Stock Compensation Plans and Share-Based Compensation Awards

6 Months Ended

Jun. 30, 2022

Stock Compensation Plans and Share-Based Compensation Awards

Stock Compensation Plans and Share-Based Compensation Awards

(22) Stock Compensation Plans and Share-Based Compensation Awards

The Company provides share-based compensation awards to its employees under the Amended and Restated 2018 Omnibus Incentive Stock Plan (the “Amended and Restated 2018 Plan”). The original Omnibus Equity Incentive Plan (the “2018 Plan”) was adopted in conjunction with the Company’s IPO and became effective on May 22, 2018. In February 2020, the Company adopted the Amended and Restated 2018 Plan, which was approved by the Company’s stockholders at the Company’s 2020 annual meeting of stockholders held in June 2020. The Amended and Restated 2018 Plan amended and restated the 2018 Plan in its entirety and increased the number of shares of the Company’s Class A common stock available for grant and issuance under the 2018 Plan from 7,792,162 shares to 15,142,162 shares. The Amended and Restated 2018 Plan was further amended in November 2021 solely to clarify certain provisions in anticipation of the implementation of the Company’s performance-based equity awards. The Amended and Restated 2018 Plan provides for accelerated vesting under certain conditions.

The following table summarizes share-based compensation expense, and the related income tax benefit recognized for share-based compensation awards. Share-based compensation expense is presented within selling, general, and administrative expenses within the unaudited condensed consolidated statements of operations and comprehensive (loss) income:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Share-based compensation expense	$	7,707	$	6,489	$	14,710	$	12,287
Income tax benefit	$	(1,237)	$	(963)	$	(2,365)	$	(1,921)

Restricted stock units

Service-Based Restricted Stock Units

The Company recognized share-based compensation expense for RSUs granted of $4.5 million and $3.2 million, for the three months ended June 30, 2022 and 2021, respectively. The Company recognized share-based compensation expense for RSUs granted of $8.3 million and $5.7 million for the six months ended June 30, 2022 and 2021, respectively.

A summary of RSUs activity is as follows (in thousands, except per share data):

	Number of RSUs	Weighted-average grant date fair value
Balance at December 31, 2021	1,339	$	24.35
Granted	956		23.60
Vested	(547)		22.37
Forfeited	(38)		24.24
Balance at June 30, 2022	1,710	$	24.55

As of June 30, 2022 and 2021, total unrecognized share-based compensation expense related to outstanding RSUs was $35.7 million and $28.9 million, respectively. RSUs settle in Class A common stock. RSUs granted in connection with the Company’s annual long-term incentive plan and off-cycle grants vest in equal annual vesting installments over a period of three or four years from the grant date. RSUs granted to the Company’s executive officers as part of the annual 2021 and all participants as part of the annual 2022 grant, vest in equal annual vesting installments over a period of three years from the grant date. The weighted-average remaining vesting period over which expense will be recognized for unvested RSUs is 2.3 years as of June 30, 2022 and 2.4 years as of June 30, 2021. The total fair value of shares vested during the six months ended June 30, 2022 and 2021 was $12.2 million and $7.8 million, respectively.

Stock options

Service-Based Stock Options

The Company recognized share-based compensation expense for the service-based stock options granted of $2.3 million and $2.9 million, for the three months ended June 30, 2022 and 2021, respectively. The Company recognized share-based compensation expense for the service-based stock options granted of $4.9 million and $6.0 million, for the six months ended June 30, 2022 and 2021, respectively.

A summary of service-based stock option activity is as follows (in thousands, except per share and term data):

	Number of Options	Weighted-average grant date fair value		Weighted-average exercise price		Weighted-average remaining contractual term		Total intrinsic value
Balance at December 31, 2021	5,491	$	8.11	$	22.19		7.67	$	19,802
Granted	—		—		—		—		—
Exercised	(76)		5.77		15.07		—		635
Forfeited	(87)		9.17		25.22		—		—
Balance at June 30, 2022	5,328	$	8.12		22.23		7.16	$	14,536
Exercisable at June 30, 2022	3,695	$	7.70	$	20.72		6.82	$	14,502

As of June 30, 2022 and 2021, total unrecognized share-based compensation expense related to unvested service-based stock options was $12.2 million and $24.9 million, respectively. The weighted-average remaining vesting period over which expense will be recognized for unvested stock options is 1.8 years as of June 30, 2022 and 2.5 years as of June 30, 2021. Stock options granted in connection with the Company’s annual long-term incentive plan and off-cycle grants vest in equal annual installments over a period of four years from grant date. Stock options granted to the Company’s executive officers (excluding the Chief Executive Officer (“CEO”)) as part of the annual 2021 grant vest in equal annual vesting installments over a period of three years from the grant date. Stock options expire no later than 10 years from the date of grant.

Market and Service-Based Stock Options

During the quarter ended March 31, 2021, 287,395 stock options with a fair value of approximately $2.9 million were granted to the Company’s CEO. These options vest only upon the satisfaction of certain market-based and service-based vesting conditions. The market-based vesting condition, which was met in the second quarter of 2021, required that the twenty trading day trailing average price for the Company’s Class A common stock must equal or exceed 110% of the closing price of the Company’s Class A common stock on the grant date for a period of twenty consecutive trading days. In addition, the options are subject to a service-based vesting condition that is satisfied in three equal annual installments on the first, second and third anniversaries of the grant date. As of June 30, 2022, 95,798 stock options were exercisable.

For the purpose of calculating share-based compensation expense, the fair value of this grant was determined through the application of the Monte-Carlo simulation model with the following assumptions:

	Six Months Ended June 30,
	2021
Expected life (in years)		7.00
Weighted-average risk-free interest rate		1.15%
Expected volatility		34.65%
Dividend yield		0.00%
Exercise price	$	25.46

The Company recognizes share-based compensation expense related to this award with market-based and service-based conditions over the derived service period of 3.0 years using the graded vesting method. The Company recognized share-based compensation expense for these stock options of $0.2 million and $0.6 million for the three and six months ended June 30, 2022, respectively. The Company recognized share-based compensation expense for these stock options of $0.4 million and $0.6 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2022 and 2021, total unrecognized share-based compensation expense related to these stock options was $0.9 million and $2.3 million, respectively. The weighted-average remaining vesting period over which expense will be recognized for these stock options is 1.3 years as of June 30, 2022 and 1.8 years as of June 30, 2021.

Performance-stock units

Performance and service based stock units

During the quarter ended March 31, 2022, the Compensation Committee of the Board of Directors granted 151,187 Performance Stock Units (“PSUs”) with a grant date fair value of approximately $3.6 million to the Company’s executive officers under the Company’s long-term incentive plan. The PSUs will cliff vest three years from the grant date at a range between 0% and 200% based upon annual performance cycles and settle in Class A common stock. The vesting criteria is based on financial performance measures including revenue and EPS growth targets. Compensation costs recognized on the performance and service based stock units are adjusted, as applicable, for performance above or below the target specified in the award.

The Company recognized share-based compensation expense for PSUs granted of $0.4 million and $0.5 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, total unrecognized share-based compensation expense related to outstanding PSUs was $3.6 million. The weighted-average remaining vesting period over which expense will be recognized for unvested PSUs is 2.7 years as of June 30, 2022.

Market and service-based performance stock units

During the quarter ended March 31, 2022, the Compensation Committee of the Board of Directors granted 151,187 market and service-based performance stock units (“MPSUs”) with a grant date fair value of approximately $3.9 million to the Company’s executive officers under the Company’s long-term incentive plan. These MPSUs will cliff vest on March 31, 2025, the last day of the performance period, if the twenty trading day trailing average closing stock price for the Company’s Class A common stock meets or exceeds the threshold stock price for a twenty trading day period at any time during the performance period.

For the purpose of calculating share-based compensation expense, the fair value of this grant was determined through the application of the Monte-Carlo simulation model with the following assumptions:

	Six Months Ended June 30,
	2022
Expected life (in years)		3.10
Weighted-average risk-free interest rate		1.74%
Expected volatility		47.62%
Dividend yield		0.00%
Estimated grant date fair value (per share)	$	23.69

The Company recognized share-based compensation expense for these MPSUs of $0.3 million and $0.4 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, total unrecognized share-based compensation expense related to these MPSUs was $3.5 million. The weighted-average remaining vesting period over which expense will be recognized for these MPSUs is 2.8 years as of June 30, 2022.