Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

We maintain long-term incentive plans for the benefit of certain employees and directors. Our current and former plans consist of the 2021 Long-Term Incentive Plan (the “2021 Plan”), the 2016 Long-Term Incentive Plan (the “2016 Plan”), the 2006 Long-Term Incentive Plan (the “2006 Plan”), and the 2006 Equity Incentive Plan (the “Equity Incentive Plan”), which are collectively referred to as the “Plans.” All Plans prior to the 2021 Plan were previously expired upon approval of the superseding Plan, and any shares available for grant under the respective plans were canceled at the time of expiration.

On June 8, 2021, at the 2021 Annual Meeting of Stockholders, the stockholders approved the 2021 Plan. The 2021 Plan authorizes the issuance of a total of 5,000,000 shares of common stock. Any shares of common stock granted in connection with 2021 Plan awards will be counted against this limit as one share. No shares of common stock will be deemed to have been issued if (1) such shares covered by the unexercised portion of an option that terminates, expires, or is cancelled or settled in cash or (2) such shares are forfeited or subject to awards that are forfeited, canceled, terminated or settled in cash. In any calendar year, (1) no employee will be granted options and/or stock appreciation rights for more than 800,000 shares of common stock; (2) no employee will be granted performance-based equity awards under the 2021 Plan (other than options and stock appreciation rights), covering more than 800,000 shares of common stock. On June 6, 2023, at the 2023 Annual Meeting of Stockholders, our stockholders approved an amendment to the 2021 plan (the “Amended 2021 Plan”). The Amended 2021 Plan authorized the issuance of an additional 4,287,000 shares of common stock for a total of 9,287,000 shares of common stock. Excluding the increase in shares of common stock issuable pursuant to the Amended 2021 Plan, the terms of the Amended 2021 Plan are substantially identical to those of the 2021 Plan. As of December 31, 2023 and 2022, there were 1,669,807 and 1,002,638 shares allocated to equity awards outstanding in the Amended 2021 Plan, respectively.

Under the previously expired 2016 Plan, there were 784,678 and 1,226,875 shares, respectively, allocated to equity awards outstanding as of December 31, 2023 and 2022, respectively, in the 2016 Plan. The 2016 Plan expired on June 8, 2021 upon approval of the 2021 Plan.

Under the previously expired 2006 Plan and Equity Incentive Plan (formerly known as the Rent-Way, Inc. 2006 Equity Incentive Plan) there were 27,369 and 63,156 shares as of December 31, 2023 and 2022, respectively, allocated to outstanding equity awards under the 2006 Plan, and 18,750 and 47,827 shares as of December 31, 2023 and 2022, respectively, allocated to

outstanding equity awards under the Equity Incentive Plan. The 2006 Plan and Equity Incentive Plan previously expired in 2016. Outstanding equity awards under these plans represent vested options that will expire at various times through 2026, unless exercised or canceled prior to the expiration date.

Options granted to our employees generally become exercisable over a period of 1 to 4 years from the date of grant and may be exercised up to a maximum of 10 years from the date of grant. Options granted to directors are immediately exercisable.

We grant time-vesting restricted stock units to certain employees that vest ratably over a three-year service period. We recognize expense for these awards using the straight-line method over the requisite service period based on the number of awards expected to vest. We also grant performance-based restricted stock units that vest between 0% and 200% depending on our stock performance against an index using a total shareholder return formula established at the date of grant for the subsequent three-year period. We record expense for these awards over the requisite service period, net of the expected forfeiture rate, because the employee must maintain employment to vest in the award.

Stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021 is as follows:


	Year Ended December 31,
(in thousands)	2023		2022		2021
Stock options	$	900	$	1,327	$	2,001
Restricted share units(1)	161,216		158,031		145,553
Total stock-based compensation expense	162,116		159,358		147,554
Tax benefit recognized in the statements of earnings	5,168		3,391		4,304
Stock-based compensation expense, net of tax	$	156,948	$	155,967	$	143,250

(1) Includes expense of $137.5 million, $143.2 million and $127.1 million for the years ended December 31, 2023, 2022 and 2021, respectively in stock compensation expense related to 8,096,595 common shares issued to the former owners of Acima, as part of the Aggregate Stock Consideration subject to restricted stock agreements, and recorded to Other charges in our Consolidated Statements of Operations. Shares issued as part of the Aggregate Stock Consideration for the acquisition of Acima Holdings were not issued under the authorization of the 2021 Plan or any prior approved long-term incentive plan described above. See Note B and Note N for additional information.

We issue new shares of stock to satisfy option exercises and the vesting of restricted stock units.

The fair value of unvested options that we expect to result in compensation expense was approximately $0.4 million with a weighted average number of years to vesting of 0.88 at December 31, 2023.

Information with respect to stock option activity related to the Plans for the year ended December 31, 2023 follows:


	Equity Awards Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Balance outstanding at January 1, 2023	854,339	$	22.29
Granted	—	—
Exercised	(137,473)	17.36
Forfeited	(7,831)	26.96
Expired	(53,392)	33.49
Balance outstanding at December 31, 2023	655,643	$	22.36	5.15	$	8,223

Exercisable at December 31, 2023	552,733	$	20.75	4.89	$	7,617

The intrinsic value of options exercised during the years ended December 31, 2023, 2022, and 2021 was $1.5 million, $1.4 million, and $14.3 million, respectively, resulting in tax benefits of $0.5 million, $0.5 million, and $5.0 million, respectively, which are reflected as an outflow from operating activities and an inflow from financing activities in the Consolidated Statements of Cash Flows.

The weighted average fair values of the options granted under the Plans were calculated using the Black-Scholes method. There were no options granted in 2023 or 2022. The weighted average grant date fair value and weighted average assumptions used in the option pricing models for 2021 are as follows:


	Year Ended December 31,
	2021
Weighted average grant date fair value	$	14.94
Weighted average risk free interest rate	0.49		%
Weighted average expected dividend yield	2.87		%
Weighted average expected volatility	50.29		%
Weighted average expected life (in years)	4.62

Information with respect to non-vested restricted stock unit activity follows:


	Restricted Awards Outstanding	Weighted Average Grant Date Fair Value
Balance outstanding at January 1, 2023(1)	5,177,485	$	46.63
Granted	968,045	30.05
Vested(2)	(3,742,784)	48.71
Forfeited	(193,994)	32.47
Balance outstanding at December 31, 2023(1)	2,208,752	$	37.10

(1) Includes 3,691,328 and 363,791 outstanding shares at January 1, 2023 and December 31, 2023, respectively, related to RSA agreements issued as part of the Aggregate Stock Consideration for the acquisition of Acima Holdings, described further in Note B, which were not issued under the authorization of the 2021 Plan or any previously approved long-term incentive plan described above.

(2) Includes 3,327,537 shares vested during 2023 as part of RSA agreements issued as part of the Aggregate Stock Consideration for the acquisition of Acima Holdings, as described above.

Restricted stock units are valued using the closing price reported by the Nasdaq Global Select Market on the trading day immediately preceding the day of the grant. Unrecognized compensation expense for unvested restricted stock units at December 31, 2023, was approximately $33.4 million expected to be recognized over a weighted average period of 1.51 years.