Share-Based Compensation

6 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

The 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 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 March 31, 2021, there were approximately 2,177 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 March 31, 2021, there were approximately 4,990 shares available for grants under the Equity Incentive Plan.

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 March 31, 2021 is presented below:


(In thousands, except per share amounts)	Options	Weighted Average Exercise Price/Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value






Outstanding at September 30, 2020	7,430	$	10.30	5.9 years	$	83,152
Granted	611	24.76
Exercised	(2,185)	6.04

Forfeited	(7)	19.20

Outstanding at March 31, 2021	5,849	$	13.39	6.4 years	$	75,542
Options exercisable at March 31, 2021	3,857	$	9.62	5.2 years	$	64,333
Options vested and expected to vest at March 31, 2021	5,774	$	13.25	6.3 years	$	75,349

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 six months ended March 31, 2021 was $43,564.

A summary of the status of the Company's non-vested stock options as of and for the six months ended March 31, 2021 is presented below.


(In thousands, except per share amounts)	Shares	Weighted Average Grant Date Fair Value/Share
Nonvested at beginning of period	2,166	$	5.56
Granted	611	8.98
Vested	(778)	5.56
Forfeited	(7)	6.47
Nonvested at end of period	1,992	$	6.60

The total fair value of options vested during the six months ended March 31, 2021, was $4,326.

Restricted Stock Units

The following is a summary of the RSU activity for the six months ended March 31, 2021.


(In thousands, except per share amounts)	Shares	Weighted Average Grant Date Fair Value/Share
Outstanding at September 30, 2020	750	$	17.86
Granted	494	24.69
Vested	(234)	17.64
Forfeited	(3)	18.85

Cancelled	(7)	21.22
Outstanding at March 31, 2021	1,000	$	21.26
Expected to vest at March 31, 2021	948	$	21.11

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 $3,214 and $2,326 during the three months ended March 31, 2021 and 2020, respectively, of which $3,214 and $2,304 was non-cash, respectively. Total share-based compensation expense was $6,290 and $6,017 during the six months ended March 31, 2021 and 2020, respectively, of which $6,233 and $5,984 was non-cash, respectively. The unrecognized compensation expense related to stock options and RSUs was $11,897 and $19,110, respectively at March 31, 2021, and is expected to be recognized over a weighted average period of 2.5 years and 2.6 years, respectively. The Company received $13,430 from the exercise of stock options during the six months ended March 31, 2021.

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 March 31, 2021 and 2020, the Company incurred compensation expense of $187 and $35, respectively, in salaries and wages with respect to the ESPP, representing the fair value of the discounted price of the shares. During the six months ended March 31, 2021 and 2020, the Company incurred compensation expense of $403 and $74, respectively. These amounts are included in the total share-based compensation expense above. On October 2, 2020 and April 1, 2021, 120 and 62 shares, respectively, were issued under the ESPP plan.