Equity-Based Compensation Plans

12 Months Ended

Dec. 31, 2021

Equity-Based Compensation Plans

Equity-Based Compensation Plans

20. Equity-Based Compensation Plans

The following table summarizes the equity-based compensation that has been included in the following line items within the consolidated statements of operations during:

	Year Ended December 31,
($ in thousands)	2021		2020		2019
Equity-based compensation expense:
Costs applicable to revenue	$	762	$	903	$	847
Selling, general, and administrative		47,174		19,758		12,298
Total equity-based compensation expense	$	47,936	$	20,661	$	13,145
Total income tax benefit recognized related to equity-based compensation	$	5,982	$	2,176	$	1,275

2016 Incentive Award Plan

In October 2016, the Company adopted the 2016 Plan under which the Company may grant up to 14,693,518 stock options, restricted stock units, and other types of equity-based awards to employees, consultants or non-employee directors of the Company. The Company does not intend to use cash to settle any of its equity-based awards. Upon the exercise of a stock option award, the vesting of a restricted stock unit or the award of common stock or restricted stock, shares of Class A common stock are issued from authorized but unissued shares or from shares held in treasury. Stock options and restricted stock units granted to employees generally vest in equal annual installments over a three to five-year period and are canceled upon termination of employment. Stock options are granted with an exercise price equal to the fair market value of the Company’s Class A common stock on the date of grant. Stock option grants expire after ten years unless canceled earlier due to termination of employment. Restricted stock units granted to non-employee directors vest in equal annual installments over a one-year or three-year period subject to voluntary deferral elections made prior to the grant.

The Company did not grant any stock options during the years ended December 31, 2021, 2020 and 2019. A summary of stock option activity for the year ended December 31, 2021 is as follows:

							Weighted Average
					Aggregate		Remaining
	Stock Options		Weighted Average		Intrinsic Value		Contractual Life
	(in thousands)		Exercise Price		(in thousands)		(years)
Outstanding at December 31, 2020		470	$	21.90
Exercised		(188)	$	21.87
Forfeited		(10)	$	22.00
Outstanding at December 31, 2021		272	$	21.93	$	5,016		4.6
Options exercisable at December 31, 2021		272	$	21.93	$	5,016		4.6

At December 31, 2021, all stock options were fully vested. There were no exercises of stock options during the year ended December 31, 2019. The intrinsic value of stock options exercised was $3.5 million and $2.3 million for the years ended December 31, 2021 and 2020, respectively. The actual tax benefit for the tax deductions from the exercise of stock options was $0.6 million and $0.3 million for the years ended December 31, 2021 and 2020, respectively.

A summary of restricted stock unit activity for the year ended December 31, 2021 is as follows:

	Restricted		Weighted Average
	Stock Units		Grant Date
	(in thousands)		Fair Value
Outstanding at December 31, 2020		3,392	$	28.87
Granted		2,052	$	35.31
Vested		(972)	$	27.53
Forfeited		(295)	$	32.32
Outstanding at December 31, 2021		4,177	$	32.54

The weighted-average grant date fair value of restricted stock units granted during the years ended December 31, 2021, 2020 and 2019 was $35.31, $32.54, and $11.17, respectively. At December 31, 2021, the intrinsic value of unvested restricted stock units was $168.8 million. At December 31, 2021, total unrecognized compensation cost related to unvested restricted stock units was $124.4 million and is expected to be recognized over a weighted-average period of 3.8 years.

The fair value of restricted stock units that vested during the years ended December 31, 2021, 2020 and 2019 was $38.7 million, $16.7 million, and $11.8 million, respectively. The actual tax benefit for the tax deductions from the vesting of restricted stock units was $5.6 million, $2.1 million, and $0.7 million for the years ended December 31, 2021, 2020, and 2019, respectively. A portion of the actual tax benefit for tax deductions from the vesting of restricted stock units relating to the year ended December 31, 2021 was subject to limitations on deductibility of executive compensation. The restricted stock units that vested were typically net share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the restricted stock units on their respective vesting dates as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to taxing authorities are reflected as a financing activity within the Consolidated Statements of Cash Flows. These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.

In December 2021, the Board of Directors of the Company awarded Marcus Lemonis, the Company’s Chairman and Chief Executive Officer, an award of 510,986 shares of the Company’s Class A common stock having an aggregate grant-date fair value of $20.0 million or $39.14 per share, which was recognized as equity-based compensation expense during the year ended December 31, 2021. The award was made in consideration of the Company’s strong performance. Mr. Lemonis has not received compensation since the

time of the Company’s initial public offering other than Company-provided benefits such as medical and dental insurance. Similar to the vesting of restricted stock units discussed above, this award to Mr. Lemonis was net share settled such that the Company withheld shares with value equivalent to Mr. Lemonis’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the shares of Class A common stock on the date of the award as determined by the Company’s closing stock price. Total payments for Mr. Lemonis’ tax obligations to taxing authorities are reflected as a financing activity within the Consolidated Statements of Cash Flows. This net share settlement had the effect of a share repurchase by the Company as they reduced the number of shares that would have otherwise been issued as a result of the award and did not represent an expense to the Company. The actual tax benefit for the tax deduction for this award was $2.6 million for the year ended December 31, 2021, which was subject to limitations on deductibility of executive compensation.

In June 2020, the Company entered into a consulting agreement with Melvin Flanigan that became effective after his resignation as the Company’s Chief Financial Officer and Secretary on June 30, 2020. Prior to Mr. Flanigan’s resignation from his employment with the Company, he was previously granted awards of (a) 62,500 restricted stock units (“RSU”) on January 21, 2019 (the “First Award”), and (b) 60,000 RSUs on November 12, 2019 (the “Second Award”) pursuant to the Company’s 2016 Incentive Award Plan. The consulting agreement provided, among other things, that (i) the remaining unvested 41,667 RSUs held by Mr. Flanigan pursuant to the First Award would vest on January 1, 2021, provided that the consulting agreement had not been terminated prior to December 31, 2020, and (ii) 20,000 unvested RSUs held by Mr. Flanigan pursuant to the Second Award that were scheduled to vest on November 15, 2020 would vest on such date, provided that the Consulting Agreement had not been terminated prior to such date. This modification resulted in an incremental equity-based compensation charge of $1.3 million relating to the modified RSUs, which was recorded between June 2020 and December 31, 2020.