Equity Compensation |
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| Equity Compensation | Equity Compensation 2021 Omnibus Incentive Plan
The Company maintains its 2021 Omnibus Incentive Plan (the “Plan”) under which it grants stock-based awards to eligible directors, officers and employees in order to attract, retain and reward such individuals and strengthen the mutuality of interest between such individuals and the Company’s stockholders. The Plan allows to issue and grant 15,125,000 shares.
The Company measures compensation expense for stock-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). During the twelve months ended December 31, 2022, the Company granted stock-based awards including restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”) and stock options under the Plan. The grant date value of RSUs and PSUs are equal to the closing price of the Company’s common stock on either: (i) the date of grant; or (ii) the previous trading day, depending on the level of administration required. Forfeitures are recognized as they occur. Any unvested RSUs, PSUs, or stock options are forfeited upon a “Termination of Service”, as defined in the Plan, or as otherwise provided in the applicable award agreement or determined by the Company’s Compensation Committee of the Board of Directors.
Restricted Stock Unit Grants
RSUs are subject to a one year or four year service vesting period. RSUs activity for the years ended January 1, 2022 and December 31, 2022 is as follows:
Stock-based compensation expense for RSUs is recognized straight line over the requisite service period, reduced for actual forfeitures, and included in general and administrative in the accompanying Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the above awards was approximately $2,442 and $66 for the years ended December 31, 2022 and January 1, 2022, respectively. As of December 31, 2022, there was an aggregate of $4,034 of unrecognized expense related to the RSUs granted, which the Company expects to amortize over a weighted-average period of 3.09 years.
Performance-based Restricted Stock Unit Grants
The performance criteria applicable to PSUs is based on the satisfaction of performance conditions based on the achievement of the Company’s performance metrics. The number of PSUs that become earned can range between 0% and 200% of the original target number of
PSUs awarded for the 2022 awards. As of December 31, 2022, the Company deemed it probable that the performance condition will be met and therefore concluded to value the PSUs based on a 150% payout. PSUs are subject to a three-year performance vesting period. As of December 31, 2022, PSUs activity for the twelve months ended December 31, 2022 is as follows:
Stock-based compensation expense for PSUs is recognized straight line over the requisite service period, reduced for actual forfeitures, and included in general and administrative in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the PSUs was approximately $1,189 for the twelve months ended December 31, 2022. As of December 31, 2022, there was an aggregate of $2,377 of unrecognized expense related to the PSUs granted, which the Company expects to amortize over a weighted-average period of 2.0 years.
Compensation expense related to the performance-based awards reflect a 150% payout of the performance-based shares resulting from achieving “target” performance for year-ended December 31, 2022. Actual payouts will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 2, 2022, through December 31, 2024.
Stock Options
The Company applies a valuation method to determine the grant date fair value for each stock option award. Stock option awards typically vest in 25% annual installments on each of the first anniversaries of the vesting commencement date and expire ten years from the grant date. The fair value of each option is estimated using a Black-Scholes option valuation model using the independent valuations of the Company’s stock.
The principal assumptions utilized in valuing stock options include the expected option life, the risk-free interest rate (an estimate based on the yield of United States Treasury zero coupon with a maturity equal to the expected life of the option), the expected stock price volatility using the historical and implied price volatility; and the expected dividend yield.
A summary of the assumptions used in determining the fair value of stock options is as follows
(1) Expected life is the weighted average of mid-point between vesting and expiry.
(2) The risk-free rate is based on an average of U.S. Treasury yields in effect at the time of grant corresponding with the expected term.
(3) Expected volatility is based on historical volatilities from a group of comparable entities for a time period similar to that of the expected term.
Stock options activity for the year ended December 31, 2022 is as follows:
Stock-based compensation expense for stock options is recognized straight line over the requisite service period, reduced for actual forfeitures, and included in general and administrative in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to stock options was approximately $484 for the twelve months ended December 31, 2022. Total unamortized stock-based compensation expense related to the unvested stock options was approximately $2,644, which the Company expects to amortize over a weighted-average period of 3.34 years. There were no stock options exercised during the twelve months ended December 31, 2022.
Midco - Class B Unit Incentive Plan
Prior to the Business Combination, commencing on March 15, 2018, the Board of Directors of Midco approved the Class B Unit Incentive Plan (the “Class B Plan”), which was a form of long-term compensation that provided for the issuance of ownership units to employees for purposes of retaining them and enabling such individuals to participate in the long-term growth and financial success of Midco.
As a result of the Business Combination, the Board of Directors approved an accelerated vesting for 16,079 units (equivalent to 4,012,873 shares of Company common stock) granted in connection with the Class B Plan, to allow accelerated vesting of the units upon consummation of the Business Combination. The accelerated vesting of Company common stock resulted in $5.2 million of non-cash share-based compensation recorded to general and administrative expenses in the Company’s Consolidated Statement of Operations and Comprehensive Income for the year ended January 1, 2022. Effective June 7, 2021, as a result of the Business Combination, the Class B Plan was terminated.
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