Note 12. Stockholders’ equity

Capitalization

Capital Stock

As of December 31, 2018, the Company had 19,696,810 shares of Class A common stock, and 19,720,381 shares of Class B common stock, issued and outstanding.

On June 20, 2017, the Company announced that its Board of Directors authorized the repurchase of up to $25.0 million of the Company’s Class A common stock, par value $0.0001 per share (“Class A common stock”). Under the Company’s stock repurchase program, management is authorized to purchase shares of the Company’s common stock from time to time through open market purchases at prevailing prices, subject to stock price, business and market conditions and other factors. During the year ended December 31, 2018, the Company repurchased 199,600 shares of Class A common stock under the repurchase program for an aggregate purchase price of $2.4 million. As of December 31, 2018, the Company repurchased 2.0 million shares of Class A common stock under the repurchase program for an aggregate purchase price of $24.4 million, and was recorded as treasury stock on the consolidated balance sheet. As of December 31, 2018, the Company had $0.6 million remaining for future repurchases under the existing stock repurchase program, which expires on May 24, 2019.

On August 15, 2018, the Company announced that its Board of Directors authorized the repurchase of up to an additional $25.0 million of the Company’s Class A common stock on an opportunistic basis.

Voting

Class B common stock votes on a 10 to 1 basis with the Class A common stock, which means that each share of Class B common stock will have 10 votes and each share of Class A common stock will have 1 vote. The Class B common stock shall be convertible in whole or in part at any time at the option of the holder or holders thereof, into an equal number of Class A common stock. Warrants are not entitled to vote, unless converted into shares of the Company’s Class A common stock.

Equity Incentive Plans

Effective May 16, 2016, the stockholders of all classes of capital stock of the Company approved at the annual stockholder meeting the Hemisphere Media Group, Inc. Amended and Restated 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”) to increase the number of shares of Class A common stock that may be delivered under the 2013 Equity Incentive Plan to an aggregate of 7.2 million shares of our Class A common stock. At December 31, 2018, 2.7 million shares remained available for issuance of stock options or other stock‑based awards under our 2013 Equity Incentive Plan (including shares of restricted Class A common stock surrendered to the Company in payment of taxes required to be withheld in respect of vested shares of restricted Class A common stock, which are available for re-issuance). The expiration date of the 2013 Equity Incentive Plan, on and after which date no awards may be granted, is April 4, 2023. The Company’s Board of Directors, or a committee thereof, administers the 2013 Equity Incentive Plan and has the sole and plenary authority to, among other things: (i) designate participants; (ii) determine the type, size, and terms and conditions of awards to be granted; and (iii) determine the method by which an award may be settled, exercised, canceled, forfeited or suspended.

The Company’s time‑based restricted stock awards and option awards generally vest in three equal annual installments beginning on the first anniversary of the grant date, subject to the grantee’s continued employment or service with the Company. The Company’s event‑based restricted stock awards and option awards generally vest either upon the Company’s Class A common stock attaining a $15.00 closing price per share, as quoted on the NASDAQ Global Market, on at least 10 trading days, subject to the grantee’s continued employment or service with the Company. Other event‑based restricted stock awards granted to certain members of our Board vest on the day preceding the Company’s annual shareholder meeting.

Stock‑Based Compensation

Stock‑based compensation expense relates to both stock options and restricted stock. Stock-based compensation expense $3.9 million and $4.1 million for the years ended December 31, 2018 and 2017, respectively. At December 31, 2018, there was $0.9 million of total unrecognized compensation cost related to non‑vested stock options, which is expected to be recognized over a weighted‑average period of 1.8 years. At December 31, 2018, there was $1.1 million of total unrecognized compensation cost related to non‑vested restricted stock, which is expected to be recognized over a weighted‑average period of 0.9 years.

Stock Options

The fair value of stock options granted is estimated at the date of grant using the Black‑Scholes pricing model for time‑based options and the Monte Carlo simulation model for event‑based options. The expected term of options granted is derived using the simplified method under ASC 718‑10‑S99‑1/SEC Topic 14.D for “plain vanilla” options and the Monte Carlo simulation for event‑based options. Expected volatility is based on the historical volatility of the Company’s competitors given its lack of trading history. The risk‑free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has estimated forfeitures of 1.5%, as the awards are to management for which the Company expects lower turnover, and has assumed no dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future.


Black-Scholes Option Valuation Assumptions	2018					2017
Risk-free interest rate	2.7	%	-	3.0	%	2.2	%
Dividend yield				—		—
Volatility	39.0	%	-	41.0	%	25.8	%
Weighted-average expected term (years)				6.0		6.0

The following table summarizes stock option activity for the years ended December 31, 2018 and 2017 (shares and intrinsic values in thousands):


				Weighted-
				average
		Weighted-		remaining	Aggregate
	Number of	average exercise		contractual	intrinsic
	shares	price		term	value
Outstanding at December 31, 2016	2,920	$	11.64	7.6	$	1,274
Granted	55	$	11.35	6.0		—
Exercised	—		—	—		—
Forfeited	(37)		10.39	—		—
Expired	(40)	$	11.51	—		—
Outstanding at December 31, 2017	2,898	$	11.62	6.5	$	1,738
Granted	109	$	12.84	6.0		—
Exercised	(67)		13.38	—		—
Forfeited	(24)		12.30	—		—
Expired	(6)	$	12.10	—		—
Outstanding at December 31, 2018	2,910	$	11.62	5.6	$	2,806
Vested at December 31, 2018	2,175	$	11.71	5.3	$	2,102
Exercisable at December 31, 2018	2,175	$	11.71	5.3	$	2,102

The weighted average grant date fair value of options granted for the years ended December 31, 2018 and 2017 was $5.49 and $3.39. At December 31, 2018, 0.3 million options granted are unvested, event‑based options.

Restricted Stock

Certain employees and directors have been awarded restricted stock under the 2013 Equity Incentive Plan. The time‑based restricted stock grants vest primarily over a period of three years. The fair value and expected term of event‑based restricted stock grants is estimated at the grant date using the Monte Carlo simulation model. The following table summarizes restricted share activity for the years ended December 31, 2018 and 2017 (shares in thousands):


	Number of	Weighted-average
	shares	grant date fair value
Outstanding at December 31, 2016	561	$	10.58
Granted	154		11.19
Vested	(203)		11.80
Forfeited	(8)		13.38
Outstanding at December 31, 2017	504	$	10.23
Granted	93		11.85
Vested	(218)		11.49
Forfeited	(9)		11.85
Outstanding at December 31, 2018	370	$	9.86

At December 31, 2018, 0.2 million shares of restricted stock issued are unvested, event‑based shares.