Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.19.3
Stock-Based Compensation
9 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
 
The Company has stock options and restricted stock units outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the 2019 Equity Plan.

As a result of the PIEtech Acquisition (See “Note 3—Business Acquisitions”), the Company adopted the 2019 Equity Plan in order to make inducement grants to certain PIEtech employees who will join Envestnet | MoneyGuide. Envestnet agreed to grant at future dates, not earlier than the sixty day anniversary of the PIEtech Acquisition, up to 301,469 shares of Envestnet common stock in the form of RSUs and PSUs pursuant to the 2019 Equity Plan. The RSUs vest over time and the PSUs vest upon the achievement of meeting certain performance conditions as well as a subsequent service condition. The Company is recognizing the estimated expense on a graded-vesting method over a requisite service period of three to five years, which is the estimated vesting period. The Company estimates the expected vesting amount and recognizes compensation expense only for those awards expected to vest. This estimate is reassessed by management each reporting period and may change based upon new facts and circumstances. Changes in assumptions impact the total amount of expense and are recognized over the vesting period.

As of September 30, 2019, the maximum number of common shares available for future issuance under the Company’s plans is 2,227,462.  
 
Stock-based compensation expense under the Company’s plans was as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
Stock-based compensation expense
 
$
13,169

 
$
10,603

 
$
39,467

 
$
29,574

Tax effect on stock-based compensation expense
 
(3,438
)
 
(2,682
)
 
(10,305
)
 
(7,482
)
Net effect on income
 
$
9,731


$
7,921


$
29,162

 
$
22,092


 
The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 26.1% for the three and nine months ended September 30, 2019. The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.3% for the three and nine months ended September 30, 2018.

Stock Options
 
The following weighted average assumptions were used to value options granted during the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
Grant date fair value of options
 
$

 
$

 
$
21.55

 
$

Volatility
 
%
 
%
 
40.0
%
 
%
Risk-free interest rate
 
%
 
%
 
2.5
%
 
%
Dividend yield
 
%
 
%
 
%
 
%
Expected term (in years)
 

 

 
6.5

 


 
The following table summarizes option activity under the Company’s plans:
 
 
 
 
 
 
Weighted-Average
 
 
 
 
 
 
Weighted-
 
Remaining
 
 
 
 
 
 
Average
 
Contractual Life
 
Aggregate
 
 
Options
 
Exercise Price
 
(Years)
 
Intrinsic Value
Outstanding as of December 31, 2018
 
1,887,969

 
$
20.05

 
3.4
 
$
56,046

Granted
 
81,807

 
49.02

 
 
 
 
Exercised
 
(200,326
)
 
16.91

 
 
 
 
Forfeited
 
(1,100
)
 
31.70

 
 
 
 
Outstanding as of March 31, 2019
 
1,768,350

 
21.74

 
3.5
 
77,197

Exercised
 
(114,109
)
 
13.36

 
 
 
 
Outstanding as of June 30, 2019
 
1,654,241

 
22.31

 
3.4
 
76,187

Exercised
 
(225,414
)
 
9.41

 
 
 
 
Forfeited
 
(34,818
)
 
48.86

 
 
 
 
Outstanding as of September 30, 2019
 
1,394,009

 
23.74

 
3.3
 
45,949

Options exercisable
 
1,332,602

 
$
22.77

 
3.0
 
$
45,209


 
Exercise prices of stock options outstanding as of September 30, 2019 range from $7.15 to $55.29. At September 30, 2019, there was $987 of unrecognized stock-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted-average period of 2 years.
 
Restricted Stock Units and Restricted Stock Awards
 
Periodically, the Company grants restricted stock units and awards and performance stock units and awards to employees. Performance-based restricted unit awards vest upon the achievement of certain pre-established business and financial metrics as well as a subsequent service condition. The business and financial metrics governing the vesting of these performance-based restricted stock unit awards provide thresholds that dictate the number of shares to vest upon each evaluation date, which range from 50% to 150%. If these metrics are achieved, as defined in the individual grant terms, these shares would cliff vest three years from the grant date.

The following is a summary of the activity for unvested restricted stock units and performance stock units granted under the Company’s plans:
 
 
RSUs
 
PSUs
 
 
Number of
Shares
 
Weighted-
Average Grant
Date Fair Value
per Share
 
Number of
Shares
 
Weighted-
Average Grant
Date Fair Value
per Share
Outstanding as of December 31, 2018
 
1,461,468

 
$
46.59

 
124,320

 
$
44.64

Granted
 
872,104

 
60.94

 
68,510

 
64.32

Vested
 
(479,479
)
 
45.98

 

 

Forfeited
 
(20,830
)
 
48.31

 
(4,036
)
 
61.27

Outstanding as of March 31, 2019
 
1,833,263

 
53.67

 
188,794

 
51.42

Granted
 
48,032

 
68.50

 
123,812

 
73.60

Vested
 
(114,056
)
 
47.94

 
(68,334
)
 
31.03

Forfeited
 
(22,074
)
 
56.55

 

 

Outstanding as of June 30, 2019
 
1,745,165

 
54.40

 
244,272

 
$
67.78

Granted
 
77,199

 
71.49

 
3,495

 
77.68

Vested
 
(242,789
)
 
42.80

 

 

Forfeited
 
(39,734
)
 
54.61

 

 

Outstanding as of September 30, 2019
 
1,539,841

 
57.37

 
247,767

 
67.98



At September 30, 2019, there was $74,375 of unrecognized stock-based compensation expense related to unvested restricted stock units and awards, which the Company expects to recognize over a weighted-average period of 2.0 years. At September 30, 2019, there was $16,722 of unrecognized stock-based compensation expense related to unvested performance-based restricted stock units and awards, which the Company expects to recognize over a weighted-average period of 2.5 years.