Management Incentive Plans

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

The Company initially adopted the Omnibus Incentive Plan on July 20, 2016 for the purpose of: (a) encouraging the profitability and growth of the Company through short-term and long-term incentives that are consistent with the Company’s objectives; (b) giving participants an incentive for excellence in individual performance; (c) promoting teamwork among participants; and (d) giving the Company a significant advantage in attracting and retaining key employees, directors and consultants. To accomplish such purposes, the Omnibus Incentive Plan, and such subsequent amendments to the Omnibus Incentive Plan, provides that the Company may grant options, stock appreciation rights, restricted shares, RSUs, performance-based awards (including performance-based restricted shares and restricted stock units), other share based awards, other cash-based awards or any combination of the foregoing.

Following the approval of the 2022 Amended and Restated Omnibus Incentive Plan, the Company will reserve 2,600,000 shares of its common stock for issuance. The number of shares issued or reserved pursuant to the Omnibus Incentive Plan will be adjusted by the plan administrator, as they deem appropriate and equitable, as a result of stock splits, stock dividends, and similar changes in the Company’s common stock. In connection with the grant of an award, the plan administrator may provide for the treatment of such award in the event of a change in control. All awards are made in the form of shares only.

Service-Based Awards

The Company grants service-based stock awards in the form of RSUs. Service-based RSUs granted to executives, employees, and non-employee directors vest ratably, on an annual basis, over three years and in the case of certain awards to non-employee directors, one year. The grant date fair value of the service-based awards was equal to the closing market price of the Company’s common stock on the date of grant. For both the three months ended March 31, 2023 and 2022, the Company recognized $0.4 million of stock-based compensation expense related to outstanding service-based RSUs.

The following table summarizes the Company's service-based RSU activity for the three months ended March 31, 2023:


	Awards	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2022	280,275	$	9.06
Granted	160,433	11.69
Vested	(162,203)	8.32
Forfeited	—	—
Unvested at March 31, 2023	278,505	$	10.89

Performance-Based Awards

The Company grants performance-based restricted stock units (“PRSUs”) under which shares of the Company’s common stock may be earned based on the Company’s performance compared to defined metrics. The number of shares earned under a performance award may vary from zero to 150% of the target shares awarded, based upon the Company’s performance compared to the metrics. The metrics used for the grant are determined by the Company’s Compensation Committee of the Board of Directors and are based on internal measures such as the achievement of certain predetermined adjusted EBITDA, EPS growth and EBITDA margin performance goals over a three year period.

The Company recognizes stock-based compensation expense for these awards over the vesting period based on the projected probability of achievement of the performance conditions as of the end of each reporting period during the performance period and may periodically adjust the recognition of such expense, as necessary, in response to any changes in the Company’s forecasts with respect to the performance conditions. For the three months ended March 31, 2023 and 2022, the Company recognized $0.7 million and $0.2 million, respectively, of stock-based compensation expense related to outstanding PRSUs.

The following table summarizes the Company's PRSU activity for the three months ended March 31, 2023:


	Awards	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2022	497,940	$	8.32
Granted	237,994	11.71
Performance factor adjustment(1)	32,327	4.29
Vested	(121,827)	4.29
Forfeited	—	—
Unvested at March 31, 2023	646,434	$	10.12

(1) Performance-based awards covering the three year period ended December 31, 2022 were paid out in the first quarter of 2023. The performance factor during the measurement period used to determine compensation payouts was 136.13% of the pre-defined metric target.

Market-Based Awards

The vesting of the Company's market-based RSU (“MRSUs”) was contingent upon the Company’s closing price of a share of the Company's common stock on the Nasdaq Capital market, or such other applicable principal securities exchange or quotation system, achieving at least $18.00 over a period of eighty consecutive trading days during the three-year period commencing on August 1, 2018 and concluding on July 31, 2021. On September 4, 2020, the Compensation Committee of the Board of Directors of the Company approved amendments to modify the MRSUs to extend the measurement period to July 16, 2022. In

addition to the market performance-based vesting condition, the vesting of such restricted stock unit was subject to continued employment from August 1, 2017 through the later of July 31, 2019 or the date on which the Compensation Committee certifies the achievement of the performance goal. The Company accounted for this amendment as a Type I modification and recognized approximately $0.2 million of incremental stock-based compensation expense over 1.26 years from the modification date based on an updated Monte Carlo simulation model. These awards expired on July 16, 2022 as the MRSU award market condition was not achieved.

Stock-Based Compensation Expense

Total recognized stock-based compensation expense amounted to $1.1 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. The aggregate fair value as of the vest date of RSUs that vested during the three months ended March 31, 2023 and 2022 was $3.3 million and $1.1 million, respectively. Total unrecognized stock-based compensation expense related to unvested RSUs which are probable of vesting was $6.2 million at March 31, 2023. These costs are expected to be recognized over a weighted average period of 2 years.