Stock-Based Compensation

3 Months Ended

Mar. 31, 2026

Share-Based Payment Arrangement [Abstract]

We recorded stock-based compensation expense of $1 million ($1 million, net of tax) and $6 million ($4 million, net of tax) during the three months ended March 31, 2026 and 2025, respectively.

As part of our declaration and payment of a special cash dividend in December 2023, we granted additional restricted stock units (“RSUs”) to our award holders with unvested shares as a dividend equivalent, which has been deferred until, and will not be paid unless, the shares of stock underlying the award vest.

In March 2026, the Company granted market-based RSUs that vest based on the level of total shareholder return. The grant date fair value of the market-based RSUs incorporates the total shareholder return metric, which is estimated using a Monte Carlo simulation model to estimate the Company’s ranking relative to an applicable stock index. The weighted average assumptions used in the Monte Carlo simulation model to calculate the fair value of the Company’s stock unit awards are outlined in the table below.


	Three Months Ended March 31, 2026
Expected volatility of stock price	20.4	%
Risk-free interest rate	3.68	%
Valuation period	3 years
Dividend yield	—	%

The activity related to stock units 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 as of January 1, 2026	419	$	88.53
Granted (a)	157	101.88
Vested (b)	(161)	90.62
Forfeited	(22)	85.09
Outstanding and expected to vest as of March 31, 2026 (c)	393	$	93.18	1.6	$	57
Performance-based and market-based RSUs
Outstanding as of January 1, 2026	556	$	87.91
Granted (a)	187	122.36
Vested	—	—
Forfeited	(212)	113.69
Outstanding as of March 31, 2026	531	$	89.78	2.1	$	77
Outstanding and expected to vest as of March 31, 2026 (c)	125	$	122.36	2.1	$	18

__________

(a)Reflects the maximum number of stock units assuming achievement of all time-, performance- and market-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time- and performance-based RSUs granted during the three months ended March 31, 2025 was $62.64.

(b)The total fair value of time-based RSUs vested during the three months ended March 31, 2026 was $15 million and the total fair value of time- and performance-based RSUs vested during the three months ended March 31, 2025 was $23 million.

(c)Aggregate unrecognized compensation expense related to time-, performance- and market-based RSUs amounted to $46 million and will be recognized over a weighted average vesting period of 1.7 years.