30
Granted	515		26.21
Vested	(139)		16.27
Forfeited	(36)		21.79
Balance at September 30, 2019	846	$	22.11

As of September 30, 2019, total unrecognized share-based compensation expense related to outstanding RSUs was $16.1 million. Each RSU vests in equal annual vesting installments over a period of four years from the grant date and will settle in Class A common stock. The weighted average period outstanding for unvested RSUs is 3.0 years.

Stock options

The Company recognized share-based compensation expense for unvested stock options of $1.7 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively. The Company recognized share-based compensation expense for unvested stock options of $4.2 million and $1.3 million, respectively, for the nine months ended September 30, 2019 and 2018.

A summary of stock option activity is as follows (in thousands, except per share data):


	Number of Options	Weighted average grant date fair value		Weighted average exercise price		Weighted average remaining contractual term


Balance at December 31, 2018	2,086	$	6.77	$	16.22
Granted	1,384		9.47		26.19
Exercised	(50)		6.80		16.32
Forfeited	(128)		8.07		20.78
Balance at September 30, 2019	3,292	$	7.85	$	20.24		8.98
Exercisable at September 30, 2019	455	$	6.70	$	16.06		8.65

As of September 30, 2019, total unrecognized share-based compensation expense related to unvested stock options was $19.9 million. The weighted average period outstanding for unvested stock options is 3.3 years. Each stock option vests in equal annual installments over a period of four years from grant date, and stock options expire no later than 10 years from the date of grant. For the purpose of calculating share-based compensation expense, the fair value of the stock option grants was determined through the application of the Black-Scholes model with the following assumptions:


	Nine Months Ended September 30,
	2019		2018

Expected life (in years)		7.00		7.00
Weighted average risk-free interest rate		2.59%		3.04%
Expected volatility		33.35%		34.28%
Dividend yield		0.00%		0.00%
Weighted average fair value at grant date	$	9.46	$	6.84

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the stock option from the date of the grant. The assumption for expected volatility is based on the historical volatility of a peer group of market participants as the Company has limited historical volatility. It is the Company’s intent to retain all profits for the operations of the business for the foreseeable future, as such the dividend yield assumption is zero. The Company applied the simplified method in determining the expected life of the stock options as the Company has limited historical basis upon which to determine historical exercise periods. The Company based the assumptions of the expected term of the options as the expected term plus half of the remaining life through expiration. All stock options exercised will be settled in Class A common stock.