22. Share-based payments
The Company has three share-based incentive plans: the 2002 Stock Incentive Plan adopted on July 1, 2002 (which has expired), the 2006 Incentive Award Plan adopted on June 1, 2006, as amended and restated in February 2009, September 2011 and September 2013 (which has expired), and the 2016 Incentive Award Plan effective from September 27, 2016 (collectively referred to as the “Plans”). All the Plans are equity-settled. Under the Plans, share-based options and RSUs may be granted to eligible participants. Options and RSUs are generally granted for a term of ten years and have a graded vesting period of up to four years. The Company settles employee share-based options and RSU exercises with newly issued ordinary shares. As at March 31, 2018, the Company had 2,515,803 ordinary shares available for future grants.
Share-based compensation expense during the years ended March 31, 2018, 2017 and 2016 are as follows:
| Year ended March 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
|
Share-based compensation expense recorded in |
$ | $ | $ | |||||||||
|
Cost of revenue |
3,770 | 2,765 | 1,923 | |||||||||
|
Selling and marketing expenses |
2,557 | 1,723 | 1,370 | |||||||||
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General and administrative expenses |
24,238 | 18,548 | 14,626 | |||||||||
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Total share-based compensation expense |
$ | 30,565 | $ | 23,036 | $ | 17,919 | ||||||
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Upon exercise of share options and RSUs, the Company issued 1,521,521, 906,255 and 455,642 shares during the years ended March 31, 2018, 2017 and 2016, respectively.
Share-based options
Movements in the number of options outstanding under the 2006 Incentive Award Plan and their related weighted average exercise prices are as follow:
| Shares | Weighted average exercise price |
Weighted average remaining contract term (in years) |
Aggregate intrinsic value |
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|
Outstanding as at March 31, 2016 |
739,618 | $ | 23.34 | 0.54 | $ | 5,419 | ||||||||||
|
Exercised |
(425,941 | ) | 10.52 | |||||||||||||
|
Lapsed |
(196,498 | ) | 13.44 | |||||||||||||
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Outstanding as at March 31, 2017 |
117,179 | $ | 27.25 | 0.10 | $ | 163 | ||||||||||
|
Exercised |
(48,227 | ) | 7.63 | |||||||||||||
|
Lapsed |
(68,952 | ) | 7.87 | |||||||||||||
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Outstanding as at March 31, 2018 |
— | — | — | — | ||||||||||||
|
Options exercisable |
— | $ | — | — | $ | — | ||||||||||
The aggregate intrinsic value of options exercised during the year ended March 31, 2018, 2017 and 2016 was $180, $2,697 and $856, respectively. The total grant date fair value of options vested during the year ended March 31, 2018, 2017 and 2016 was $Nil for each year. Total cash received as a result of options exercised during the year ended March 31, 2018, 2017 and 2016 was $1,347, $8,941 and $1,302, respectively.
The fair value of options granted is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. No options were granted during the years ended March 31, 2018, 2017 and 2016.
The weighted average share price of options exercised during the year ended March 31, 2018, 2017 and 2016 was $30.44, $27.46 and $28.19, respectively. As no options were outstanding at March 31, 2018, there was no exercise price for these options (March 31, 2017: $15.68 to $29.21) and their weighted average remaining contractual term was zero years (March 31, 2017: 0.10 years)
Restricted Share Units
The 2006 Incentive Award Plan and the 2016 Incentive Award Plan also allow for grant of RSUs. Each RSU represents the right to receive one ordinary share and vests over a period of up to three years.
| (i) | Movements in the number of RSUs dependent on non-market performance condition outstanding under the 2006 Incentive Award Plan and the 2016 Incentive Award Plan and their related weighted average fair values are as follow: |
| Shares | Weighted average fair value |
Weighted average remaining contract term (in years) |
Aggregate intrinsic value |
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|
Outstanding as at March 31, 2016 |
1,448,312 | $ | 19.25 | 7.78 | $ | 44,376 | ||||||||||
|
Granted |
516,264 | 30.26 | ||||||||||||||
|
Exercised |
(343,623 | ) | 20.18 | |||||||||||||
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Forfeited |
(47,707 | ) | 25.50 | |||||||||||||
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Lapsed |
— | — | ||||||||||||||
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Outstanding as at March 31, 2017 |
1,573,246 | $ | 22.47 | 7.50 | $ | 45,011 | ||||||||||
|
Granted |
497,689 | 30.85 | ||||||||||||||
|
Exercised |
(961,111 | ) | 21.45 | |||||||||||||
|
Forfeited |
(34,775 | ) | 29.07 | |||||||||||||
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Lapsed |
(2,216 | ) | 23.47 | |||||||||||||
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Outstanding as at March 31, 2018 |
1,072,833 | $ | 27.05 | 7.75 | $ | 48,632 | ||||||||||
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RSUs exercisable |
309,312 | $ | 20.90 | 5.94 | $ | 14,021 | ||||||||||
The fair value of RSUs is generally the market price of the Company’s shares on the date of grant. As at March 31, 2018, there was $6,893 of unrecognized compensation cost related to unvested RSUs. This amount is expected to be recognized over a weighted average period of 2.7 years. To the extent the actual forfeiture rate is different than what the Company has anticipated, share-based compensation expense related to these RSUs will be different from the Company’s expectations.
The weighted average grant date fair value of RSUs granted during the year ended March 31, 2018, 2017 and 2016 was $30.85, $30.26, and $25.16 per ADS, respectively. The aggregate intrinsic value of RSUs exercised during the year ended March 31, 2018, 2017 and 2016 was $34,339, $9,991 and $10,294, respectively. The total grant date fair value of RSUs vested during the year ended March 31, 2018, 2017 and 2016 was $16,931, $14,631 and $6,824, respectively.
The weighted average share price of RSU exercised during the year ended March 31, 2018, 2017 and 2016 was $35.73, $29.08 and $28.52, respectively.
| (ii) | The 2006 Incentive Award Plan and the 2016 Incentive Award Plan also allow for grant of RSUs based on the market price of the Company’s shares achieving a specified target over a period of time. The fair value of market-based share awards is determined using Monte-Carlo simulation. |
Movements in the number of RSUs dependent on market performance condition outstanding under the 2006 Incentive Award Plan and the 2016 Incentive Award Plan and their related weighted average fair values are as follows:
| Shares | Weighted average fair value |
Weighted average remaining contract term (in years) |
Aggregate intrinsic value |
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Outstanding as at March 31, 2016 |
129,590 | $ | 4.44 | 8.53 | $ | 3,971 | ||||||||||
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Granted |
74,400 | 12.56 | ||||||||||||||
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Exercised |
— | — | ||||||||||||||
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Forfeited |
— | — | ||||||||||||||
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Lapsed |
— | — | ||||||||||||||
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Outstanding as at March 31, 2017 |
203,990 | $ | 13.21 | 8.10 | $ | 5,836 | ||||||||||
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Granted |
— | |||||||||||||||
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Exercised |
— | |||||||||||||||
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Forfeited |
— | |||||||||||||||
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Lapsed |
— | |||||||||||||||
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Outstanding as at March 31, 2018 |
203,990 | 13.21 | 7.10 | $ | 9,247 | |||||||||||
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RSUs exercisable |
— | $ | — | — | $ | — | ||||||||||
On March 15, 2017, the Company modified the vesting period in respect of the RSUs as below:
| a. | for RSUs granted in April 2014, the vesting date has been extended to the fifth anniversary of the grant date (i.e. April 2019) |
| b. | for RSUs granted in April 2015, the vesting date has been extended to the fourth anniversary of the grant date (i.e. April 2019) |
| c. | for RSUs granted in April 2016, the vesting date has been extended to the fourth anniversary of the grant date (i.e. April 2020) |
Subsequent vesting of RSUs for each of the remaining years would be subject to continued employment.
The incremental fair value was determined using Monte-Carlo simulation by reference to the difference between fair value of original RSUs as of modification date and the fair value of modified RSUs as of modification date. The additional cost as a result of such modification in respect of modified share awards amounted to $1,185. The additional cost is spread over the period from the modification date until the vesting date of the modified award, which differ from the vesting date of the original award. The incremental cost recognized in the current year (March 31, 2017: $24) in respect of such modified share awards amounted to $540.
As at March 31, 2018, there was $963 of unrecognized compensation cost related to unvested market based RSUs. This amount is expected to be recognized over a weighted average period of 1.3 years. The weighted average grant date fair value of the RSUs granted during the years ended March 31, 2018, 2017 and 2016 was Nil, $12.56 and $6.37 per ADS, respectively.
| (iii) | RSUs related to Total Shareholder’s Return (“TSR”) |
During the year ended March 31, 2018, the Company issued 248,655 RSUs to certain employees. The conditions for the vesting of these RSUs are linked to the TSR of the Company in addition to the condition of continued employment with the Company through the applicable vesting period.
The performance of these RSUs shall be assessed based on the TSR of the custom peer group (based on percentile rank) and the industry index (based on outperformance rank). The RSUs granted with the TSR condition shall vest on the third anniversary of the grant date, subject to the participant’s continued employment with the Company through the applicable vesting date and achievement of the specified conditions of stock performance and TSR parameters.
The fair value of these RSUs is determined using Monte-Carlo simulation. The grant date fair value was determined at $36.52. The stock compensation expense charged during the year ended March 31, 2018 was $1,368. As at March 31, 2018, there was $3,585 of unrecognized compensation cost related to these RSUs.
Movements in the number of RSUs linked to the TSR condition outstanding under the 2016 Incentive Award Plan and their related weighted average fair values are as follows:
| Shares | Weighted average fair value |
Weighted average remaining contract term (in years) |
Aggregate intrinsic value |
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|
Outstanding as at March 31, 2017 |
— | $ | — | — | $ | — | ||||||||||
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Granted |
248,655 | 36.52 | ||||||||||||||
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Exercised |
— | |||||||||||||||
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Forfeited |
— | |||||||||||||||
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Lapsed |
— | |||||||||||||||
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Outstanding as at March 31, 2018 |
248,655 | 36.52 | 9.08 | 11,272 | ||||||||||||
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RSUs exercisable |
— | $ | — | — | $ | — | ||||||||||
Performance share units
The 2006 Incentive Award Plan and 2016 Incentive Award Plan also allow for grant of performance share units (“PSUs”). Each PSU represents the right to receive one ordinary share-based on the Company’s performance against specified non-market performance condition and vests over a period of three years.
Movements in the number of PSUs outstanding under the 2006 Incentive Award Plan and the 2016 Incentive Award Plan and their related weighted average fair values are as follow:
| Shares | Weighted average fair value |
Weighted average remaining contract term (in years) |
Aggregate intrinsic value |
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Outstanding as at March 31, 2016 |
951,588 | $ | 17.83 | 7.77 | $ | 29,157 | ||||||||||
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Granted |
422,062 | 31.12 | ||||||||||||||
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Exercised |
(141,741 | ) | 14.11 | |||||||||||||
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Forfeited |
(47,057 | ) | 26.27 | |||||||||||||
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Outstanding as at March 31, 2017 |
1,184,852 | $ | 21.00 | 7.36 | $ | 33,899 | ||||||||||
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Granted |
400,463 | 30.35 | ||||||||||||||
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Exercised |
(506,660 | ) | 16.79 | |||||||||||||
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Forfeited |
(18,681 | ) | 29.38 | |||||||||||||
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Outstanding as at March 31, 2018 |
1,059,975 | 26.36 | 7.51 | 48,048 | ||||||||||||
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PSUs exercisable |
194,629 | $ | 18.14 | 5.86 | $ | 8,823 | ||||||||||
The fair value of PSUs is generally the market price of the Company’s shares on the date of grant, and assumes that performance targets will be achieved. As at March 31, 2018, there was $8,634 of unrecognized compensation cost related to unvested PSUs, net of forfeitures. This amount is expected to be recognized over a weighted average period of 2.2 years. Over the performance period, the number of shares that will be issued will be adjusted upward or downward based upon the probability of achievement of the performance targets. The ultimate number of shares issued and the related compensation cost recognized as expense will be based on a comparison of the final performance metrics to the specified targets.
The weighted average grant date fair value of PSUs granted during the years ended March 31, 2018, 2017 and 2016 was $30.35, $31.12, and $20.12 per ADS, respectively. The aggregate intrinsic value of PSUs exercised during the year ended March 31, 2018, 2017 and 2016 was $17,737, $4,237 and $532, respectively. The total grant date fair value of PSUs vested during the year ended March 31, 2018, 2017 and 2016 was $8,696, $6,280 and $Nil, respectively.
The weighted average share price of PSU exercised during the year ended March 31, 2018, 2017 and 2016 was $35.01, $29.89 and $29.45, respectively.
BBBEE program in South Africa
During the year ended March 31, 2018, the Company’s South African subsidiary issued share appreciation rights to certain employees to be settled with the Company’s shares on the fourth anniversary of the grant date. As part of the settlement, the Company has granted 32,050 RSUs which shall vest on the fourth anniversary of the grant date, subject to such grantee’s continued employment with the Company through the applicable vesting date. The grant date fair value was estimated using a binomial lattice model. The total stock compensation expense in relation to these RSUs was $3,040 to be amortized over the vesting period of four years. The stock compensation expense charged during the year ended March 31, 2018 was $547.