Janus International Group Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Equity Compensation

Equity Compensation

6 Months Ended

Jul. 01, 2023

Share-Based Payment Arrangement [Abstract]

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 the Company 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 six months ended July 1, 2023, 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 fair value of RSUs 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 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 vesting period between one and four years. RSU activity for the six months ended July 1, 2023 is as follows:

(dollar amounts in thousands, except share and per share data)


	Six Months Ended July 1, 2023
	RSUs	Weighted-Average Grant Date Fair Value
Unvested, outstanding at December 31, 2022	465,064	$	10.5
Granted	593,587	10.4
Vested	(140,238)	10.5
Forfeited	(14,659)	10.2
Unvested, outstanding at July 1, 2023	903,754	$	10.5

Stock-based compensation expense for RSUs is recognized straight line over the respective vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the above awards was approximately $947 and $679 for the three months ended July 1, 2023 and July 2, 2022, respectively. Total compensation expense related to the above awards was approximately $1,584 and $1,278 for the six months ended July 1, 2023 and July 2, 2022, respectively. As of July 1, 2023, there was an aggregate of $8,494 of unrecognized expense related to the RSUs granted, which the Company expects to amortize over a weighted-average period of 2.62 years.

Performance-based Restricted Stock Unit Grants

PSU awards are based on the satisfaction 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 and 2023 awards. PSUs are subject to a three-year performance cliff-vesting period.

PSUs activity for the six months ended July 1, 2023 is as follows:

(dollar amounts in thousands, except share and per share data)


	Six months ended July 1, 2023
	PSUs	Weighted-Average Grant Date Fair Value
Unvested, outstanding at December 31, 2022	252,923	$	9.5
Granted	229,091	10.6
Vested	—	—
Forfeited	—	—
Unvested, outstanding at July 1, 2023 (1)	482,014	$	10.0

1) This number excludes 252,923 performance stock units, which represents the incremental number of units that would be issued based on performance results from previously-granted PSU awards. The PSUs granted in 2022 are currently estimated at 200% of target.

Stock-based compensation expense for PSUs is recognized straight line over the requisite vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Condensed Consolidated Statement of Operations and Comprehensive

Income. Total compensation expense related to the PSUs was approximately $598 and $138 for the three months ended July 1, 2023 and July 2, 2022, respectively.

Total compensation expense related to the performance-based awards was approximately $1,591 and $138 for the six months ended July 1, 2023 and July 2, 2022, respectively. As of July 1, 2023, there was an aggregate of $4,391 of unrecognized expense related to the PSUs granted, which the Company expects to amortize over a weighted-average period of 1.96 years.

The above table represents PSUs assuming 100% of target payout at the time of the grant. Actual payouts can range between 0% and 200%, depending on performance results for the three-year performance period. As of July 1, 2023, the Company deemed the estimate of the PSUs granted in fiscal year ended December 31, 2022 to be issued at 200% of target, and have reflected such estimates within the share-based compensation expense. The Company estimates the PSU’s granted during the period ending July 1, 2023 to be issued at 100% of target.

The Actual payout of the 2022 grants 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 28, 2024. The Actual payout of the 2023 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 1, 2023, through December 27, 2025.

Stock Options

Stock options are granted by applying a Black-Scholes valuation model to determine the fair value on the grant date. Stock options are subject to a vesting period of either three or four years. Stock option awards typically vest in 33% or 25% annual installments on each annual anniversary of the vesting commencement date for the duration of the vesting period, and expire ten years from the grant date.

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:

(dollar amounts in thousands, except share and per share data)


	Six Months Ended July 1, 2023
Expected life of option (years)	6.00 - 6.25
Risk-free interest rate	2.9% - 3.7%
Expected volatility of the Company’s stock	45% - 48%
Expected dividend yield on the Company’s stock	—	%

Stock option activity for the six months ended July 1, 2023 is as follows:


	Six Months Ended July 1, 2023
	Stock Options	Weighted-Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in years)	Intrinsic value
Unvested, outstanding at December 31, 2022	700,729	$	4.5	9.8	$	0.2
Granted	18,796	5.3		9.7	0.1
Exercised	—	—		—	—
Vested	(175,175)	4.5		8.7	1.2
Forfeited	—	—		—	—
Unvested, outstanding at July 1, 2023	544,350	$	4.5	8.9	$	—
Vested not exercised at July 1, 2023	175,175	$	4.5	8.7	$	1.2

Stock-based compensation expense for stock options is recognized straight line over the respective vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to stock options was approximately $206 and $94 for the three months ended July 1, 2023 and July 2, 2022, respectively. Total compensation expense related to stock options was approximately $406 and $94 for the six months ended July 1, 2023 and July 2, 2022, respectively. Total unamortized stock-based compensation expense related to the unvested stock options was approximately $2,338, which the Company expects to amortize over a weighted-average period of 2.84 years.