Equity-Based Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

The Company’s equity-based compensation programs are intended to attract, retain and provide incentives for employees, officers and directors. The Company has the following stock-based compensation plans and programs.

Restricted Stock

The majority of the Company’s restricted stock awarded to its employees was originally issued on December 10, 2020 in exchange for the Class B Profits Interest Unit (the “Class B Units”) of EQT, which was the former parent of the Company.

Share-based compensation for the restricted stock exchanged for the time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years. Share-based compensation for the restricted stock exchanged for the performance-based Class B Units is recognized using the accelerated attribution approach.

In 2021, the Company granted 87,127 replacement shares of restricted stock in connection with the Pinnacle 21 acquisition under which equity-based awards are outstanding. The fair value of the restricted stock awarded was initially based on the fair value of our common stock on the date of grant, then adjusted for time restrictions due to unregistered shares and lack of marketability. The non-vested restricted stock at March 31, 2024 issued in 2021 has a three-year vesting period.


	SHARES	WEIGHTED- AVERAGE GRANT DATE FAIR VALUE
Non-vested restricted stock as of December 31, 2023	538,661	$	23.18
Granted*	16,842	17.35
Vested*	(63,041)	21.49
Forfeited	—	—
Cancelled*	(16,842)	23.00
Non-vested restricted stock as of March 31, 2024	475,620	$	23.20

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* The Company did not legally authorize or issue any restricted stock during the three month period ended March 31, 2024. During the first quarter of 2024, the Company modified an award for a recipient, resulting in 16,842 shares assumed to be granted, vested, and cancelled.

Equity-based compensation expenses related to the restricted stock exchanged for performance-based Class B Units were $250 and $655 for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $637, which is expected to be recognized over a weighted-average period of 12.5 months.

Equity-based compensation expenses related to the restricted stock exchanged for time-based Class B Units were $377 and $498 for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $888, which is expected to be recognized over a weighted-average period of 14.8 months.

Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $106 and $292 for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $212, which is expected to be recognized over a weighted-average period of 6 months.

2020 Incentive Plan

In order to align the Company’s equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan. The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”) to employees, directors, officers, and consultants or advisors of the Company. The 2020 Incentive Plan allows for 20,000,000 shares (the “plan share reserve”) of common stock to be issued. No more than the number of shares of common stock equal to the plan share reserve may be issued in the aggregate pursuant to the exercise of incentive stock options. The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $1,000,000 in total value, except for certain awards made to a non-executive chair of our Board of Directors.

Restricted Stock Units ("RSU")

RSUs represent the right to receive shares of the Company’s common stock at a specified date in the future. The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant.

A summary of the Company’s RSU activity is as follows:


	UNITS	WEIGHTED- AVERAGE GRANT DATE FAIR VALUE
Non-vested RSUs as of December 31, 2023	2,588,403	$	23.77
Granted*	247,434	17.55
Vested**	(42,810)	17.71
Forfeited	(23,968)	23.83
Cancelled*	(38,729)	$	23.95
Non-vested RSUs as of March 31, 2024	2,730,330	$	23.30

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*The majority of shares granted during the first quarter of 2024 were issued under the 2020 Incentive Plan. During the first quarter of 2024, the Company modified awards for a recipient, resulting in 38,729 shares assumed to be granted, vested, and cancelled for accounting purpose.

**The number of the RSUs vested included 1,492 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation expenses related to the RSUs were $7,705 and $4,798 for three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding RSUs was $35,779, which is expected to be recognized over a weighted-average period of 21.5 months.

Performance Stock Units ("PSU")

PSUs are issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds including year over year revenue growth, unlevered free cash flow growth, annual revenue, and annual EBITDA. The PSUs granted in 2023 and 2024 also contains market conditions.

Share-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach. The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost.

A summary of the Company’s PSU activity for the period ended March 31, 2024 is as follows:


	UNITS	WEIGHTED- AVERAGE GRANT DATE FAIR VALUE
Non-vested PSUs as of December 31, 2023	849,467	$	24.84
Granted*	315,814	19.08
Vested	—	—
Forfeited	—	—
Cancelled*	(394,050)	27.09
Non-vested PSUs as of March 31, 2024	771,231	$	21.33

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* During the first quarter of 2024, the Company modified an award for a recipient, resulting in 6,651 shares assumed to be granted and cancelled for accounting purpose.

Equity-based compensation expenses related to the PSUs were $636 and $2,287 for the three months ended at March 31, 2024 and 2023, respectively. At March 31, 2024, the total unrecognized equity-based compensation expense related to outstanding PSUs was $4,981, which is expected to be recognized over a weighted-average period of 18.6 months.

The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss) for each period presented:


	THREE MONTHS ENDED MARCH 31,
		2024		2023
	(In thousands)
Cost of revenues		$	3,239	$	2,042
Sales and marketing		617		381
Research and development		1,649		1,650
General and administrative		3,568		4,470
Total		$	9,073	$	8,543