Equity-based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

The Company granted new awards during the three months ended September 30, 2023, consisting of 8,142 restricted stock units (“RSUs”). The Company granted new awards during the nine months ended September 30, 2023 consisting of 388,878 RSUs and 647,359 performance stock units (“PSUs”).

Awards are eligible to vest provided that the employee remains in continuous service on each vesting date. Generally, the RSUs vest ratably in three installments on each of the first three anniversaries of the grant date. The PSUs vest after a three-year performance period. The number of PSUs that vest is contingent on the Company achieving certain performance goals, one being a market condition and the other being a performance condition. The number of PSU shares that vest may range from zero to 200% of the original grant, based upon the level of performance. The awards are considered probable of meeting vesting requirements, and therefore, the Company has started recognizing expense.

The fair value of the total RSUs granted during the three months ended September 30, 2023 was less than $1 million. The fair value of the total RSUs, performance based PSUs, and market based PSUs granted during the nine months ended September 30, 2023 were $11 million, $11 million, and $9 million, respectively. The Company based the fair value of the RSUs and performance based PSUs on the Company’s stock price on the grant date.

The range of assumptions used for issued PSUs with a market condition valued using the Monte Carlo model were as follows:


	Nine months ended
	September 30, 2023	September 24, 2022
Annual dividend yield	—%	—%
Expected term (years)	2.6 - 2.8	2.4 - 2.8
Risk-free interest rate	3.65% - 4.51%	2.32% - 3.05%
Expected volatility	37.9% - 38.8%	40.9% - 43.9%
Correlation to the index peer group	60.2% - 60.3%	50.7% - 59.5%

The Company recorded $3 million and $10 million of share-based compensation expense during the three and nine months ended September 30, 2023, respectively, and $5 million and $12 million during the three and nine months ended September 24, 2022, respectively, within selling, general and administrative expenses on the unaudited consolidated statements of operations.