10.	Stock-Based Compensation Plans

2013 Omnibus Equity Incentive Plan

The board of directors adopted the 2013 Omnibus Equity Incentive Plan (“2013 Plan”), which became effective upon the Company’s IPO. Grants are made from time to time by the Company’s board of directors at its discretion subject to certain restrictions as to the number and value of shares that may be granted to any individual. Upon adoption of the 2013 Plan, 5,500,000 shares of common stock were initially reserved for the issuance of awards. Pursuant to the automatic increase provided for in the 2013 Plan, the board of directors have approved share reserve increases aggregating 3,300,000, including 1,100,000 share reserve increase effective January 1, 2017. At December 31, 2016, there were 4,521,299 shares available for future grants under the Plan.

 

Awards Granted and Settled

Under the 2013 Plan, the Company has issued RSA’s to non-employee directors and RSU’s to employees and independent contractors. All RSAs vest in equal annual installments over a three-year period from the date of grant. All RSUs vest in equal annual installments over a five-year period from the date of grant. Any unvested awards are canceled upon termination of service. Awards accelerate upon death subject to approval by the compensation committee. As of December 31, 2016, there were no issued or outstanding options, SARs, performance units or performance shares awards.

During the year ended December 31, 2016, 258,123 shares of RSAs and RSUs vested, including 5,158 shares not yet delivered, 435,026 shares of DSUs settled and 226,009 shares of common stock were withheld to pay applicable required employee statutory withholding taxes based on the market value of the shares on the vesting date. The shares withheld for taxes were returned to the share reserve and are available for future issuance in accordance with provisions of the 2013 Plan.

During the years ended December 31, 2016, 2015 and 2014, the Company recorded windfall tax benefits, net resulting from the settlement of stock-based award activity, in the amounts of $2.7 million, $6.2 million and $4.3 million, respectfully. Such windfall tax benefits were included as a component of additional paid-in capital when the awards were settled. As discussed in Note 1 – “Description of Business and Basis of Presentation,” in periods subsequent to December 31, 2016, any windfall tax benefits will be recorded as a discrete item in the Company’s provision for income taxes.

Outstanding Awards

Activity under the 2013 Plan consisted of the following (dollars in thousands, except per share data):

 

		RSA Grants to Non- employee Directors				RSU Grants to Employees				RSU Grants to Independent Contractors				Total				Weighted- Average Grant Date Fair Value Per Share
Nonvested shares at December 31, 2014 (1)			42,882				516,437				647,690				1,207,009			$	18.23
Granted			10,110				31,713				46,885				88,708				42.91
Vested			(17,628	)			(57,711	)			(138,119	)			(213,458	)			14.90
Transferred			—				(8,423	)			8,423				—				17.81
Forfeited/canceled			—				(13,047	)			(43,099	)			(56,146	)			16.29
Nonvested shares at December 31, 2015 (1)			35,364				468,969				521,780				1,026,113			$	21.17
Granted
February 2016			—				172,496				8,856				181,352
March 2016			—				30,000				—				30,000
May 2016			14,742				11,051				8,188				33,981
August 2016			—				12,781				49,608				62,389
November 2016			—				12,684				15,228				27,912
Total Granted			14,742				239,012				81,880				335,634				23.76
Vested			(20,994	)			(104,820	)			(132,309	)			(258,123	)			19.88
Transferred			—				2,062				(2,062	)			—				14.54
Forfeited/canceled			—				(38,743	)			(14,451	)			(53,194	)			20.07
Nonvested shares at December 31, 2016 (1)			29,112				566,480				454,838				1,050,430			$	22.38
Unrecognized stock-based compensation expense as of December 31, 2016 (2)		$	482			$	10,299			$	8,559			$	19,340
Weighted average remaining vesting period (years) as of December 31, 2016			1.83				3.40				2.75				3.07

 

(1)	Nonvested RSU’s will be settled through the issuance of new shares of common stock.

(2)	The total unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.07 years.

For the years ended December 31, 2016 and 2015, the aggregate fair value of vested RSUs and RSAs were $7.0 million and $7.5 million, respectively.

As of December 31, 2016, 930,419 fully vested DSUs remained outstanding. For the years ended December 31, 2016 and 2015, the fair value of fully vested DSUs was $10.4 million and $18.6 million, respectively. See “Amendments to Restricted Stock and SARs” section below and Note 13 – “Earnings Per Share” for additional information.

Employee Stock Purchase Plan

In 2013, the Company adopted the 2013 Employee Stock Purchase Plan (“ESPP Plan”). The ESPP Plan qualifies under Section 423 of the IRS Code and provides for consecutive, non-overlapping 6-month offering periods. The offering periods generally start on the first trading day on or after May 15 and November 15 of each year. Qualifying employees may purchase shares of the Company stock at a 10% discount based on the lower of the market price at the beginning or end of the offering period, subject to IRS limitations. The Company determined that the ESPP Plan was a compensatory plan and is required to expense the fair value of the awards over each 6-month offering period.

The ESPP Plan initially had 366,667 shares of common stock reserved and 277,104 and 307,184 shares of common stock remain available for issuance at December 31, 2016 and 2015, respectively. The ESPP Plan provides for annual increases in the number of shares available for issuance under the ESPP, equal to the least of (i) 366,667 shares, (ii) 1% of the outstanding shares on such date, or (iii) an amount determined by the board. Pursuant to the provisions of the ESPP Plan, the board of directors determined a share reserve increase was not required in 2016. At December 31, 2016, total unrecognized compensation cost related to the ESPP Plan was $69,000 and is expected to be recognized over a weighted average period of 0.37 years.

Amendments to Restricted Stock and SARs

Restricted Stock

In connection with the IPO, the formula settlement value of all outstanding shares of REIS stock held by the plan participants was removed, all outstanding shares of REIS were converted to MMI shares and all such shares of stock are subject to sales restrictions that lapse at a rate of 20% per year for five years, if the participant remains as a service provider. In the event of death or termination of employment after reaching the age of 67, 100% of the shares of stock will be released from the resale restriction. Further, 100% of the shares of stock will be released from the resale restriction upon the consummation of a change of control of the Company. Of the original 3,689,326 shares subject to resale restriction, 1,475,730 shares remain subject to sales restriction for the year ended December 31, 2016.

SARs and DSUs

Prior to the IPO, certain employees were granted SARs. As of March 31, 2013, the outstanding SARs were frozen at the liability amount, and will be paid out to each participant in installments upon retirement or departure under the terms of the revised SARs agreements. To replace beneficial ownership in the SARs, the difference between the book value liability and the fair value of the awards was granted to plan participants in the form of DSUs. The DSUs were fully vested upon receipt and will be settled in actual stock at a rate of 20% per year if the participant remains employed by the Company during that period (otherwise all unsettled shares of stock upon termination from service will be settled five years from the termination date). In the event of death or termination of service after reaching the age of 67, 100% of the DSUs will be settled.

Summary of Stock-Based Compensation

Components of stock-based compensation included in selling, general and administrative expense in the consolidated statements of net and comprehensive income consisted of the following (in thousands, except common stock price):

 

		Year Ended December 31,
		2016				2015				2014
Employee stock purchase plan		$	169			$	285			$	128
RSAs – non-employee directors			422				319				197
RSUs – employees			3,130				2,351				817
RSUs – independent contractors (1)			3,314				4,159				3,892
		$	7,035			$	7,114			$	5,034
Common stock price at beginning of period		$	29.14			$	33.25			$	14.90
Common stock price at end of period		$	26.72			$	29.14			$	33.25
(Decrease) increase in stock price		$	(2.42	)		$	(4.11	)		$	18.35

 

(1)

The Company grants RSUs to independent contractors (i.e. investment sales and financing professionals), who are considered non-employees under ASC 718. Accordingly, such awards are required to be measured at fair value at the end of each reporting period until settlement under ASC 505. Stock-based compensation expense is therefore impacted by the changes in the Company’s common stock price during each reporting period.