Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Under our 2011 Stock Incentive Plan (the "2011 Plan"), we may grant awards of non-qualified stock options, incentive stock options, restricted stock, stock units, performance shares, performance units and other incentives payable in cash or in shares of our common stock to officers, employees or members of the Board of Directors. We are authorized to grant an aggregate of 3,105,764 shares under the 2011 Plan. As of December 31, 2020, there were 941,749 shares available for issuance of future grants of awards under the 2011 Plan and 1,208,610 shares representing outstanding awards under the 2011 Plan. We may issue new shares or use shares held in treasury to deliver shares to employees for our equity grants or upon exercise of non-qualified stock options.

The following table summarizes the pre-tax stock-based compensation expense included in reported net income (in thousands):


	Years ended December 31,
	2020		2019		2018
Cost of revenue	$	4,020	$	1,995	$	992
General and administrative expenses	920		622		358
Total stock-based compensation expense	$	4,940	$	2,617	$	1,350

We recognized a deferred income tax benefit of $0.9 million, $0.4 million and $0.3 million, respectively, during the years ended December 31, 2020, 2019, and 2018 associated with the compensation expense recognized in our consolidated financial statements. As of December 31, 2020, we had restricted stock units outstanding under these plans as discussed below.

Non-Qualified Stock Options

Non-qualified stock options are granted with an exercise price not less than the fair market value of our common stock at the date of grant, vest over a period up to ten years, and expire at various terms up to ten years from the date of grant. There were no outstanding stock options as of December 31, 2020 and 2019, respectively. We received cash for the exercise price associated with stock options exercised of less than $0.1 million during the year ended December 31, 2018. The total intrinsic value realized by participants on stock options exercised and/or settled was less than $0.1 million during the year ended December 31, 2018.

Restricted Stock Units

In addition to stock options, we issue restricted stock units to key employees and members of the Board of Directors based on meeting certain service goals. The stock units vest to the recipients at various dates, up to five years, based on fulfilling service requirements. We recognize the value of the market price of the underlying stock on the date of grant to compensation expense over the requisite service period. Upon vesting, the stock units are settled in shares of our common stock. Summarized share information for our restricted stock units is as follows:


	Year ended December 31, 2020	Weighted average grant date fair value
	(In shares)	(In dollars)
Outstanding and unvested, beginning of period	92,101	$	18.19
Granted	512,922	6.82
Vested	(59,710)	17.82
Forfeited	(76,757)	7.08
Outstanding and unvested, end of period	468,556	$	7.62

The total intrinsic value realized by participants upon the vesting of restricted stock units was $0.4 million, $2.3 million and $1.3 million during the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had unrecognized compensation cost of $2.3 million related to the unvested portion of our outstanding restricted stock units to be recognized over a weighted average remaining service period of 2.8 years. During the years ended December 31, 2020, 2019, and 2018, we realized excess income tax deficiencies of $0.1 million, $0.1 million and $0.3 million respectively, related to stock option exercises or expirations and restricted stock vesting.

We have a long-term incentive program (LTIP) which provides for the issuance of performance-based stock units (PSUs) under the 2011 Plan to certain executives. Under the LTIP, a target level of equity compensation is set for each officer. Under the program, the Compensation Committee typically sets the performance-based goals within the first 90 days of each year. Vesting of the PSU's is contingent upon the employee's continued employment and the Company's achievement of certain performance goals during a three-year performance period. The performance goals are established by the Compensation Committee for a three-year performance period based on (i) PSUs granted for the 2019-2021 performance period, certain financial targets, and (ii) PSUs granted in 2020, certain stock price appreciation based targets. For PSUs with financial targets, we recognize compensation expense on a straight-line basis over the performance period based on the probable outcome of achievement of the financial targets. At the end of each reporting period, we estimate the number of PSU's expected to vest, based on the probability and extent to which the performance goals will be met, and take into account these estimates when calculating the expense for the period. If the number of shares expected to be earned changes during the performance period, we make a cumulative adjustment to compensation expense based on the revised number of shares expected to be earned. For PSUs with stock price appreciation targets, we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the PSU’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the performance period and there is no ongoing adjustment or reversal based on actual achievement during the period.

Summarized share information for our performance-based and market based restricted stock units is as follows:


	Year ended December 31, 2020	Weighted average grant date fair value
	(In shares)	(In dollars)
Outstanding and unvested, beginning of period	476,711	$	18.67
Granted	533,204	5.52
Vested	(59,102)	7.08
Forfeited	(210,759)	18.65
Outstanding and unvested, end of period	740,054	$	10.13

As of December 31, 2020, we had unrecognized compensation cost of $2.2 million related to the unvested portion of our outstanding performance-based restricted stock units to be recognized over a weighted average remaining service period of 2.2 years.