WEST PHARMACEUTICAL SERVICES INCWST
WEST PHARMACEUTICAL SERVICES INC Stock Compensation Disclosure
Stock-Based Compensation
The West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. In March 2025, the Board of Directors approved, and our stockholders subsequently approved in May 2025, an amendment to the 2016 Plan ("the Amended and Restated 2016 Plan"), which, among other things, added 2.0 million shares of common stock to the maximum number of shares of common stock as to which awards may be granted. Following the approval of the Amended and Restated 2016 Plan, all stock options or SARs that are not forfeited or cancelled will reduce the number of shares available for issuance under the Amended and Restated 2016 Plan by one share for each share subject to the award. Awards issued following the amendment that are payable in common stock (other than stock options or SARs) will reduce the total number of shares available for grant under the Amended and Restated 2016 Plan by an amount equal to 2.0 times the number of shares subject to the award. The reduction was previously equal to 2.5 times the number of shares subject to the award under the 2016 Plan. At December 31, 2025, there were 3.1 million shares remaining in the 2016 Plan for future grants.
The following table summarizes our stock-based compensation expense recorded within selling, general and administrative expenses for the years ended December 31:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Stock option and appreciation rights | $ | 9.6 | $ | 11.0 | $ | 11.3 | |||||||||||
| Performance share units | 3.9 | 2.2 | 5.9 | ||||||||||||||
| Employee stock purchase plan | 1.2 | 1.3 | 1.3 | ||||||||||||||
| Deferred compensation plans and restricted share awards | 9.1 | 4.2 | 4.8 | ||||||||||||||
| Total stock-based compensation expense | $ | 23.8 | $ | 18.7 | $ | 23.3 | |||||||||||
The Company estimates expected forfeitures. The amount of unrecognized compensation expense for all non-vested awards as of December 31, 2025 was $24.6 million, which is expected to be recognized over a weighted average period of 1.7 years.
Stock Options
Stock options granted to employees vest in equal increments. All awards expire 10 years from the date of grant. Upon the exercise of stock options, shares are issued in exchange for the exercise price of the options.
The following table summarizes changes in outstanding options:
| (in millions, except per share data) | Stock Options | Weighted Average Exercise Price | |||||||||
Options outstanding, January 1, 2025 | 1.2 | $ | 176.37 | ||||||||
| Granted | 0.1 | 219.70 | |||||||||
| Exercised | (0.2) | 75.54 | |||||||||
| Forfeited | (0.1) | 309.03 | |||||||||
Options outstanding, December 31, 2025 | 1.0 | $ | 187.07 | ||||||||
Options vested and expected to vest, December 31, 2025 | 1.0 | $ | 186.28 | ||||||||
Options vested and exercisable, December 31, 2025 | 0.9 | $ | 165.95 | ||||||||
As of December 31, 2025, the weighted average remaining contractual life of options outstanding and of options exercisable was 4.0 years and 3.1 years, respectively. As of December 31, 2025, the aggregate intrinsic value of total options outstanding was $107.3 million, of which $103.5 million represented vested options.
The fair value of the options was estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted average assumptions in 2025, 2024 and 2023: a risk-free interest rate of 4.3%, 4.3%, and 4.1%, respectively; stock volatility of 36.2%, 32.0%, and 29.8%, respectively; and dividend yields of 0.4%, 0.3%, and 0.3%, respectively. Stock volatility is estimated based on historical data and the impact from expected future trends. Expected lives, which are based on prior experience, averaged 6.5 years for 2025, 6.0 years for 2024 and 5.7 years for 2023. The weighted average grant date fair value of options granted in 2025, 2024 and 2023 was $93.67, $134.25 and $108.95, respectively. Stock option expense is recognized over the vesting period, net of forfeitures.
For the years ended December 31, 2025, 2024 and 2023, the intrinsic value of options exercised was $28.2 million, $90.5 million and $151.0 million, respectively. The grant date fair value of options vested during those same periods was $11.4 million, $10.8 million and $8.6 million, respectively.
Performance Awards
In addition to stock options, we grant performance share unit (“PSU”) awards to eligible employees. These awards are earned based on the Company’s performance against pre-established targets, including annual growth rate of revenue and return on invested capital, over a specified performance period. Depending on the achievement of the targets, recipients of stock-settled PSU awards are entitled to receive a certain number of shares of common stock, whereas recipients of cash-settled PSU awards are entitled to receive a payment in cash per unit based on the fair market value of a share of our common stock at the end of the performance period.
The following table summarizes changes in our outstanding stock-settled PSU awards:
| Units | Weighted Average Fair Value | ||||||||||
Non-vested stock-settled PSU awards, January 1, 2025 | 93,374 | $ | 326.56 | ||||||||
| Granted at target level | 59,923 | 216.80 | |||||||||
| Adjustments above/(below) target | (18,788) | 364.76 | |||||||||
| Vested and converted | (8,351) | 211.38 | |||||||||
| Forfeited | (14,897) | 276.40 | |||||||||
Non-vested stock-settled PSU awards, December 31, 2025 | 111,261 | $ | 265.21 | ||||||||
Shares earned under PSU awards may vary from 0% to 200% of an employee’s targeted award. The fair value of stock-settled PSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures. The weighted average grant date fair value of stock-settled PSU awards granted during the years 2025, 2024 and 2023 was $216.80, $348.20 and $306.97, respectively. Including forfeiture and target achievement expectations, we expect that the stock-settled PSU awards, for which the performance period has completed, will convert to 12,736 shares to be issued during 2026.
As described above, certain eligible employees are entitled to cash-settled PSU awards. The fair value of these cash-settled PSU awards is also based on the market price of our stock at the grant date. These awards are revalued at the end of each quarter based on changes in our stock price. As a result of the cash settlement feature, cash-settled PSU awards are recorded within other long-term liabilities. The amount of cash-settled PSU awards granted during the years 2025, 2024 and 2023 were immaterial.
Restricted Share Awards
We grant stock settled-restricted share unit (“RSU”) awards to eligible employees. During 2025, 2024 and 2023, we granted 64,350, 9,660 and 8,343 stock-settled restricted share unit (“RSU”) awards, respectively, at weighted grant-date fair values of $222.01, $339.32 and $314.06 per share, respectively, to employees under the 2016 Plan. These awards are earned over a specified performance period. The fair value of stock-settled RSU awards is based on the market price of our stock at the grant date and is recognized as expense over the vesting period, net of forfeitures.
| Units | Weighted Average Fair Value | ||||||||||
Non-vested stock-settled RSU awards, January 1, 2025 | 18,499 | 324.50 | |||||||||
| Granted | 64,350 | 222.01 | |||||||||
| Vested and converted | (6,308) | 230.21 | |||||||||
| Forfeited | (7,900) | 241.19 | |||||||||
Non-vested stock-settled RSU awards, December 31, 2025 | 68,641 | $ | 238.53 | ||||||||
The amount of cash-settled RSU awards granted during the years 2025, 2024 and 2023 were immaterial.
Employee Stock Purchase Plan
We also offer an Employee Stock Purchase Plan (“ESPP”), which provides for the sale of our common stock to eligible employees at 85% of the current market price on the last trading day of each quarterly offering period. Payroll deductions are limited to 25% of the employee’s base salary, not to exceed $25,000 in any one calendar year. In addition, employees may not buy more than 2,000 shares during any offering period (8,000 shares per year). Purchases under the ESPP were 32,842 shares, 25,237 shares and 23,955 shares for the years 2025, 2024 and 2023, respectively. At December 31, 2025, there were 3.7 million shares available for issuance under the ESPP.
Deferred Compensation Plans
Our deferred compensation plans include a Non-Qualified Deferred Compensation Plan for Non-Employee Directors, under which non-employee directors may defer all or part of their annual cash or stock retainers. The deferred fees may be credited to a stock-equivalent account. Amounts credited to this account are converted into deferred stock units based on the fair market value of one share of our common stock on the last day of the quarter. For deferred stock units ultimately paid in cash, a liability is calculated at an amount determined by multiplying the number of units by the fair market value of our common stock at the end of each reporting period. In addition, annual stock awards are granted on the date of our annual meeting and are distributed in shares of common stock at the next annual meeting, unless deferred. In 2025, 2024 and 2023, we granted 11,781, 6,064 and 6,160 deferred stock awards with weighted average grant-date fair values of $205.36, $386.03 and $357.00, respectively.
As of December 31, 2025, the two deferred compensation plans held a total of 313,371 deferred stock units, including 8,741 units to be paid in cash. As of December 31, 2024, the two deferred compensation plans held a total of 332,897 deferred stock units, including 8,851 units to be paid in cash.
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.