Equity-Based Compensation

12 Months Ended

Dec. 31, 2023

Equity-Based Compensation

Equity-Based Compensation

13. Equity-Based Compensation

During the second quarter of 2023, the Company’s shareholders approved a new Holdings 2023 Omnibus Incentive Plan (the “2023 Incentive Plan”), that became effective immediately upon approval, superseding the prior 2013 Incentive Plan (the “2013 Incentive Plan”). The 2023 Incentive Plan along with the 2013 Incentive Plan (collectively referred to as the “Incentive Plan”), include restrictive stock units which may have time-based or performance-based vesting criteria. In addition, during the fourth quarter of 2023, pursuant to the inducement award exception under New York Stock Exchange Rule 303A.08, the Board of Directors approved equity grants to the newly appointed CEO (“2023 CEO Grants”) which have both time-based and performance-based vesting criteria.

The Company recognizes equity-based compensation expense in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income (Loss). The Company recognizes corporate income tax benefits relating to the vesting of restricted stock units in “Provision for income taxes” in the accompanying Consolidated Statements of Income (Loss).

Employee stock-based compensation expense under the Company’s Incentive Plan, net of the amount capitalized in internally developed software, is as follows (in thousands):

	Year Ended
	December 31,
	2023		2022		2021
Expense from time-based awards (a)	$	12,305	$	16,103	$	21,042
Expense from performance-based awards (a)(b)		3,718		2,175		6,073
Expense from bonus to be settled in shares (c)		3,513		3,766		7,183
Equity-based compensation expense	$	19,536	$	22,044	$	34,298
Tax benefit from equity-based compensation		(2,834)		(3,238)		(5,052)
Deficit / (excess) tax benefit from equity-based compensation		965		536		(121)
Net compensation cost	$	17,667	$	19,342	$	29,125

(a) During 2022, the Company recognized $2.2 million of expense upon the acceleration of certain grants issued in connection with the restructuring, as further discussed in Note 2, Summary of Significant Accounting Policies. In addition, during the third quarter of 2022, the Company recognized $1.4 million of expense upon acceleration of certain grants that were issued to two employees and former owners of an acquired company who departed during the third quarter of 2022.

(b) Expense recognized for performance-based awards is re-assessed each quarter based on expectations of achievement against the performance conditions. During the first quarter of 2022, the Company had a significant amount of forfeitures related to performance-based awards issued to the Company’s former CEO which, subsequent to his departure, will no longer vest.

(c) A portion of the annual corporate bonus earned is to be settled in shares. These amounts are recognized as “Accrued liabilities” in the Consolidated Balance Sheets and are not included in “Additional paid-in capital” until the shares are issued.

Time-based Restricted Stock

Time-based restricted stock units and restricted stock awards are valued using the Company’s closing stock price prior to the date of grant. Grants awarded to the Company’s Board of Directors generally vest over a one-year period. Grants awarded to the Company’s employees, other than grants issued to former owners in connection with acquisitions, generally vest equally in annual installments over a two or three-year period. Grants awarded to former owners in connection with acquisitions vest in varying lengths from two to four years. See to Note 6, Acquisitions and Dispositions, for additional discussion regarding the details of these transactions. The 2023 CEO Grants vest over a one-year and three-year period. Compensation expense is recognized on a straight-line basis over the vesting period.

The following table summarizes equity-based compensation activity related to time-based restricted stock units and restricted stock awards:

	Shares	Weighted average grant date fair value per share
Balance, January 1, 2023	611,102	$	32.23
Granted (a)(b)	1,019,620	$	15.50
Shares vested (including tax withholding) (c)	(458,707)	$	28.88
Forfeited	(105,421)	$	22.13
Balance, December 31, 2023	1,066,594	$	18.68

(a) During the fourth quarter of 2023, the Company granted 287,364 time-based restricted stock units to the newly appointed CEO with a weighted average grant date fair value of $8.98 per share. All the restricted stock units remain outstanding as of December 31, 2023. These equity awards were made pursuant to the inducement award exception under the New York Stock Exchange Rule 303A.08 and were not granted from the 2023 Incentive Plan.

(b) The weighted average grant date fair value per share for the years ended December 31, 2022 and 2021 were $32.23 and $36.84 respectively.

(c) Pursuant to the terms of the Incentive Plans, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.

At December 31, 2023, there was $9.6 million of total unrecognized expense for time-based restricted stock awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.8 years.

Performance-based Restricted Stock

Performance-based restricted stock units (“PSUs”) granted to employees under the Incentive Plan are stock-based awards that generally vest at the end of a three-year period in which the number of shares ultimately received depends on the Company’s achievement of either a specified revenue target or the Company’s total shareholder return (“rTSR”) relative to a peer company index over a distinct performance period. The number of shares that could be issued range from 0% to 200% of the participant’s target award and if the minimum threshold conditions are not met, no shares will vest. PSUs are valued using the Company’s closing stock price prior to the date of grant. For these awards, compensation expense is recognized over the vesting period and is adjusted based on the estimated revenue achievement for each target. For the 2023 CEO Grants, the PSUs vest based on the price of the Company’s class A common stock during the performance period that runs from the grant date through December 31, 2027. The number of shares that could be issued range from 0% to 200% of the participant’s target award and if the minimum threshold conditions are not met, no shares will vest. PSUs that vest upon achievement of a rTSR target and for the 2023 CEO Grants are valued on the date of grant using a Monte Carlo simulation and compensation expense is recognized over the vesting period.

The following table summarizes equity-based compensation activity related to PSUs:

	Shares	Weighted average grant date fair value per share
Balance, January 1, 2023	143,199	$	33.47
Granted (a)(b)	826,062	$	7.95
Shares vested (including tax withholding) (c)	(134,114)	$	28.68
Forfeited	(51,757)	$	26.04
Balance, December 31, 2023	783,390	$	7.87

(a) During the fourth quarter of 2023, the Company granted 580,648 performance-based restricted stock units to the newly appointed CEO with a weighted average grant date fair value of $2.99 per share. All the restricted stock units

remain outstanding as of December 31, 2023. These equity awards were made pursuant to the inducement award exception under the New York Stock Exchange Rule 303A.08 and were not granted from the 2023 Incentive Plan.

(b) The weighted average grant date fair value per share for the years ended December 31, 2022 and 2021 were $33.47 and $31.02, respectively.

(c) Pursuant to the terms of the Incentive Plans, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.

At December 31, 2023, there was $3.6 million of total unrecognized PSU expense. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.8 years for PSUs.

After giving effect to all outstanding awards (assuming maximum achievement of performance goals for performance-based awards), there were 2,554,960 additional shares available for the Company to grant under the 2023 Incentive Plan as of December 31, 2023.