Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 15 - Stock-Based Compensation

Equity Incentive Plans

On April 1, 2020, the Company approved the establishment of the Company’s 2020 Equity Incentive Plan, as amended (the “2020 Plan”). On November 20, 2022 the Company amended the 2020 Plan to increase the maximum aggregate number of shares available for issuance under the 2020 Plan by 2,500,000 shares (the “Pool Increase”). The Pool Increase is conditional upon shareholder approval at the next annual meeting of shareholders. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to its employees, directors and consultants. As of December 31 2022, there are 3,054,448 shares available for future issuance under the 2020 Plan.

In connection with the Merger, the Company assumed the fuboTV Inc. 2015 Equity Incentive Plan, and in connection with the Company's acquisition of Vigtory, the Company assumed the Vigtory, Inc. 2020 Equity Compensation Plan, as amended (collectively, the "Assumed Plans"). No shares are available for future issuance under the Assumed Plans.

On August 3, 2022, the Board approved the adoption of the 2022 Employment Inducement Equity Incentive Plan (the “Inducement Plan”), which was adopted without shareholder approval pursuant to Rule 303A.08 of the New York Stock Exchange Listed Company Manual. The Inducement Plan provides for the grant of equity-based awards, including non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares, and its terms are substantially similar to the 2020 Plan, with the exception that awards can only be made to new employees in connection with their commencement of employment. As of December 31, 2022, there are 2,898,116 shares available for future issuance under the Inducement Plan.

During the years ended December 31, 2022, 2021 and 2020 the Company recognized stock-based compensation expense as follows:

	Years Ended December 31,
	2022		2021		2020
Subscriber related	$	144	$	71	$	32
Sales and marketing	22,198		7,818		2,395
Technology and development	9,998		13,752		5,446
General and administrative	20,114		31,509		43,866
	$	52,454	$	53,150	$	51,739

During the year ended December 31, 2022, in connection with the MEP Framework Agreement (See Note 14), the Company recorded approximately $2.9 million of stock-based compensation expense to shares settled liability which is included in accrued expenses and other current liabilities and other long-term liabilities on the consolidated balance sheet.

Stock Options

The Company provides option grants to employees, directors, and consultants under the 2020 Plan. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has lacked sufficient company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based primarily on the historical volatility of a publicly-traded set of peer companies with consideration of the volatility of its own traded stock price. The risk-free interest rate is determined by referencing the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term. The simplified method was used because the Company does not have sufficient historical exercise data to provide a reasonable basis for an estimate of expected term.

A summary of stock option activity for the year ended December 31, 2022, is as follows (in thousands, except share and per share amounts):

	Number of Shares	Weighted Average  Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life  (in years)
Outstanding as of December 31, 2021	11,454,890	$	6.40	$	70,231	7.4
Exercised	(616,304)	$	1.34
Forfeited or expired	(594,814)	$	11.16
Outstanding as of December 31, 2022	10,243,772	$	6.43	$	1,956	6.0
Options vested and exercisable as of December 31, 2022	8,118,408	$	5.76	$	1,956	5.7

There were no options granted during the year ended December 31, 2022.

During the year ended December 31, 2021, the Company granted options to purchase 220,099 shares of common stock with an aggregate fair value of $3.2 million. The following was used in determining the fair value of stock options granted during the year ended December 31, 2021:

Dividend yield	—	%
Expected price volatility	44.8%-45.2%
Risk free interest rate	0.6%-1.1%
Expected term (years)	5.8 - 6.1 years

As of December 31, 2022, the estimated value of unrecognized stock-based compensation expense related to unvested options was $9.3 million to be recognized over a period of 1.3 years.

Performance-Based Stock Options

On October 8, 2020, the Company awarded the CEO an option to purchase up to 4,100,000 shares of the Company's common stock which vests based upon the achievement of certain predetermined goals for each of the five years in the performance period related to stock price, revenue, gross margin, subscribers, new markets launched and new revenue streams between January 1, 2021 and December 31, 2025, which are described in the Company’s annual operating plan. On a given Determination Date (subsequent to the Company’s calendar year end), the Company’s Board of Directors (the “Board”) will review actual performance against the predetermined metrics and determine, in its sole discretion, the amount of any vesting that occurs on a given Determination Date. Any such vesting is subject to the CEO’s continuation in service with the Company through such Determination Date. The Board may determine vesting at, above, or below 20% of the shares subject to the performance option. All shares may be eligible for vesting until the Determination Date following the 2026 calendar year. Because the number of shares to be earned on each Determination Date is subject to the discretion of the Board, a grant date will not occur until then. As such, compensation expense is adjusted each reporting period for changes in fair value prorated for the portion of the requisite service period rendered and based on the number of shares expected to be earned. As of December 31, 2022, 820,000 shares of the option had vested, and during the year ended December 31, 2022 the Company recognized $2.2 million of stock-based compensation benefit related to the options. Upon each subsequent Determination Date in 2023, 2024, 2025, and 2026, total stock-based compensation expense for each vested tranche will be remeasured and adjusted to reflect the grant date fair value.

Modification of Options and Restricted Stock Units

During the years ended December 31, 2022 and December 31, 2021, the Board of Directors approved a modification to stock option and restricted stock award grants to employees who terminated from the Company. The modifications accelerated the vesting of unvested stock options and restricted stock awards as of the termination date and provided the option holders with an additional months post-termination to exercise their stock options. The modifications resulted in incremental stock-based compensation expense of $2.1 million and $10.6 million during the years ended December 31, 2022 and December 31, 2021, respectively.

Non-employees

During the year ended December 31, 2020, the Company granted options to purchase 280,000 shares of the Company’s common stock at an exercise price of $7.20 per share. These options have a fair value of $1.0 million, a five-year term and expires on December 21, 2024. These options were immediately vested as of the grant date. During the year ended December 31, 2021, 280,000 options were exercised in exchange for 222,962 shares of the Company’s common stock.

As part of the Merger, the Company also assumed 343,047 options granted to non-employees with a weighted average exercise price of $0.23 (included in table above). Stock-based compensation expense related to unvested non-employee options was immaterial for the year ended December 31, 2020.

Other than the options assumed as described above, there were no options granted to non-employees during the years ended December 31, 2022 and 2021.

Market and Service Condition Based Stock Options

A summary of activity under the Plan for market and service-based stock options for the year ended December 31, 2022 is as follows (in thousands, except share and per share amounts):

	Number of Shares	Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2021	4,453,297	$	12.75	$	17,933	5.7
Outstanding as of December 31, 2022	4,453,297	$	12.75	$	—	4.7
Options vested and exercisable as of December 31, 2022	3,536,630	$	10.98	$	—	4.5

Stock based compensation expense is based on the estimated value of the awards on the grant date, and is recognized over the period from the grant date through the expected vest dates of each vesting condition, both of which were estimated based on a Monte Carlo simulation model applying the following key assumptions as of the grant date:

	December 31, 2021
Dividend yield	—
Expected volatility	71.5	%
Risk free rate	1.3	%
Derived service period	2.0 years

There were no market and service-based options granted during the year ended December 31, 2022.

During the year ended December 31, 2021, 1,375,000 stock options with a fair value of $19.2 million were granted to an employee of the Company. The options vest on the earlier of each anniversary of the grant date or based on the achievement of pre-established parameters relating to the performance of the Company’s stock price. During the year ended December 31, 2022 and 2021, the Company recognized $7.8 million and $7.2 million, respectively, of stock-based compensation related to its market and service-based stock options. As of December 31, 2022, there was $4.2 million of unrecognized stock-based compensation expense for market and service-based stock options.

During the year ended December 31, 2020, 3,078,297 stock options with a fair value of $20.9 million were granted to an employee of the Company. The options vest on the earlier of each anniversary of the grant date or based on the achievement of pre-established parameters relating to the performance of the Company’s stock price. During the year ended December 31, 2020, the pre-established parameters related to the Company’s stock performance were achieved, the 3,078,297 options were fully vested, and the Company recognized $20.9 million of stock-based compensation related to these market and service-based stock options.

Service-based Restricted Stock Awards

MEP Framework Agreement - MEP Project Restricted Stock Awards

In connection with the MEP Framework Agreement, stock-based compensation cost for MEP Project restricted stock awards (the "MEP Project RSAs") totaling approximately $23.0 million measured as the fair value of the 1,600,000 shares issued for the first tranche issued on August 12, 2022 at $7.0 million, plus the fixed monetary amount of $8.0 million settleable in shares on August 2, 2023, and the fixed monetary amount of $8.0 million settleable in shares on August 2, 2024. Compensation cost will be recognized on a straight-line basis over the term of the three-year service period as if the Company paid cash for the services. The second two tranches are liability classified because they are a fixed monetary amount, settleable in shares. As compensation cost is recognized for these tranches, a corresponding credit to share-based liabilities will be recorded and reclassified to equity upon issuance of the related shares.

In connection with the MEP Project RSAs, as of December 31, 2022 the unrecognized stock-based compensation totaled $20.0 million, and $2.1 million of shares liability in accrued expenses and other current liabilities and other long-term liabilities was recorded on the consolidated balance sheet.

Performance-based Restricted Stock Awards

MEP Framework Agreement - MEP Network Restricted Stock Awards

The restricted stock awards allocated as consideration for the MEP Network (“MEP Network RSAs”) are performance-based RSAs. The performance condition consists of creating a new television channel with unique content, features and functionality. Compensation cost is measured on the grant date for shares that vest based upon the achievement of the performance condition are recognized when probable over the requisite service period, that is the implicit service period over which the performance conditions are probable of achievement.

Stock-based compensation cost for the MEP Network RSAs totaling approximately $5.7 million is measured as the fair value of the 400,000 shares issued for the first tranche issued on August 12, 2022 at $1.7 million, plus the fixed monetary amount of $2.0 million, settleable in shares on August 2, 2023, plus the fixed monetary amount of $2.0 million, settleable in shares on August 2, 2024 The MEP Network RSAs are subject to forfeiture until launch of the MEP Network. The Company determined the that it is probable that the Network will be launched by the end of the two-year service agreement. The Company will recognize the total fair value of $5.7 million ratably over the two-year period. Should the performance condition not be achieved, the Company will reverse any stock-based compensation cost recognized for the MEP Network RSAs.

In connection with the MEP Network RSAs, as of December 31, 2022, the unrecognized stock-based compensation totaled $4.6 million, and $0.8 million of shares liability in accrued expenses and other current liabilities and other long-term liabilities was recorded on the consolidated balance sheet.

Time-Based Restricted Stock Units

A summary of the Company’s time-based restricted stock unit activity during the year ended December 31, 2022 is as follows:

	Number of Shares	Weighted Average Grant-Date  Fair Value
Unvested at December 31, 2021	2,785,800	$	25.73
Granted	12,803,284	$	3.68
Vested	(1,611,348)	$	23.25
Forfeited	(922,107)	$	13.82
Unvested at December 31, 2022	13,055,629	$	5.25

During the year ended December 31, 2022, the Company granted 12,803,284 time-based restricted stock units which generally vest annually over a four-year period, subject to the recipient’s continuation in service through each applicable vesting date. The fair value of restricted stock units is measured based on their fair value at grant date which totaled $47.2 million. During the year ended December 31, 2022, the Company issued 1,576,231 shares of common stock to its Board of Directors and employees in settlement of vested restricted stock units.

During the year ended December 31, 2021, the Company granted 2,883,240 time-based restricted stock units which generally vest annually over a four-year period, subject to the recipient’s continuation in service through each applicable vesting date. The fair value of restricted stock units is measured based on their fair value at grant date which totaled $75.3 million. During the year ended December 31, 2021, the Company issued 91,580 shares of common stock to its Board of Directors and employees in settlement of vested restricted stock units.

As of December 31, 2022, the estimated value of unrecognized stock-based compensation related to restricted stock units totaled $63.6 million, had an aggregate intrinsic value of $22.7 million, and a weighted average remaining contractual term of 3.5 years.

Performance-Based Restricted Stock Units

A summary of the Company’s performance-based restricted stock unit activity during the year ended December 31, 2022 and 2021 is as follows:

	Number of Shares	Weighted Average Grant-Date  Fair Value
Unvested at December 31, 2021	1,900,000	$	33.87
Vested	(380,000)	$	33.87
Unvested at December 31, 2022	1,520,000	$	33.87

On November 3, 2021, the Company granted 1.9 million performance-based restricted stock units (“PRSUs”) to an employee of the Company. The PRSUs will vest over a period of 5-calendar years through 2026, subject to the achievement of certain established performance metrics including Revenue, Subscribers, New Markets Launched and New Revenue Streams. The determination of the number of awards to be earned is based upon the assessment during each calendar year of the level of the achievement of the Revenue, Subscribers, New Markets Launched, and New Revenue Streams performance metrics as compared to the Company’s annual operating plan. At each reporting period, the Company will make a determination of the most likely outcome for achievement of each performance metric. This may result in a cumulative catch-up as the Company assessments are evaluated. The fair value of the PRSUs is measured based on their grant date fair value which totaled $64.4 million.

During the year ended December 31, 2022, the Company determined the performance metrics were met for 286,667 PRSUs and 93,333 PRSUs were forfeited. The Company recognized stock-based compensation of $14.6 million during the year ended December 31, 2022, and as of December 31, 2022, unrecognized stock-based compensation totaled $41.0 million.During the year ended December 31, 2021, the Company determined that the performance metrics for 380,000 PRSUs were met, and accordingly, recognized stock-based compensation of $5.6 million.