Share-Based Compensation

12 Months Ended

Feb. 02, 2020

Share-based Payment Arrangement [Abstract]

2019 Omnibus Incentive Plan

In June 2019, the Company’s board of directors adopted and approved the 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan became effective on June 13, 2019 and allows for the issuance of up to 31,864,865 shares of Class A common stock. No awards may be granted under the 2019 Plan after June 2029.

The 2019 Plan provides for the grant of stock options, including incentive stock options, non-qualified stock options, restricted stock, dividend equivalents, stock payments, RSUs, performance shares, other incentive awards, stock appreciation rights, and cash awards (collectively “awards”). The awards may be granted to the Company’s employees, consultants, and directors, and the employees and consultants of the Company’s affiliates and subsidiaries.

RSUs

In connection with the consummation of the IPO, the Company granted RSUs under the 2019 Plan. Certain of these RSUs vest upon satisfaction of both a service-based vesting condition (the “Service Condition”) and a performance-based vesting condition (the “Share Price Condition”) as described below.

The Service Condition will be satisfied with respect to 25% of an employee’s RSUs on the first anniversary of the 2019 Plan’s registration date and then with respect to 12.5% of an employee’s RSUs at the end of each six month period thereafter, subject to the employee’s continued employment with the Company through the applicable vesting date.

The Share Price Condition shall be satisfied with respect to a percentage of an employee’s RSUs, as and when the price per share of Class A common stock specified (each, a “Share Price Hurdle”) is achieved, on a volume adjusted weighted-average basis, on every trading day during a consecutive 45-trading day period completed prior to the fifth anniversary of the 2019 Plan’s effective date subject to the employee’s continued employment with the Company through the applicable vesting date.

RSU Activity

The following table summarizes the activity related to the Company’s RSUs for Fiscal Year 2019 (in thousands, except for weighted average grant date fair value):


	Number of RSUs	Weighted Average Grant Date Fair Value
Outstanding as of February 3, 2019	—	$	—
Granted	26,677	$	36.31
Vested	(2,778)	$	36.86
Forfeited	(2,615)	$	36.62
Unvested and outstanding as of February 2, 2020	21,284	$	36.20

The total fair value of RSUs that vested during Fiscal Year 2019 was $103.3 million. As of February 2, 2020, total unrecognized compensation expense related to unvested RSUs was $192.3 million and is expected to be recognized over a weighted-average expected performance period of 1.9 years.

During Fiscal Year 2019, the Company issued 82,941 RSUs to a director of the Company that vested. For accounting purposes, this is treated as a distribution to the Parent because such director is an employee of the Parent.

The fair value of the RSUs with share price hurdles was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for the Company and peer companies with the following assumptions:


Performance period			5 years
Weighted-average risk-free interest rate			1.8%
Weighted-average volatility			49.6%
Weighted-average dividend yield			—%

The risk-free interest rate utilized is based on a 5-year term-matched zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on historical volatility of the stock of the Company’s peer firms.

As of February 2, 2020, there were 7.8 million additional shares of Class A common stock reserved for future issuance under the 2019 Plan.

Citrus Profits Interest Plan

Subsequent to the PetSmart Acquisition, the Company’s share-based compensation included profits interests units (“PIUs”) granted by Citrus Intermediate Holdings L.P. (the “Citrus Partnership”), a Delaware limited partnership (the “Citrus Profits Interest Plan”). The Citrus Partnership is a parent company of PetSmart and a wholly-owned subsidiary of the Sponsors. The Company recognized share-based compensation as equity contributions from the Citrus Partnership in its consolidated financial statements for awards granted under the Citrus Profits Interest Plan as it relates to grantees’ services as employees of the Company.

As of June 13, 2019, an aggregate of 768,785 profits interests units under the Citrus Profits Interest Plan were held by employees of Chewy, Inc. and were canceled.

Share-Based Compensation Expense

Share-based compensation expense is included within selling, general and administrative expenses in the consolidated statements of operations. The Company recognized share-based compensation expense as follows (in thousands):


	Fiscal Year
	2019		2018		2017
RSUs	$	124,761	$	—	$	—
PIUs	10,165		14,351		11,209
Total share-based compensation expense	$	134,926	$	14,351	$	11,209