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Equity Agreements and Incentive Equity Plans
 3 Months Ended
Apr. 01, 2022
Share-based Payment Arrangement [Abstract]  
Equity Agreements and Incentive Equity Plans Equity Agreements and Incentive Equity Plans
Former Parent Incentive Plan — In October 2017, the Former Parent Entity approved the Class B Unit Incentive Plan (the “2017 Plan”) pursuant to the Company’s partnership agreement. Class B-1 Incentive Units (“B-1 Units”) issued under the 2017 Plan vest in installments over a five-year period, subject to the grantee’s continued employment or service. Class B-2 Incentive Units (“B-2 Units” and collectively with the B-1 Units, “Incentive Units”) issued under the 2017 Plan contain both service conditions consistent with the B-1 Units and market-based vesting conditions that require the achievement of a specified return hurdle to the controlling shareholders in order to vest. The Company recognized $1,060 of compensation expense within selling, general and administrative expenses related to Incentive Units for the three months ended March 26, 2021.

2021 Incentive Plan — On July 16, 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”) in order to provide a means through which to attract, retain, and motivate key personnel. Awards available for grant under the
2021 Plan include non-qualified and incentive stock options, restricted shares of our common stock, other equity-based awards tied to the value of our common stock and cash-based awards.

Equity Award Conversion — During the year ended December 31, 2021, and in connection with the IPO, all outstanding unvested Incentive Units were replaced with newly issued shares of our restricted common stock. Vested Incentive Units were exchanged into shares of our common stock using the same formula as unvested Incentive Units (together, the “Equity Award Conversion”). The restricted shares of common stock that the holders received in exchange for their unvested B-1 Units are subject to the same vesting terms that applied to the B-1 Units prior to the Equity Award Conversion.

The restricted stock awards issued to replace B-2 Units vest based upon achievement of one or more hurdles, which are substantially the same as the previous market-condition vesting criteria of the B-2 Units. Although the restricted stock awards that replace the B-2 Units do not contain an explicit service condition, the vesting is subject to continued employment, resulting in a derived service period. For additional information on the Equity Award Conversion, see Note 13 of the Notes to the Consolidated Financial Statements for the year ended December 31, 2021, in the Annual Report.

Restricted Stock Awards

In connection with the IPO, the Company issued restricted common stock to holders of unvested B-1 Units and B-2 Units. The grant date fair value of restricted stock awards was determined to be $18.00 per share, based on the initial listing price of the Company’s common stock on the grant date.

The summary of the Company’s restricted stock awards activity is as follows:

Restricted Stock Awards
B-1 Incentive UnitsB-2 Incentive Units
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Outstanding at December 31, 2021633 $18.00 807 $18.00 
Granted— — — — 
Vested53 18.00 — — 
Forfeited7 18.00 — — 
Outstanding at April 1, 2022573 $18.00 807 $18.00 

Stock Options

In connection with the IPO, the Company granted options to holders of B-1 Units (“Time-based Options”) and options to holders of B-2 Units (“Market-based Options” and collectively with the Time-based Options, “Leverage Replacement Options”), as further discussed in Note 13 of the Notes to the Consolidated Financial Statements for the year ended December 31, 2021, in the Annual Report.
The summary of the Company’s option activity is as follows:

Time-based OptionsMarket-based Options
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Aggregate Intrinsic Value (a)
Number of
Units
Weighted-
Average
Grant-Date
Fair Value
Aggregate Intrinsic Value (a)
Outstanding at December 31, 20214,393 $6.49 $13,532 1,155 $5.66 $3,558 
Granted— — — — — — 
Exercised— — — — — — 
Forfeited52 6.82 — — — — 
Outstanding at April 1, 20224,341 $6.48 $— 1,155 $5.66 $— 
Options exercisable at April 1, 20222,501 $6.09 $— — $— $— 

(a) The intrinsic value represents the amount by which the fair value of the Company’s stock exceeds the option exercise price as of April 1, 2022.

Restricted Stock Units — The Company grants restricted stock units (“RSUs”) with time-based vesting requirements under the 2021 Plan. These RSUs typically have an initial annual cliff vest and then vest quarterly over the remaining service period, which is generally one to four years. The fair value of RSUs is based on the Company’s closing stock price on the date of grant.

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

Restricted Stock Units
Number of
Units
Weighted-Average
Grant-Date
Fair Value
Outstanding at December 31, 2021390 $18.22 
Granted803 20.42
Vested— — 
Forfeited13 19.95
Outstanding at April 1, 20221,180 $19.70 

Performance Stock Units — During the three months ended April 1, 2022, the Company granted performance-based restricted stock units (“PSUs”) to certain employees under the 2021 Plan. The fair value of PSUs granted is based on the Company’s closing stock price on the date of grant. Each PSU grant vests in annual tranches over a three-year service period. Total units earned for grants may vary between 0% and 200% of the units granted based on the attainment of net sales and company-specific adjusted EBITDA targets during the performance period (generally the fiscal year of the date of the grant) and upon continued service. Compensation expense for PSUs is recognized on a graded-vesting basis if it is probable that the performance conditions will be achieved. Adjustments to compensation expense are made each period based on changes in our estimate of the number of PSUs that are probable of vesting. PSUs will vest with continued service and upon achievement of the relevant performance targets.
The summary of the Company’s PSU activity is as follows:

Performance Stock Units
Number of
Units
Weighted-Average
Grant-Date
Fair Value
Outstanding at December 31, 2021— $— 
Granted368 20.46 
Exercised— — 
Forfeited— — 
Outstanding at April 1, 2022368 $20.46 

Other equity-based compensation — In connection with the Staub acquisition (see Note 3), the Company granted 69 shares of common stock with an aggregate fair value of $1,208 to a key executive. The shares are accounted for as equity-based compensation because the shares are subject to forfeiture based on post-acquisition time-based service vesting. The shares vest annually in equal installments over a three-year service period beginning on the acquisition date. The grant date fair value of the shares was determined to be $17.42 per share based on the Company’s closing stock price on the date of the grant.

Total equity-based compensation expense — Equity-based compensation expense is included within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. For all equity-based compensation awards, the Company recognizes forfeitures as they occur. Compensation expense for the three months ended April 1, 2022 and unrecognized stock compensation expense and weighted average remaining expense period as of April 1, 2022 consisted of:

Compensation ExpenseAs of April 1, 2022
Three months ended April 1, 2022Unrecognized Compensation ExpenseWeighted-Average Remaining Contractual Term (Years)
2021 Plan
Restricted stock awards$1,145 $7,581 1.75
Time-based options1,729 12,366 2.29
Market-based options645 4,780 1.84
Restricted stock units1,436 20,155 3.20
Performance stock units565 6,965 1.89
Other equity-based compensation79 1,129 2.80
Total$5,599 $52,976 2.27

Control4 Equity Awards — In connection with the acquisition of Control4 Corporation (“Control4”) in 2019, the Company agreed to a settlement of Control4 equity awards that were outstanding immediately prior to the acquisition date, consisting of stock options and restricted stock units. As of the acquisition date, 2,998 shares of Control4 awards were cancelled and converted into rights to receive cash payments (“Replacement Awards”).

The Company recognized $283 and $1,726 of compensation expense relating to the Replacement Awards within selling, general and administrative expenses in the accompanying condensed consolidated statement of operations during the three months ended April 1, 2022 and March 26, 2021, respectively.

The unrecognized compensation expense related to the unvested Replacement Awards, which is expected to be recognized subsequent to April 1, 2022, is not significant.