XML 28 R18.htm IDEA: XBRL DOCUMENT v3.23.1
Equity Agreements and Incentive Equity Plans
 3 Months Ended
Mar. 31, 2023
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 contained both service conditions consistent with the B-1 Units and market-based vesting conditions that required the achievement of a specified return hurdle to the controlling shareholders in order to vest.

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, and other equity-based awards tied to the value of our common stock and cash-based awards.

During the quarter ended March 31, 2023, upon the settlement date of certain outstanding equity awards, shares were withheld to cover the required withholding tax, which was based on the value of a share on the settlement date as determined by the closing price of our common stock on the trading day of the applicable settlement date. The remaining shares were delivered to the recipient as shares of our common stock. The amount remitted to the tax authorities for the employees’ tax obligation was reflected as a financing activity on our consolidated statements of cash flows. These shares withheld by us as a result of the net settlement of equity awards issued under the 2021 Plan were not considered issued and outstanding. These shares were returned to the 2021 Plan reserve and are available for future issuance thereunder. We may also require employees to sell a portion of the shares that they received upon the vesting of equity awards in order to cover any required withholding taxes.

Equity Award Conversion — During the year ended December 31, 2021, and in connection with the Company’s initial public offering (“ 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 30, 2022, 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 30, 2022223 $18.00 792 $18.00 
Granted— — — — 
Vested46 18.00 — — 
Forfeited5 18.00 — — 
Outstanding at March 31, 2023172 $18.00 792 $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 30, 2022, 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 30, 20224,233 $6.47 $— 1,125 $5.66 $— 
Granted— $— — — $— — 
Exercised— $— — — $— — 
Forfeited132 $6.29 — — $— — 
Outstanding at March 31, 20234,101 $6.47 $— 1,125 $5.66 $— 
Options exercisable at March 31, 20233,199 $6.24 $— — $— $— 

(a) The intrinsic value represents the amount by which the fair value of the Company’s stock exceeds the option exercise price as of December 30, 2022 and March 31, 2023.

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 30, 20221,360 $17.05 
Granted1,809 11.31
Vested301 17.33 
Forfeited19 18.52
Outstanding at March 31, 20232,849 $13.37 

As of March 31, 2023, there were 99 vested and unissued restricted stock units.

Performance Stock Units — During the three months ended March 31, 2023 and 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. Total units earned for grants may vary between 0% and 200% of the units granted based on the attainment of company-specific targets during the performance period 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 awards issued during the three months ended March 31, 2023 contain three separate tranches, each for a separate one-year performance period and each with a performance target to be established concurrently with the annual budget process. Accordingly, each tranche is accounted for as a separate grant. The Company-specific targets include: (i) adjusted EBITDA, (ii) adjusted EBITDA margin, and (iii) the results of an engagement survey administered annually in the fourth quarter to employees below the level of director.

The awards issued during the three months ended April 1, 2022, vest in annual tranches over a three-year service period, subject to a one-year performance target. Total units earned for grants are 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. For the year-ended December 30, 2022, the Company determined that, based on actual performance with respect to Adjusted EBITDA and Net Sales combined, the awards were earned at 51%.

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 30, 2022254 $17.96 
Granted322 11.31 
Vested132 15.65 
Forfeited— — 
Outstanding at March 31, 2023444 $13.82 

As of March 31, 2023, there were 71 vested and unissued performance share units.

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 March 31, 2023 and April 1, 2022, and unrecognized stock compensation expense and weighted average remaining expense period as of March 31, 2023 consisted of:

Compensation ExpenseAs of March 31, 2023
Three Months Ended March 31, 2023Three Months Ended April 1, 2022Unrecognized Compensation ExpenseWeighted-Average Remaining Contractual Term (Years)
2021 Plan
Restricted stock awards$633 $1,145 $3,598 0.98
Time-based options1,022 1,729 6,294 1.80
Market-based options629 645 2,142 0.85
Restricted stock units3,543 1,436 35,193 3.24
Performance stock units1,650 565 4,469 1.01
Other equity-based compensation100 79 728 1.81
Total$7,577 $5,599 $52,424 2.00

Employee Stock Purchase Plan — The Company’s board of directors adopted, and its shareholders approved, the Snap One Holdings Corp. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP initially reserved 750 shares for issuance. The number of shares available for issuance under the ESPP is subject to adjustment for certain changes in our capitalization. In addition, the ESPP contains an evergreen provision such that each January 1 starting in 2022 and ending in 2031, the number of shares available for issuance shall be increased by that number of shares equal to the lesser of (i) a number of shares such that the aggregate amount of shares available following the increase is equal to 1% of the fully diluted shares outstanding on December 31 of the preceding year, or (ii) a lesser amount determined by our Compensation Committee. Pursuant to this provision we increased the number of shares in the ESPP by approximately 186 shares. Under the ESPP, shares of common stock may be purchased by eligible participants during defined purchase periods at 85% of the lesser of the closing price of the Company’s common stock on the first day or last day of each purchase period. The Company used a Black-Scholes option pricing model to value the common stock purchased as part of the Company’s ESPP. The fair value estimated by the option pricing model is affected by the price of the common stock as well as subjective variables that include assumed interest rates, our expected dividend yield, and the expected share volatility over the term of the award.

Offering periods are generally six months long and begin on May 23 and November 23 of each year. Eligible participants contributed $985 and $287 as of March 31, 2023 and December 30, 2022, respectively, which is included in accrued liabilities in the accompanying condensed consolidated balance sheet. The Company recorded compensation expense of $186, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2023. Unrecognized compensation expense as of March 31, 2023 associated with the remaining ESPP purchase period through May 22, 2023 was $109.