STERLING INFRASTRUCTURE, INC.STRL
STERLING INFRASTRUCTURE, INC. Stock Compensation Disclosure
| 14. | STOCK INCENTIVE PLAN AND OTHER EQUITY ACTIVITY | ||||
General—The Company has a stock incentive plan (the “Stock Incentive Plan”) and an employee stock purchase plan (the “ESPP”) that are administered by the Compensation and Talent Development Committee of the Board of Directors. Under the Stock Incentive Plan, the Company can issue shares to employees and directors in the form of restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance share units (“PSUs”). Compensation expense recognized related to the Company’s Stock Incentive Plan was $22,411, $17,870 and $12,426 for 2025, 2024 and 2023, respectively. Under the Stock Incentive Plan, we are authorized to issue 5,300 shares, and assuming PSU vestings occur at maximum payout, 1,364 authorized shares remained available under our Stock Incentive Plan for future grants at December 31, 2025.
Under the ESPP, employees may make quarterly purchases of shares at a discount through regular payroll deductions for up to 15% of their compensation, subject to a $25 fair market value maximum purchase per year. The shares are purchased at 85% of the closing price per share on the last trading day of the calendar quarter. Included within total stock-based compensation expense is $355, $258 and $181 of expense related to the ESPP, for 2025, 2024 and 2023, respectively. ESPP expense represents the difference between the fair value on the date of purchase and the price paid. The Company issued 11, 13 and 18 shares related to the ESPP in 2025, 2024 and 2023, respectively. At December 31, 2025, 649 authorized shares remained available for issuance under the ESPP.
Total equity-based compensation expense recognized related to the Company’s Stock Incentive Plan and the ESPP was $22,766, $18,128 and $12,607 for 2025, 2024 and 2023, respectively, primarily recognized within general and administrative expenses. At December 31, 2025, there was approximately $24,300 of unrecognized compensation cost related to equity-based grants, which is expected to be recognized over a weighted-average period of 1.5 years. The Company recognizes forfeitures as they occur, rather than estimating expected forfeitures.
We receive a tax deduction upon the vesting of RSUs and performance based shares for the price of the shares at the date of vesting. Our total recognized tax benefit based on our compensation expense was $21,000, $33,100 and $12,200 for 2025, 2024 and 2023, respectively.
RSAs—The Company’s RSA awards may not be sold or otherwise transferred until certain restrictions have lapsed, which is generally over a -year period for Directors. The total initial fair value for these awards is determined based upon the market price of our stock at the grant date and is expensed on a straight-line basis over the vesting period. During 2025, we recognized $786 of compensation expense. The following table presents RSA activity during 2025:
| RSAs | Number of Shares | Weighted Average Fair Value Per Share | |||||||||
| Balance at December 31, 2024 | 5 | $ | 125.68 | ||||||||
| Granted | 5 | $ | 191.05 | ||||||||
| Vested | (5) | $ | 125.68 | ||||||||
| Forfeited | — | $ | — | ||||||||
| Balance at December 31, 2025 | 5 | $ | 191.05 | ||||||||
During 2024, 8 RSAs were granted with a weighted-average grant-date fair value per share of $125.28. During 2023, 20 RSAs were granted with a weighted-average grant-date fair value per share of $40.26. The total fair value of RSAs that vested during 2025, 2024 and 2023 was $675, $1,101 and $609, respectively.
RSUs—The Company’s RSU awards may not be sold or otherwise transferred until certain restrictions have lapsed, which is generally over a three-year graded vesting period. The total initial fair value for these awards is determined based upon the market price of our stock at the grant date and is expensed on a straight-line basis over the vesting period. During 2025, we recognized $8,587 of compensation expense. The following table presents RSU activity during 2025:
| RSUs | Number of Shares | Weighted Average Fair Value Per Share | |||||||||
| Balance at December 31, 2024 | 221 | $ | 57.60 | ||||||||
| Granted | 47 | $ | 175.93 | ||||||||
| Vested | (120) | $ | 66.96 | ||||||||
| Forfeited | (2) | $ | 103.37 | ||||||||
| Balance at December 31, 2025 | 146 | $ | 87.37 | ||||||||
During 2024, 99 RSUs were granted with a weighted-average grant-date fair value per share of $97.95. During 2023, 106 RSUs were granted with a weighted-average grant-date fair value per share of $36.76. The total fair value of RSUs that vested during 2025, 2024 and 2023 were $8,057, $4,139 and $3,307, respectively.
PSUs—The Company’s performance-based share awards are subject to the achievement of specified performance targets, including financial performance targets or stock price performance targets.
Financial Performance-Based Awards—The Company’s financial performance-based awards are subject to the achievement of specified targets, generally based upon EPS, and vest ratably over three years (pre-2024 grants) or cliff vest at the end of three years (post-2023 grants). The total fair value for these awards is determined based upon the market price of our stock at the grant date and is expensed and adjusted over the vesting period based on the level of payout expected to be achieved. As a result of financial performance conditions met during 2025, we recognized $8,098 of compensation expense. During 2025, 2024 and 2023, PSU shares totaling 27, 104 and 143, respectively, were granted with a weighted-average grant-date fair value per share of $167.05, $112.95 and $34.62, respectively. During 2025, upon vesting and achievement of certain performance goals, we distributed 119 shares of common stock related to PSU awards with a weighted-average grant-date fair value per share of $36.32. The total fair value of PSUs that vested during 2025, 2024 and 2023 was $4,301, $8,549 and $7,779, respectively.
Stock Performance-Based Awards—The Company has stock performance-based awards that are based upon the Company’s stock price performance relative to industry peers and cliff vest at the end of three years. The total initial fair value for these awards is determined based upon a Monte Carlo simulation value at the grant date applied to the total number of granted target shares. This fair value is expensed ratably over the vesting period, and during 2025, the Company recognized $1,200 of compensation expense. During 2025, 8 shares of this award type were granted with a weighted-average grant-date fair value per share of $235.99, that was based upon a risk-free interest rate of 4.18% an expected dividend yield of zero, historical volatility of 46.1%, and a remaining performance period of 3 years. During 2024, 12 shares of this award type were granted with a weighted-average grant-date fair value per share of $129.62, that was based upon a risk-free interest rate of 3.97% an expected dividend yield of zero, historical volatility of 44.3%, and a remaining performance period of 3 years.
Additionally, the Company has stock performance-based awards that are based upon specific stock price performance targets and cliff vest at the end of three years. The total initial fair value for these awards is determined based upon Monte Carlo simulation values at the grant date applied to the number of granted target shares. This fair value is expensed ratably over the vesting period, and during 2025, the Company recognized $3,740 of compensation expense. There were no shares granted or vested of this award type during 2025. In 2024, 183 shares of this award type were granted with a weighted-average grant-date fair value per share of $61.31, that was based upon a risk-free interest rate of 3.97%, an expected dividend yield of zero, historical volatility of 44.3%, and a remaining performance period of 3 years.
Liability-Based Awards—The Company has liability-based awards for which the number of units awarded is not determined until the vesting date. During 2025, 2024 and 2023, the Company recognized $1,415, $875 and $2,015, respectively, of compensation expense, and upon vesting reclassified the grant date fair value of $1,264, $3,200 and $1,725, respectively, from a liability to additional paid in capital. During 2025 and 2024, 10 and 30, respectively, shares of liability-based awards vested.
Shares Withheld for Taxes—The Company withheld 97, 175 and 174 shares for taxes on RSU and PSU stock-based compensation vestings for $21,019, $21,452 and $9,567 during 2025, 2024 and 2023, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.