Stock Compensation Plans

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

8. STOCK COMPENSATION PLANS

As of June 30, 2023, the Company’s stock-based compensation consisted of restricted stock units, employee stock purchase plan and stock options. Stock-based compensation expense for the following periods were:


In millions	Three months ended June 30				Six months ended June 30
	2023		2022		2023		2022
Restricted stock units	$	34	$	28	$	62	$	54
Stock options	—		5		2		10
Employee stock purchase plan	2		2		4		5
Stock-based compensation expense	36		35		68		69
Tax benefit	(4)		(4)		(4)		(8)
Stock-based compensation expense (net of tax)	$	32	$	31	$	64	$	61

Stock-based compensation expense is recognized in the Condensed Consolidated Financial Statements based upon fair value.

On February 13, 2023, 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 $35.04 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 $35.09 to $41.77 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 February 13, 2023:


Dividend yield	—	%
Risk-free interest rate	4.15	%
Expected volatility	55.90	%

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.

As of June 30, 2023, the total unrecognized compensation cost of $198 million related to unvested restricted stock grants is expected to be recognized over a weighted average period of approximately 1.1 years. As of June 30, 2023, the total unrecognized compensation cost related to unvested stock option grants was approximately zero.

Employee Stock Purchase Plan The Company's 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.

For the three months ended June 30, 2023, employees purchased 0.3 million shares, at a discounted price of $19.93. For the three months ended June 30, 2022, employees purchased 0.2 million shares, at a discounted price of $26.44.