Share-Based Compensation

In connection with the IPO, the Board adopted and the Company's stockholders approved the Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (or the Equity Incentive Plan), under which equity awards may be made in the respect of 5,100 shares of common stock of the Company. Under the Equity Incentive Plan, 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).

Share-based compensation expense was $614 and $4,405 during the three months ended June 30, 2017 and 2018, respectively, and $1,634 and $11,257 during the nine months ended June 30, 2017 and 2018, respectively. The unrecognized compensation expense related to stock options and restricted stock units was $11,330 and $16,996, respectively at June 30, 2018, and is expected to be recognized over a weighted average period of 3.8 years and 1.3 years, respectively. $9 was received from the exercise of stock options during the three months ended June 30, 2018. The remaining stock options exercised during the three months ended June 30, 2018 were effected via a cashless net exercise.

Option awards 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 June 30, 2018 is presented below (amounts in thousands except per share amounts):



	Options		Weighted Average Exercise Price/Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at September 30, 2017	9,060		$	5.18	7.5 years	$	11,011
Granted	1,365		20.96
Exercised	(1,057	)	4.77
Forfeited	(112	)	8.29
Expired	—		—
Outstanding at June 30, 2018	9,256		7.52		7.9 years	$	20,503
Options exercisable at June 30, 2018	5,697		$	4.90	6.3 years	$	6,169

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 nine months ended June 30, 2018 was $19,577.

A summary of the status of the Company's non-vested stock options as of and for the nine month period ended June 30, 2018 is presented below.



	Shares		Weighted Average Grant Date Fair Value/Share
Nonvested at September 30, 2017	4,300		$	1.36
Granted	1,365		7.94
Vested	(1,995	)	1.16
Forfeited	(112	)	2.25
Nonvested at June 30, 2018	3,558		$	3.97

The total fair value of options vested during the nine months ended June 30, 2018, was $2,317.

Restricted Stock Units

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, recipients received, in the aggregate, 1,197 stock-settled RSUs, the aggregate value of which equals $25,000. The RSUs will vest and settle in full upon the second anniversary of the IPO (the “Vesting Date”).

The following is a summary of the RSU activity for the nine months ended June 30, 2018.



	Shares		Weighted Average Grant Date Fair Value/Share
Outstanding at September 30, 2017	—		$	—
Granted	1,224		20.88
Forfeited	(7	)	20.88
Outstanding at June 30, 2018	1,217		$	20.88