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Stock-based Compensation
 6 Months Ended
Jul. 01, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-based Compensation Stock-based Compensation
2019 Management Incentive Plan
On March 28, 2019, the Company adopted the 2019 Management Incentive Plan (the “2019 Plan”) which allows for the issuance of stock options to directors, officers, key employees and other key individuals. Stock options awarded under the 2019 Plan contain both service and performance conditions. Awards issued under the 2019 Plan have a 10-year contractual term. In connection with the adoption of the Omnibus Incentive Compensation Plan (as defined below), the Company ceased issuing awards under the 2019 Plan. As a result, no shares remain available for issuance under the 2019 Plan; however, the 2019 Plan continues to govern awards that are outstanding under it. The total number of shares outstanding under the 2019 Plan as of July 1, 2023, was 15.6 million.
Omnibus Incentive Plan
In connection with the IPO, the Company’s Board of Directors approved the Omnibus Incentive Compensation Plan (the “Omnibus Incentive Plan”), which became effective upon the effectiveness of the registration statement on Form S-1 for the IPO on June 28, 2023. Upon effectiveness of the Omnibus Incentive Plan, the Company ceased granting new awards under the 2019 Plan.
The Omnibus Incentive Plan allows for issuance of up to 15.0 million new shares of common stock at the effective date, plus shares of common stock underlying any award under the 2019 Plan that expires, terminates, or is canceled for any reason without having been exercised in full. Awards under the Omnibus Incentive Plan may be in the form of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, other stock based awards and cash awards. Awards issued under the Omnibus Incentive Plan have a maximum contractual term of 10 years. As of July 1, 2023, there were 14.4 million shares available for future issuance under the Omnibus Incentive Plan.
Stock-based Compensation
Stock-based compensation expense for the twenty-six weeks ended July 1, 2023 and July 2, 2022 was $1.9 million and $0.3 million, respectively.
Time-based options
Stock option awards containing only a service condition (“time-based options”) generally vest in equal annual installments over five years from the date of grant, subject to continued employment through each vesting date. Stock-based compensation cost for time-based options is measured at the grant date based on
the fair value of the award using the Black-Scholes-Merton option pricing model and is recognized ratably over the requisite service period of the awards. The Company accounts for forfeitures for time-based options as they occur. The following assumptions apply to time-based options awarded during the twenty-six weeks ended July 1, 2023 and July 2, 2022:
Twenty-Six Weeks Ended
July 1, 2023July 2, 2022
Expected volatility
35.4% to 35.7%
32.7% to 39.8%
Risk-free interest rate
3.4% to 4.2%
1.8% to 3.0%
Expected term (in years)6.56.5
Weighted average fair value options per share$6.01$5.13
Expected volatility is based on historic share price volatilities of comparable publicly traded companies. The risk-free rate is based on the 10 Year U.S. Treasury yield curve in effect at the time of each grant. The expected term of options granted represents the period of time that options are expected to be outstanding.
The following table summarizes the activity related to time-based options as of July 1, 2023:
(in thousands, except per share and remaining term amounts)Number of optionsWeighted average exercise priceWeighted average remaining contractual term (in years)Aggregate intrinsic value
Outstanding at December 31, 20226,976 $4.99 7.66$60,299 
Granted933 13.96
Exercised(186)1.52
Forfeited or expired(100)12.99
Outstanding at July 1, 20237,623 6.077.4757,206 
Exercisable at July 1, 20233,291 2.426.4935,806 
Performance-based options
Stock option awards containing a performance condition (“performance-based options”) vest after either a change in control or an initial public offering, and after the Company achieves market-specific performance conditions during the performance period. Performance-based options are subject to continued employment through the vesting date and vest in 25% increments as performance measurements are achieved through the term of the options, with 25% vesting upon the completion of the Company’s IPO and the remaining vesting in equal increments over three years as performance measurements are achieved. In October 2022 and May 2023, the Company modified the vesting terms of its outstanding performance-based options to reflect the above vesting terms. The Company determined that the respective modified vesting terms constituted modifications under Topic 718 and thus remeasured the fair value of the outstanding performance-based options as of their respective modification dates.
Compensation expense for performance-based options is recognized when it is probable that performance measurements will be achieved. The Company accounts for forfeitures for performance-based options as they occur. A Black-Scholes-Merton option pricing model was used to determine the grant-date fair value of the performance-based options that were tied to the Company’s IPO and a Monte Carlo simulation under the option pricing framework was used to determine the grant-date fair value of the performance-based options subject to market-specific performance conditions. As of July 1, 2023, the Company had not recognized compensation expense for performance-based options because achievement of the underlying performance conditions had not been met. As the IPO was completed on July 3, 2023 and was an underlying performance condition, the Company intends to commence recognition of compensation expense for these awards beginning in the third quarter of fiscal year 2023.
On July 3, 2023, 2.0 million performance-based options vested upon completion of our IPO. See Note 12 for additional details regarding the vesting of the performance-based options after July 1, 2023.
The following table summarizes the activity related to performance-based options as of July 1, 2023:
(in thousands, except per share and remaining term amounts)Number of OptionsWeighted average exercise priceWeighted average remaining contractual term (in years)Aggregate intrinsic value
Outstanding at December 31, 20227,948 $2.05 7.02$90,339 
Outstanding at July 1, 20237,948 2.05 6.5289,319 
Restricted Stock Units
Restricted stock units (“RSUs”) containing only a service condition generally vest in equal installments over a one-year or three-year period from the date of grant, subject to continued employment through each vesting date. The fair value of the RSUs is determined by using the closing price of the Company’s common stock on the date of the grant. All RSUs were granted after the Company’s common stock commenced trading on June 29, 2023.
The following table summarizes the activity related to RSUs as of July 1, 2023:
(in thousands, except per share and remaining term amounts)Number of UnitsWeighted Average Grant Date Fair Value
Unvested at December 31, 2022— $— 
Granted553 22.91 
Unvested at July 1, 2023553 22.91