Stock-Based Compensation and Stock Options

9 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation and Stock Options

Note 3 — Stock-Based Compensation and Stock Options

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (the “Plan”) as in effect at December 31, 2024, options exercisable for up to 61,845,000 shares of the Company’s common stock may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant. Options granted under the Plan are non-statutory stock options and generally vest 25% one year from the date of grant with the remaining 75% vesting ratably each month over the following 36 months. The options granted to employees and directors expire at the end of five years and ten years from the date of grant, respectively. No options were granted during the three months ended December 31, 2024. All options granted in the nine months ended December 31, 2024 and in the three and nine months ended December 31, 2023, were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options.

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses historical data, among other factors, to estimate the expected volatility, the expected dividend yield and the expected option life. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option. No options were granted during the three months ended December 31, 2024. The following assumptions were used to estimate the fair value of options granted during the three months ended December 31, 2023, using the Black-Scholes option-pricing model:

	Three Months Ended
		December 31, 2023
Risk-free interest rate		4.65%
Expected volatility		36%
Expected dividend yield		0.00%
Expected weighted average life of option in years		4.2 years

For the three months ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense of $1,823,000 and $1,076,000, respectively. For the nine months ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense of $4,376,000 and $3,690,000, respectively. The table below shows the amounts recognized in the unaudited consolidated financial statements for stock-based compensation expense for time-based options and performance-based options during the three and nine months ended December 31, 2024 and 2023, respectively.

	Three Months Ended
	December 31, 2024			December 31, 2023
Cost of revenues	$	685,000		$	731,000
General and administrative		1,138,000			345,000
Total cost of stock-based compensation included in    income before income tax provision		1,823,000			1,076,000
Amount of income tax benefit recognized		(416,000	)		(254,000	)
Amount charged against net income	$	1,407,000		$	822,000
Effect on basic earnings per share	$	(0.03	)	$	(0.02	)
Effect on diluted earnings per share	$	(0.03	)	$	(0.02	)

	Nine Months Ended
	December 31, 2024			December 31, 2023
Cost of revenues	$	2,123,000		$	2,078,000
General and administrative		2,253,000			1,612,000
Total cost of stock-based compensation included in    income before income tax provision		4,376,000			3,690,000
Amount of income tax benefit recognized		(938,000	)		(799,000	)
Amount charged against net income	$	3,438,000		$	2,891,000
Effect on basic earnings per share	$	(0.07	)	$	(0.06	)
Effect on diluted earnings per share	$	(0.07	)	$	(0.06	)

The following table summarizes information for all stock options for the three and nine months ended December 31, 2024 and 2023:

	Three Months Ended
	December 31, 2024					December 31, 2023
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		1,285,827		$	47.71		1,725,789		$	38.77
Options granted		—			—		129,000			66.85
Options exercised		(48,108	)		42.82		(73,998	)		31.59
Options cancelled/forfeited		(6,894	)		68.49		(10,569	)		49.81
Options outstanding, ending		1,230,825		$	47.79		1,770,222		$	41.05

	Nine Months Ended
	December 31, 2024					December 31, 2023
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning		1,469,181		$	43.13		1,955,571		$	36.03
Options granted		63,000			93.71		178,500			68.86
Options exercised		(286,158	)		33.27		(344,739	)		26.44
Options cancelled/forfeited		(15,198	)		61.26		(19,110	)		49.45
Options outstanding, ending		1,230,825		$	47.79		1,770,222		$	41.05

The following table summarizes the status of stock options outstanding and exercisable at December 31, 2024:

Range of Exercise Price	Number of Outstanding Options		Weighted Average Remaining Contractual Life		Outstanding Options – Weighted Average Exercise Price		Exercisable Options – Number of Exercisable Options		Exercisable Options – Weighted Average Exercise Price
$11.05 to $29.23		365,172		2.25	$	22.64		365,172	$	22.64
$29.24 to $52.00		411,330		2.64		47.97		212,598		45.52
$52.01 to $66.85		346,896		3.46		62.40		116,964		60.29
$66.86 to $102.27		107,427		5.41		85.38		12,009		74.09
Total		1,230,825		3.00	$	47.79		706,743	$	36.63

The following table summarizes the status of all outstanding options at December 31, 2024, and changes during the three months then ended:

	Number of Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of December 31, 2024
Options outstanding at October 1, 2024		1,285,827		$	47.71
Granted		—			—
Exercised		(48,108	)		42.82
Cancelled – forfeited		(6,894	)		68.49
Cancelled – expired		—			—
Ending outstanding		1,230,825		$	47.79		3.00	$	78,123,656
Ending vested and expected to vest		1,074,012		$	46.12		3.04	$	69,960,809
Ending exercisable at December 31, 2024		706,743		$	36.63		2.53	$	52,746,881

There were no options granted during the three months ended December 31, 2024. The weighted-average grant-date fair value of options granted during the three months ended December 31, 2023. was $23.86.

Included in the above-noted stock option grants and stock-based compensation expense are performance-based stock options that vest only upon the Company’s achievement of certain earnings per share targets that are assessed on a calendar year basis, as determined by the Company’s Board of Directors (the “Board”). These options were valued in the same manner as the time-based options. However, the Company only recognizes stock-based compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. The Company recognized $819,000 and $58,000 of stock-based compensation expense for the three months ended December 31, 2024 and 2023, respectively, for performance-based stock options. The Company recognized $1,354,000 and $758,0000 of stock-based compensation expense for the nine months ended December 31, 2024 and 2023, respectively, for performance-based stock options.