XML 41 R25.htm IDEA: XBRL DOCUMENT v3.20.4
Share-Based Compensation
 3 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Share Based Compensation Share-Based CompensationThe Company designs equity compensation plans to attract and retain employees while also aligning
employees’ interests with the interests of the Company’s shareholders. In addition, members of the Company’s Board of Directors (the “Board”) participate in equity compensation plans in connection with their service on the Company’s Board.

The Company established the Evoqua Water Technologies Corp. Stock Option Plan (the “Stock Option Plan”) shortly after the acquisition date of January 16, 2014. The plan allows certain management employees and the Board to purchase shares in the Company. Under the Stock Option Plan, the number of shares available for award was 11,083. As of December 31, 2020, there were approximately 2,149 shares available for future grants, however, the Company does not currently intend to make additional grants under the Stock Option Plan.    
In connection with the IPO, the Board adopted, and the Company’s shareholders approved, the Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (the “Equity Incentive Plan”), under which equity awards may be granted in the form of options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalent rights, share awards and performance-based awards (including performance share units and performance-based restricted stock). Upon adoption of the Equity Incentive Plan, 5,100 shares of common stock of the Company were reserved for issuance thereunder. On February 18, 2020, the Company’s shareholders approved the amendment and restatement of the Equity Incentive Plan in order to increase the number of shares of common stock reserved for issuance thereunder by 5,000 shares and incorporate other changes. As of December 31, 2020, there were approximately 5,916 shares available for grants under the Equity Incentive Plan.

In addition to the establishment of the Equity Incentive Plan, in connection with the IPO, the Company entered into restricted stock unit (“RSU”) agreements with each of the executive officers and certain other key members of management. Pursuant to the RSU agreements, 1,197 stock-settled RSUs were granted, the aggregate value of which equals $25,000. The RSUs vested and settled in full upon the second anniversary of the IPO on November 2, 2019, resulting in the issuance of 1,158 shares, 419 of which were deposited into treasury in satisfaction of withholding tax obligations resulting from the vesting of the RSUs.

Option awards are granted at various times during the year, vest ratably at 25% per year, and are exercisable at the time of vesting. The options granted have a ten-year contractual term.

A summary of the stock option activity as of December 31, 2020 is presented below:
(In thousands, except per share amounts)OptionsWeighted Average Exercise Price/ShareWeighted Average Remaining Contractual TermAggregate Intrinsic Value
Outstanding at September 30, 20207,430 $10.30 5.9 years$83,152 
Granted1 23.18 
Exercised(1,112)5.75 
Forfeited(4)19.00 
Outstanding at December 31, 20206,315 $11.09 5.9 years$100,326 
Options exercisable at December 31, 20204,177 $7.28 4.8 years$82,285 
Options vested and expected to vest at December 31, 20206,301 $11.07 5.9 years$100,226 
The total intrinsic value of options exercised (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) during the three months ended December 31, 2020 was $19,362.
    
A summary of the status of the Company's non-vested stock options as of and for the three months ended December 31, 2020 is presented below.
(In thousands, except per share amounts)SharesWeighted Average Grant Date Fair Value/Share
Nonvested at beginning of period2,166 $5.56 
Granted1 8.12 
Vested(25)2.27 
Forfeited(4)6.47 
Nonvested at end of period2,138 $5.60 
The total fair value of options vested during the three months ended December 31, 2020, was $57.

Restricted Stock Units
The following is a summary of the RSU activity for the three months ended December 31, 2020.
(In thousands, except per share amounts)SharesWeighted Average Grant Date Fair Value/Share
Outstanding at September 30, 2020750 $17.86 
Granted114 24.51 
Vested(1)24.25 
Forfeited(2)16.31 
Cancelled(7)21.22 
Outstanding at December 31, 2020854 $18.71 
Vested and expected to vest at December 31, 2020836 $18.63 
Expense Measurement and Recognition
The Company recognizes share-based compensation for all currently outstanding awards and, in future periods, will recognize compensation costs for the unvested portion of awards based on grant date fair values. Total share-based compensation expense was $3,076 and $3,691 during the three months ended December 31, 2020 and 2019, respectively, of which $3,019 and $3,680 was non-cash, respectively. The unrecognized compensation expense related to stock options and RSUs was $7,653 and $11,736, respectively at December 31, 2020, and is expected to be recognized over a weighted average period of 2.1 years and 2.2 years, respectively. The Company received $14,263 from the exercise of stock options during the three months ended December 31, 2020.

Employee Stock Purchase Plan    
Effective October 1, 2018, the Company implemented an employee stock purchase plan (the “ESPP”) which allows employees to purchase shares of the Company’s stock at 85% of the lower of the fair market value on the first day of the applicable offering period or on the last business day of a six-month purchase period within the offering period. These purchases are offered twice throughout each fiscal year, and are paid by employees through payroll deductions over the respective six month purchase period, at the end of which the stock is transferred to the employees. On December 21, 2018, the Company registered 11,297 shares of common stock, par value $0.01 per share, of which 5,000 are available for future issuance under the ESPP. During the three months ended December 31, 2020 and 2019, the Company incurred compensation expense of $216 and $39, respectively in salaries and wages in respect of the ESPP, representing the fair value of the discounted price of the shares. These amounts are included in the total share-based compensation expense above. On October 2, 2020, 120 shares were issued under the ESPP plan.