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Equity Agreements and Incentive Equity Plans
 6 Months Ended
Jun. 30, 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 the Company’s common stock, and other equity-based awards tied to the value of the Company’s common stock and cash-based awards.

During the six months ended June 30, 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 the Company’s common stock. The amount remitted to the tax authorities for the employees’ tax obligation was reflected as a financing activity on the Company’s consolidated statements of cash flows. These shares withheld by the Company 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. For vesting events where shares are not withheld, the Company required 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 the Company’s restricted common stock. Vested Incentive Units were exchanged into shares of the Company’s 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 fiscal 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— — — — 
Vested58 18.00 — — 
Forfeited12 18.00 130 18.00 
Outstanding at June 30, 2023153 $18.00 662 $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”), 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— — — — — — 
Forfeited189 6.49 — 190 5.66 — 
Outstanding at June 30, 20234,044 $6.47 $— 935 $5.66 $— 
Options exercisable at June 30, 20233,222 $6.25 $— — $— $— 

(a) The intrinsic value represents the amount by which the fair value of the Company’s stock exceeds the option exercise price as of June 30, 2023 and December 30, 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 30, 20221,360 $17.05 
Granted1,903 11.20
Vested459 16.90 
Forfeited128 14.21
Outstanding at June 30, 20232,676 $13.05 

As of June 30, 2023, there were 99 vested and unissued restricted stock units.

Performance Stock Units — During the six months ended June 30, 2023 and July 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 the Company’s 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 six months ended June 30, 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 six months ended July 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 (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 
Forfeited31 14.11 
Outstanding at June 30, 2023413 $13.80 

As of June 30, 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 and
six months ended June 30, 2023 and July 1, 2022, and unrecognized stock compensation expense and weighted average remaining expense period as of June 30, 2023 consisted of:

Compensation ExpenseAs of June 30, 2023
Three Months Ended
June 30, 2023		Three Months Ended July 1, 2022Six Months Ended
June 30, 2023		Six Months Ended July 1, 2022Unrecognized Compensation ExpenseWeighted-Average Remaining Contractual Term (Years)
2021 Plan
Restricted stock awards$519 $1,163 $1,152 $2,308 $2,867 0.74
Time-based options948 1,676 1,970 3,405 5,141 1.55
Market-based options(193)645 436 1,290 1,258 0.60
Restricted stock units3,090 1,970 6,633 3,406 31,499 3.26
Performance stock units870 1,134 2,520 1,699 3,157 0.79
Other equity-based compensation100 100 200 179 627 1.56
Total$5,334 $6,688 $12,911 $12,287 $44,549 1.85

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 the Company’s 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 the Company’s Compensation Committee. Pursuant to this provision the Company 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, the Company’s 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. For the three months and six months ended June 30, 2023, 186 shares of common stock were purchased under the ESPP at an average price of $6.60 per share. Stock-based compensation expense recognized related to the ESPP was $186 and $372 for the three months and six months ended June 30, 2023 and $80 for the three months and six months ended July 1, 2022, and is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. Eligible participants contributed $257 and $287 as of June 30, 2023 and December 30, 2022, respectively, which is included in accrued liabilities in the accompanying condensed consolidated balance sheet. Unrecognized compensation expense as of June 30, 2023 associated with the remaining ESPP purchase period through May 22, 2023 was $323.