Stock-based Compensation
Holdings’ equity incentive plan provides for the issuance of various stock-based awards. Under its current plan, Holdings has issued restricted stock awards. The equity plan currently allows for the issuance of 6,022,665 awards, as adjusted for cancelled or forfeited awards through December 31, 2025. As of December 31, 2025, Holdings has capacity to issue 2,572,291 stock-based awards under its equity plan. The equity plan allows for authorized but previously unissued shares or shares previously issued and outstanding and reacquired by Holdings to satisfy these awards.
The Company measures the compensation costs of stock-based compensation arrangements based on the grant-date fair value and recognizes the costs over the period during which employees are required to provide services. Restricted stock awards are valued using the closing market price of Holdings’ stock on the date of grant. The restricted stock awards generally vest over three to four years. Forfeitures are recognized as they occur.
Transactions related to restricted stock awards are as follows:
| | | | | | | | | | | |
| | Shares | | Weighted Average
Grant Date
Fair Value |
| | (share amounts in thousands) |
| Unvested balance, January 1, 2025 | 2,602 | | | $ | 28.94 | |
| Granted | 1,722 | | | 14.87 | |
| Vested | (940) | | | 30.84 | |
| Forfeited | (28) | | | 23.81 | |
| Unvested balance, December 31, 2025 | 3,356 | | | $ | 21.23 | |
For the years ended December 31, 2023, 2024, and 2025, the weighted average grant date fair values of restricted stock awards granted were $29.06, $28.38, and $14.87, respectively. For the years ended December 31, 2023, 2024, and 2025, the fair values of restricted stock awards vested were $33.9 million, $110.2 million, and $29.0 million, respectively.
In connection with the Company’s spin-off of Concentra, employees of the Company holding any unvested restricted shares of the Company’s common stock on November 4, 2024 received accelerated vesting with respect to one-third of their unvested awards, applied ratably to each unvested tranche of such awards. This accelerated vesting was approved by the Human Capital and Compensation Committee of the Company in advance of the distribution as a part of the planning intended to ensure the tax-free nature of the distribution of Concentra common stock in respect of the Company’s vested stock. This had the effect of accelerating $23.6 million of stock compensation expense into the quarter ended December 31, 2024.
In connection with the distribution of Concentra common stock on November 25, 2024, holders of unvested restricted shares of the Company’s common stock received 0.806971 unrestricted and fully vested shares of Concentra common stock for each unvested restricted share of the Company’s common stock they held. The distribution of unrestricted Concentra shares is considered an award modification that did not result in incremental fair value and therefore, incremental compensation expense was not recognized. The unrecognized service cost attributed to the Concentra shares of the modified restricted stock award was recognized as stock compensation expense at the distribution date since the Concentra shares were distributed without restrictions. The distribution of vested Concentra shares to Select’s restricted stock holders had the effect of accelerating $22.3 million of stock compensation expense into the quarter ended December 31, 2024.
Stock compensation expense recognized by the Company is as follows:
| | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| | 2023 | | 2024 | | 2025 |
| | (in thousands) |
| Stock compensation expense: | | | | | |
| Included in general and administrative | $ | 36,041 | | | $ | 79,931 | | | $ | 13,285 | |
| Included in cost of services | 7,117 | | | 19,283 | | | 3,417 | |
| Total | $ | 43,158 | | | $ | 99,214 | | | $ | 16,702 | |
Future stock compensation expense based on current stock-based awards is estimated to be as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| 2026 | | 2027 | | 2028 | | 2029 | | |
| | (in thousands) |
| Stock compensation expense | $ | 16,332 | | | $ | 9,896 | | | $ | 5,421 | | | $ | 1,097 | | | |