Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Note 10 – Stock-Based Compensation

The Company recorded stock-based compensation expense of $2.2 million and $0.0 million for the three months ended March 31, 2023 and March 31, 2022, respectively. A portion of the Company's stock-based awards are liability-classified. Accordingly, changes in the market value of the Company's common stock may result in stock-based compensation expense or benefit in certain periods. A stock-based compensation liability of $4.5 million as of March 31, 2023 and $3.3 million as of December 31, 2022 was included in Accrued expenses and other current liabilities in the Unaudited Condensed Consolidated Balance Sheets.

Restricted Stock Awards

For the three months ended March 31, 2023, the Company issued 10,000 Restricted stock awards ("RSAs") that vest over five years from the grant date with a grant date fair value of $0.4 million. Upon vesting, the vested RSAs are exchanged for an equal number of shares of the Company’s common stock. The participants have no voting or dividend rights with the RSAs. The RSAs are valued at the closing price of the Company common stock on the date of grant and the expense is recorded ratably over the vesting period.

Stock Options

For the three months ended March 31, 2023, the Company issued approximately 606,000 stock options to key employees that vest over five years from the grant date. The fair value was determined using a Black-Scholes valuation model with a grant date fair value of $8.3 million. Each stock option can be exchanged for one share of Company common stock at the stated exercise price. Upon vesting, stock options are recognized as a component of equity. Unrecognized compensation related to stock options as of March 31, 2023 was $9.8 million, which is expected to be recognized over a weighted-average period of 2.5 years.

Activity related to the Company’s stock options during the three months ended March 31, 2023 was as follows:


	Number of Stock Options	Weighted Average Exercise Price
Outstanding on December 31, 2022	288,000	$	77.59

Granted	605,821	72.74


Outstanding on March 31, 2023	893,821	74.30

Exercisable on March 31, 2023	40,000	27.01

The weighted average fair value assumptions used in the Black-Scholes model for the stock options issued during the three months ended March 31, 2023 were as follows:


Expected volatility			45.23%
Risk-free rate of return			3.6%
Expected term (in years)			6.2 years
Expected annual dividend			$0

The expected volatility was based on the historic volatility of the Company's stock price commensurate with the expected life of the stock options. The risk-free rate of return reflects the interest rate offered for zero coupon treasury bonds over the expected life of the stock options. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using the simplified method allowed by the SEC, which approximates our historical experience. The estimated annual dividend was based on the recent dividend payout trend.