Stock-based compensation

9 Months Ended

Jul. 31, 2024

Share-Based Payment Arrangement [Abstract]

During the 2021 Annual Meeting of Shareholders, our shareholders approved the Nordson Corporation 2021 Stock Incentive and Award Plan (the "2021 Plan") as the successor to the Amended and Restated 2012 Stock Incentive and Award Plan (the "2012 Plan"). The 2021 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, cash awards and other stock or performance-based incentives. A maximum of 900 common shares were authorized for grant under the 2021 Plan plus the number of shares that remained available to be granted under the 2012 Plan, as well as issuable under the CyberOptics equity plan. As of July 31, 2024, a total of 1,875 common shares were available to be granted under the 2021 Plan.

Stock Options

Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon a qualified termination in connection with a change in control. In the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues postretirement for all other unvested options granted. In the event of disability or death, all unvested stock options granted within 12 months prior to termination fully vest. Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances. The amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date. Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized compensation expense related to stock options of $1,426 and $3,960 for the three and nine months ended July 31, 2024, respectively, compared to $1,697 and $4,982 for the three and nine months ended July 31, 2023, respectively.

The following table summarizes activity related to stock options for the nine months ended July 31, 2024:


	Number of Options	Weighted- Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Term
Outstanding at October 31, 2023	1,062	$	152.41
Granted	61	238.35
Exercised	(243)	122.43
Forfeited or expired	(7)	229.00
Outstanding at July 31, 2024	873	$	166.21	$	74,716	4.9 years
Expected to vest	164	$	239.41	$	2,428	8.0 years
Exercisable at July 31, 2024	707	$	149.00	$	72,263	4.2 years

As of July 31, 2024, there was $5,668 of total unrecognized compensation cost related to unvested stock options. That cost is expected to be amortized over a weighted average period of approximately 2.9 years.

The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:


Nine Months Ended	July 31, 2024			July 31, 2023
Expected volatility	30.3%	-	31.7%	30.4%	-	31.8%
Expected dividend yield	1.15%	-	1.20%	1.12%	-	1.27%
Risk-free interest rate	4.22%	-	4.52%	3.79%	-	4.21%
Expected life of the option (in years)	5.0	-	6.2	5.0	-	6.2

The weighted-average expected volatility used to value the 2024 and 2023 options was 30.7% and 30.6%, respectively.

Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.

The weighted average grant date fair value of stock options granted during the nine months ended July 31, 2024 and 2023 was $79.84 and $77.99, respectively.

The total intrinsic value of options exercised during the three months ended July 31, 2024 and 2023 was $3,115 and $7,741, respectively. The total intrinsic value of options exercised during the nine months ended July 31, 2024 and 2023 was $33,286 and $19,873, respectively.

Cash received from the exercise of stock options for the nine months ended July 31, 2024 and 2023 was $29,142 and $18,449, respectively.

Restricted Shares and Restricted Share Units

We may grant restricted shares and/or restricted share units to our employees and directors. These shares or units may not be transferred for a designated period of time (generally one to three years) defined at the date of grant. We may also grant continuation awards in the form of restricted share units with cliff vesting and a performance measure that must be achieved for the restricted share units to vest.

For employee recipients, in the event of termination of employment due to early retirement, with the consent of the Company, restricted shares and units granted within 12 months prior to termination are forfeited, and other restricted shares and units vest on a pro-rata basis, subject to the consent of the Compensation Committee. In the event of termination of employment due to normal retirement at age 65, restricted shares and units granted within 12 months prior to termination are forfeited, and, for other restricted shares and units, the restriction period applicable to restricted shares will lapse and the shares will vest and be transferable and all unvested units will become vested in full, subject to the consent of the Compensation Committee. In the event of a recipient's disability or death, all restricted shares and units granted within 12 months prior to termination fully vest. Termination for any other reason prior to the lapse of any restrictions or vesting of units results in forfeiture of the shares or units.

For non-employee directors, all restrictions lapse in the event of disability or death of the non-employee director. Termination of service as a director for any other reason within one year of date of grant results in a pro-rata vesting of shares or units.

As shares or units are issued, stock-based compensation equivalent to the fair value on the date of grant is expensed over the vesting period.

As of July 31, 2024, there was no unrecognized compensation cost related to restricted shares. The amount charged to expense related to restricted shares during the three months ended July 31, 2024 and 2023 was $0 and $73, respectively, which included common share dividends of $0 and $2, respectively. For the nine months ended July 31, 2024 and 2023, the amounts charged to expense related to restricted shares were $0 and $336, respectively, which included common share dividends of $0 and $5, respectively.

The following table summarizes activity related to restricted share units during the nine months ended July 31, 2024:


	Number of Units	Weighted-Average Grant Date Fair Value
Restricted share units at October 31, 2023	69	$	236.28
Granted	39	234.74
Forfeited	(5)	241.30
Vested	(31)	233.05
Restricted share units at July 31, 2024	72	$	236.37

As of July 31, 2024, there was $10,876 of remaining expense to be recognized related to outstanding restricted share units, which is expected to be recognized over a weighted average period of 1.9 years. The amount charged to expense related to restricted share units during each of the three months ended July 31, 2024 and 2023 was $2,198 and $2,152, respectively, compared to charges of $6,658 and $6,658, respectively, for the nine months ended July 31, 2024 and 2023, respectively.

Performance Share Incentive Awards

Executive officers and selected other key employees are eligible to receive common share-based incentive awards. Payouts, in the form of unrestricted common shares, vary based on the degree to which corporate financial performance exceeds predetermined threshold, target and maximum performance goals over three-year performance periods. No payout will occur unless threshold performance is achieved.

The amount of compensation expense is based upon current performance projections and the percentage of the requisite service that has been rendered. The calculations are based upon the grant date fair value, which is principally driven by the stock price on the date of grant. The per share values were $229.58 and $225.14 in 2024, and $231.34, $211.25 and $214.51 for 2023. The amount charged to expense related to performance awards for the three months ended July 31, 2024 and 2023 was $771 and $1,831, respectively. For the nine months ended July 31, 2024 and July 31, 2023, $3,637 and $4,785 were charged to expense, respectively. As of July 31, 2024, there was $8,224 of unrecognized compensation cost related to performance share incentive awards.

Deferred Compensation

Our executive officers and other highly compensated employees may elect to defer up to 100 percent of their base pay and cash incentive compensation, and for executive officers, up to 90 percent of their share-based performance incentive payout each year. Additional share units are credited for quarterly dividends paid on our common shares. Expense related to dividends paid under this plan for the three months ended July 31, 2024 and 2023 was $23 and $30, respectively, compared to $71 and $77 for the nine months ended July 31, 2024 and 2023, respectively.

Deferred Directors' Compensation

Non-employee directors may defer all or part of their cash and equity-based compensation until retirement. Cash compensation may be deferred as cash or as share equivalent units. Deferred cash amounts are recorded as liabilities, and share equivalent units are recorded as equity. Additional share equivalent units are earned when common share dividends are declared.

The following table summarizes activity related to director deferred compensation share equivalent units during the nine months ended July 31, 2024:


	Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at October 31, 2023	78	$	93.11
Dividend equivalents	1	249.14
Distributions	(14)	54.21
Outstanding at July 31, 2024	65	$	103.73

The amount charged to expense related to director deferred compensation for the three months ended July 31, 2024 and 2023 was $91 and $76, respectively, compared to $226 and $234 for the nine months ended July 31, 2024 and 2023, respectively.