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STOCK COMPENSATION PLANS
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
STOCK COMPENSATION PLANS
8. STOCK COMPENSATION PLANS

The Company recognizes all share-based payments as compensation expense in its financial statements based on their fair value. As of December 31, 2022, the Company’s stock-based compensation consisted of restricted stock units, employee stock purchase plan and stock options. The Company recorded stock-based compensation expense for the years ended December 31 as follows:
In millions202220212020
Restricted stock units$99 123 78 
Stock options17 23 24 
Employee stock purchase plan9 8 6 
Stock-based compensation expense125 154 108 
Tax benefit(14)(18)(13)
Total stock-based compensation (net of tax)$111 136 95 

Approximately 27 million shares (i) remain available for future issuance and (ii) are issuable upon the exercise or settlement of outstanding awards under the 2017 Stock Incentive Plan ("SIP"). Details of the Company's stock-based compensation plans are discussed below.

Restricted Stock Units

The SIP provides for the grant of several different forms of stock-based compensation, including restricted stock units. Restricted stock units can have service-based and/or performance-based vesting with performance goals being established by the Compensation and Human Resource Committee of the Company’s Board of Directors. Any grant of restricted stock units is generally subject to a vesting period of 12 months to 48 months, to the extent permitted by the SIP. Performance-based grants conditionally vest upon achievement of future performance goals based on performance criteria such as the Company’s achievement of specific return on capital and/or other financial metrics (as defined in the SIP) during the performance period. Performance-based grants must be earned, based on performance, before the actual number of shares to be awarded is known. The Compensation and Human Resource Committee considers the likelihood of meeting the performance criteria based upon estimates and other relevant data, and certifies performance based on its analysis of achievement against the performance criteria. A recipient of restricted stock units does not have the rights of a stockholder and is subject to restrictions on transferability and risk of forfeiture. Other terms and conditions applicable to any award of restricted stock units will be determined by the Compensation and Human Resource Committee and set forth in the agreement relating to that award.
The following table reports restricted stock unit activity during the year ended December 31, 2022:
Shares in thousandsNumber of UnitsWeighted Average Grant-Date Fair Value per Unit
Unvested shares as of January 17,922 $32.86 
Shares granted6,284 $35.08 
Shares vested(4,171)$27.97 
Shares forfeited(958)$36.53 
Unvested shares as of December 319,077 $35.67 

Stock-based compensation expense is recognized in the financial statements based upon fair value. The total fair value of units vested and distributed in the form of NCR common stock was $117 million in 2022, $119 million in 2021, and $74 million in 2020. As of December 31, 2022, there was $197 million of unrecognized compensation cost related to unvested restricted stock unit grants. The unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 1.2 years. The weighted average grant date fair value for restricted stock unit awards granted in 2021 and 2020 was $34.00 and $26.50, respectively. The weighted average grant date fair value of restricted stock awards assumed through the Cardtronics acquisition is based on the fair value on the date assumed.


The following table represents the composition of restricted stock unit grants in 2022:
Shares in thousandsNumber of UnitsWeighted Average Grant-Date Fair Value
Service-based units2,667 $30.58 
Performance-based units3,617 $37.76 
Total restricted stock units6,284 $35.08 

On February 25, 2022, the Company granted market-based restricted stock units vesting on December 31, 2024. The number of awards that vest are subject to the performance of the Company's stock price from the date of grant to December 31, 2024. The fair value was determined to be $57.67 per share based on using a Monte-Carlo simulation model and will be recognized over the requisite service period. The table below details the assumptions used in determining the fair value of the market-based restricted stock units.
Dividend yield— %
Risk-free interest rate1.73 %
Expected volatility59.26 %

Expected volatility for the market-based restricted stock units is calculated as the historical volatility of the Company’s stock over a period of three years, as management believes this is the best representation of prospective trends. The risk-free interest rate was determined based on a three year U.S. Treasury yield curve in effect at the time of the grant.

On December 21, 2022, the Company granted market-based restricted stock units vesting on December 31, 2025. The number of awards that vest are subject to the compound annual growth rate ("CAGR") of the Company's stock price from January 1, 2023 to December 31, 2025 (the "performance period"), subject to an alternative level of achievement based on the Company's relative total shareholder return ranking among a comparison group. The fair value of the awards was determined to be $29.66 per share based on using a Monte-Carlo simulation model and will be recognized over the requisite service period.

Approximately 50% of these market-based restricted stock units granted include an accelerated vesting provision if a Qualified Transaction, as defined in the award agreement, takes place during the performance period (with a minimum vesting period of one year from the grant date). Upon the occurrence of a Qualified Transaction, the number of shares that vest are then based on the Company's 20-day volume-weighted average closing stock price immediately preceding the transaction date. If a qualifying transaction is deemed probable, the award will be recognized over the adjusted requisite service period at a fair value determined using a Monte-Carlo simulation model ranging from $30.00 to $35.81 per unit, dependent upon the estimated
timing of the transaction. Transactions of this nature are subject to many variables that are highly uncertain, including the receipt of regulatory approvals and market conditions.

The table below details the significant assumptions used in determining the fair value of the market-based restricted stock units granted on December 21, 2022:
Dividend yield— %
Risk-free interest rate3.90 %
Expected volatility64.93 %

Expected volatility for these restricted stock units is calculated as the historical volatility of the Company’s stock over a period of approximately three years, as management believes this is the best representation of prospective trends. The risk-free interest rate was determined based on a three year U.S. Treasury yield curve in effect at the time of the grant.

Stock Options

The SIP also provides for the grant of stock options to purchase shares of NCR common stock. The Compensation and Human Resource Committee has discretion to determine the material terms and conditions of option awards under the SIP, provided that (i) the exercise price must be no less than the fair market value of NCR common stock (defined as the closing price) on the date of grant, (ii) the term must be no longer than ten years, and (iii) in no event shall the normal vesting schedule provide for vesting in less than one year. Other terms and conditions of an award of stock options will be determined by the Compensation and Human Resource Committee as set forth in the agreement relating to that award. The Compensation and Human Resource Committee has authority to administer the SIP, except that the Committee on Directors and Governance of the Company’s Board of Directors will administer the SIP with respect to non-employee members of the Board of Directors. New shares of the Company’s common stock are issued as a result of stock option exercises.

During the years ended December 31, 2022 and 2021, the Company did not grant any stock options. During the year ended December 31, 2022, as discussed in Note 2, “Business Combinations”, the Company converted certain outstanding unvested LibertyX awards into NCR awards. LibertyX stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio (as defined in the acquisition agreement), and vested immediately. The value of the option awards was deemed attributable to services already rendered and was included as a portion of the purchase price.

During the year ended December 31, 2021, as discussed in Note 2, “Business Combinations”, the Company converted certain outstanding unvested Cardtronics awards into NCR awards. Cardtronics stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio (as defined in the acquisition agreement) and will continue to be governed generally by the same terms and conditions as were applicable prior to the acquisition. The fair value of options that the Company assumed in connection with the acquisition of Cardtronics were estimated using the Black-Scholes model.

The following table summarizes the Company’s stock option activity for the year ended December 31, 2022:
Shares in thousandsShares Under OptionWeighted Average Exercise Price per ShareWeighted Average Remaining Contractual Term (in years)Aggregate Intrinsic Value
(in millions)
Outstanding as of January 19,079 $32.96 
Granted— $— 
Assumed through acquisition217 $1.21 
Exercised(255)$10.00 
Forfeited or expired(346)$33.87 
Outstanding as of December 318,695 $32.81 3.29$3.48 
Fully vested and expected to vest as of December 311,863 $34.08 3.97$0.82 
Exercisable as of December 316,752 $32.43 3.12$2.67 
As of December 31, 2022, the total unrecognized compensation cost of $2 million related to unvested stock option grants is expected to be recognized over a weighted average period of approximately 0.2 years.

The total intrinsic value of all options exercised was $7 million in 2022, $9 million in 2021, and $1 million in 2020. Cash received from option exercises under all share-based payment arrangements was $2 million in 2022, $25 million in 2021, and $2 million in 2020. There was $1 million tax benefit realized from option exercises in 2021. There was no tax benefit realized from stock options exercised in 2022 or 2020.

Employee Stock Purchase Plan

The Company's amended Employee Stock Purchase Plan ("ESPP") provides employees a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of NCR’s closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation. The amended ESPP was approved by NCR stockholders in 2016 and became effective January 1, 2017.

Employees purchased approximately 1.3 million shares in 2022, 0.8 million shares in 2021, and 1.3 million shares in 2020, for approximately $29 million in 2022, $26 million in 2021 and $21 million in 2020. A total of 4 million shares were originally authorized to be issued under the ESPP before its amendment. Under the amended ESPP, 10 million shares were newly authorized to be issued, plus any shares remaining unissued under the prior ESPP after the last 2016 purchase date. Approximately 5.5 million authorized shares remain unissued under our amended ESPP as of December 31, 2022.