Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

Stock-Based Compensation

Stock-Based Compensation

16. Stock-Based Compensation

CPI Card Group Inc. Omnibus Incentive Plan

In October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (as amended and supplemented, the “Omnibus Plan”) pursuant to which cash and equity-based incentives may be granted to participating employees, advisors and directors. Effective January 30, 2024, the Company’s stockholders approved an amendment to the Omnibus Plan to increase the total number of shares of the Company’s common stock reserved and available for issuance thereunder by 1,000,000 shares, resulting in a total of 3,200,000 shares issuable under the Omnibus Plan.

As of December 31, 2024, there were 866,564 shares of common stock available for grant under the Omnibus Plan. Options have seven-year terms and are issued with exercise prices equal to the fair market value of the Company’s common stock on the grant date.

The following is a summary of the activity in outstanding stock options under the Omnibus Plan:

				Weighted-Average
				Remaining
		Weighted-Average		Contractual	Aggregate
		Exercise		Term	Intrinsic
	Options	Price		(in Years)	Value
Outstanding as of December 31, 2023	909,438	$	18.79	4.06	$	6,482
Exercised	(125,144)		5.98	—
Expired	(1,459)		24.71	—
Forfeited	(1,572)		18.01	—
Outstanding as of December 31, 2024	781,263	$	20.84	2.67	$	9,925
Options vested and exercisable as of December 31, 2024	711,979	$	20.70	2.52	$	9,333

Options vested and expected to vest as of December 31, 2024 781,263 $ 20.84 2.67 $ 9,925

The following is a summary of the activity in unvested stock options under the Omnibus Plan:

		Weighted-Average
		Grant-Date
	Number	Fair Value
Unvested as of December 31, 2023	160,121	$	10.92
Vested	(89,265)		10.69
Forfeited	(1,572)		11.12
Unvested as of December 31, 2024	69,284	$	11.21

Unvested stock options of 69,284 as of December 31, 2024 have a seven-year term and are expected to vest ratably over a two-year period on each anniversary of the grant date. No options were granted during the year ended December 31, 2024. The weighted average fair value of options granted during the year ended December 31, 2023 was $11.21. The total fair value of options vested during the years ended December 31, 2024 and 2023 was $1.0 million and $1.2 million, respectively.

The fair value of the stock option awards granted for the year ended December 31, 2023 was determined using a Black-Scholes option-pricing model with the following weighted-average assumptions:

	December 31,
	2024		2023
Expected term in years (1)	—		2.90
Volatility (2)	—	%	73.16	%
Risk-free interest rate (3)	—	%	4.46	%
Dividend yield (4)	—	%	—	%

(1) The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method,” as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

(2) Volatility was based on a weighting of the Company’s historical volatility and a representative peer group, which is comprised of companies with similar industry, size and financial leverage.

(3) The risk-free interest rate was determined by using the United States Treasury rate for the period consistent with the expected term described above.

(4) The Company’s expected annual dividend yield was zero based on current practice. 

The following table summarizes the changes in the number of outstanding restricted stock units for the year ended December 31, 2024 under the Omnibus Plan:

				Weighted-Average
				Remaining
		Weighted-Average		Amortization
		Grant-Date		Period
	Shares	Fair Value		(in Years)
Outstanding as of December 31, 2023	713,360	$	21.25
Granted	226,739		23.90
Vested	(305,348)		21.57
Forfeited	(38,535)		20.30
Outstanding as of December 31, 2024	596,216	$	22.15	1.25

The restricted stock unit awards contain conditions associated with continued employment or service. Restricted stock units granted in 2024 are expected to vest ratably over a one or three-year period on each anniversary of the grant date. Shares of common stock will be issued to the award recipients on the vesting date. The weighted average fair value of restricted stock units granted during the years ended December 31, 2024 and 2023 was $23.90 and $21.39, respectively. The total fair value of shares vested during the years ended December 31, 2024 and 2023 was $6.6 million and $2.2 million, respectively.

During 2024, executives received a quarterly restricted stock unit grant comprising one-fourth of the annual equity-based incentive component of their total compensation. The number of shares awarded will be determined based on a value tied to the monthly average closing price of the Company’s common stock.

In June 2023, the Company announced an award comprised of 25% nonqualified stock options and 75% restricted stock units to its CEO at the time as an incentive to remain employed by the Company through February 28, 2024. The first one-third of the awards was granted in June 2023, the second one-third was granted in August 2023, and the remainder was granted in November 2023. All of these awards will vest ratably over a two-year period irrespective of employment status with expense related to these awards to be recognized by the Company through February 28, 2024. As part of the CEO’s incentive package, the requisite service and exercise periods for his awards granted in 2023 prior to June 2023 were also modified with expense related to the modification being recognized in June 2023 through February 2024.

In January 2024, the Company granted 60,000 performance stock units (PSU) in connection with the appointment of its CEO, with a grant date fair value of $0.9 million using a Monte Carlo simulation model. The PSU award will vest, subject to continued employment, in equal one-third increments upon the attainment of the rolling weighted average closing price of the Company’s common stock equaling or exceeding each of $35.00, $50.00, and $65.00, in each case, for at least 90 consecutive trading days during the five-year performance period commencing on the grant date. Additionally, the Company granted its CEO 40,000 restricted stock units which will vest entirely at the end of the four year service period.

As of December 31, 2024, the total unrecognized compensation expense related to unvested options and restricted stock units was $7.1 million, which the Company expects to recognize over an estimated weighted-average period of approximately 1.3 years.