Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

We recorded stock-based compensation expense of $7 million ($5 million, net of tax) during the three months ended September 30, 2023 and 2022, in each period, and $23 million and $19 million ($16 million and $14 million, net of tax) during the nine months ended September 30, 2023 and 2022, respectively.

In 2020, we granted market-based restricted stock units (“RSUs”) that vest based on absolute stock price attainment. The grant date fair value of this award is estimated using a Monte Carlo simulation model.

The weighted average assumptions used in the model are as follows:

Expected volatility of stock price	91%
Risk-free interest rate	0.18%
Valuation period	3 years
Dividend yield	—%

The activity related to RSUs consisted of (in thousands of shares):

			Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Time-based RSUs
	Outstanding at January 1, 2023		451	$	92.06
		Granted (a)	74	209.08
		Vested (b)	(251)	52.95
		Forfeited	(7)	163.91
	Outstanding and expected to vest at September 30, 2023 (c)		267	$	159.55	1.4	$	48
Performance-based and market-based RSUs
	Outstanding at January 1, 2023		691	$	57.56
		Granted (a)	90	208.64
		Vested (b)	(381)	21.05
		Forfeited	(10)	147.56
	Outstanding at September 30, 2023		390	$	125.82	1.1	$	70
	Outstanding and expected to vest at September 30, 2023 (c)		344	$	116.00	1.1	$	62

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(a)Reflects the maximum number of stock units assuming achievement of all performance-, market- and time-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs and performance-based RSUs granted during the nine months ended September 30, 2022 was $178.13 and $193.48, respectively.

(b)The total fair value of RSUs vested during the nine months ended September 30, 2023 and 2022 was $21 million and $22 million, respectively.

(c)Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $50 million and will be recognized over a weighted average vesting period of 1.3 years.