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SHARE-BASED COMPENSATION
 12 Months Ended
Sep. 27, 2024
Share-Based Payment Arrangement [Abstract]  
SHARE-BASED COMPENSATION SHARE-BASED COMPENSATION:
On September 30, 2023, Aramark completed the previously announced spin-off of Vestis through a distribution of the Company's common stock to holders of record of Aramark’s common stock as of the close of business on September 20, 2023, which resulted in previous Aramark equity awards being converted to Vestis equity awards. Additionally, the Company adopted the Vestis Corporation 2023 Long-Term Incentive Plan (“LTIP”) effective as of September 30, 2023. The Compensation and Human Resources Committee of the Board of Directors approves grants under the LTIP. Under the LTIP, we are authorized to issue up to 15.0 million shares for future Vestis equity awards and issued approximately 1.7 million shares related to the conversion of Aramark equity awards outstanding as of September 30, 2023 into Vestis equity awards upon the Separation from Aramark.
Prior to the Separation, the Company had no share-based compensation plans. Certain employees of the Company historically participated in Aramark’s Stock Incentive Plan (“Aramark Stock Plan”) prior to the Separation. All awards granted under Aramark Stock Plan were approved by Aramark’s Compensation Committee of the Board of Directors or another committee authorized by Aramark’s Board of Directors. The following disclosure for the fiscal years ended September 29, 2023 and September 30, 2022 represents share-based compensation attributable to the Company based on the awards and terms previously granted to Company employees under Aramark’s share-based payment plans and is representative of only those employees who are dedicated to the Company. Share-based compensation expense allocated to the Company for Aramark corporate employees who were not dedicated to the Company are included as a component of General Corporate Expenses. The allocation of share-based compensation expense for Aramark corporate employees was $3.9 million and $4.2 million, respectively in fiscal 2023 and 2022.
The following table summarizes the share-based compensation expense (reversal) and related information for Time-Based Options (“TBOs”), Time-Based Restricted Stock Units (“RSUs”), Performance Stock Units (“PSUs”), Deferred Stock Units (“DSUs”) and Employee Stock Purchase Plan (“ESPP”) classified as “Selling, general and administrative expenses” on the Consolidated and Combined Statements of Income (in thousands).
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
TBOs(1)
$3,960 $1,125 $1,064 
RSUs(2)
6,654 8,013 8,992 
PSUs(3)
4,264 866 451 
DSUs(4)
1,458 — — 
ESPP(5)
— 597 2,609 
$16,336 $10,601 $13,116 
Income tax benefit related to share-based compensation$3,180 $2,568 $2,729 
__________________
(1)Share-based compensation expense for TBOs increased during fiscal 2024 compared to fiscal 2023 due to an increase in annual grants issued in fiscal 2024 compared to fiscal 2023.
(2)Share-based compensation expense for RSUs decreased during fiscal 2024 compared to fiscal 2023 due to a decrease in annual grants in fiscal 2024 compared to prior years.
(3)Share-based compensation expense for PSUs increased during fiscal 2024 compared to fiscal 2023 due to an increase in annual grants issued in fiscal 2024 compared to fiscal 2023.
(4)Share-based compensation expense related to DSUs increased during fiscal 2024 compared to fiscal 2023 due to the issuance of new DSU grants in fiscal 2024. No DSUs were granted in fiscal 2023 or fiscal 2022.
(5)Share-based compensation expense related to the ESPP decreased during fiscal 2024 compared to fiscal 2023 as the Company does not have an ESPP.
No compensation expense was capitalized. The Company records forfeitures as they occur.
The below table summarizes the unrecognized compensation expense as of September 27, 2024 related to non-vested awards and the weighted-average period they are expected to be recognized:
Unrecognized Compensation Expense
(in thousands)		Weighted-Average Period
(Years)
TBOs$7,290 2.1
RSUs8,896 2.0
PSUs7,472 2.0
Total$23,658 
Stock Options
Time-Based Options
The Company granted TBOs to the Company's executives and directors on October 2, 2023. Additionally, the Company’s annual TBO grants for fiscal 2024 were awarded in December 2023. Aramark’s annual TBO grants for fiscal 2023 were awarded in November 2022, while Aramark’s annual TBO grants for fiscal 2022 were awarded in November 2021. The fiscal 2024 and 2022 TBO grants vest solely based upon continued employment over a three-year time period. The fiscal 2023 TBO grants vest solely based upon continued employment over a four-year time period. All TBOs remain exercisable for 10 years from the date of grant.
The fair value of the TBOs granted was estimated using the Black-Scholes option pricing model. For fiscal 2024 TBO grants, the expected volatility was derived from a peer group’s historical volatility as Vestis did not have sufficient historical volatility based on the expected term of the underlying options. For fiscal 2023 and 2022 TBO grants, the expected volatility is based on the historic volatility of Aramark’s stock price over the expected term of the stock options. For fiscal 2024 TBO grants, the expected dividend yield was 0.0% for the October 2, 2023 grants as the Company had not declared a dividend prior to the grant date, and was 0.8% for the December 6, 2023 grants based on the dividend announced by the Company on November 29, 2023. The expected life represents the period of time that options granted are expected to be outstanding and is calculated using the simplified method, as permitted under SEC rules and regulations, due to the method providing a reasonable estimate in comparison to actual experience. The simplified method uses the midpoint between an option’s vesting date and contractual term. The risk-free rate is based on the United States Treasury security with terms equal to the expected life of the option as of the grant date. Compensation expense for TBOs is recognized on a straight-line basis over the vesting period during which employees perform related services. The unvested TBOs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the TBOs are nontransferable while subject to forfeiture. Cash received from TBOs exercised for the fiscal year ended September 27, 2024 was $0.1 million.
The table below presents the weighted average assumptions and related valuations for TBOs.
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
Expected volatility
32.3% - 33.5%
42 %41 %
Expected dividend yield
0.0% - 0.8%
1.00% - 1.19%
1.18% - 1.29%
Expected life (in years)
6.0 - 6.5
6.256.00
Risk-free interest rate
4.1% - 4.7%
3.65% - 4.21%
1.35% - 2.96%
Weighted-average grant-date fair value$6.5 $16.9 $13.4 
A summary of TBO activity is presented below:
OptionsShares
(000s)		Weighted-Average Exercise PriceAggregate Intrinsic Value
($000s)		Weighted-Average Remaining Term
(Years)
Outstanding at October 2, 2023(1)
523$18.59 
Granted1,768$19.42 
Exercised(10)$13.88 
Forfeited and expired(353)$19.57 
Outstanding at September 27, 20241,928$19.20 $44 8.4
Exercisable at September 27, 2024273$18.24 $44 4.8
Expected to vest at September 27, 20241,655$19.35 $— 9.0
__________________
(1)On October 2, 2023 our common stock began regular-way trading on the New York Stock Exchange (“NYSE”). The shares outstanding as of October 2, 2023 pertain to Aramark equity awards issued by Aramark in prior periods to employees of the Company that were converted to Vestis equity awards as part of the Separation.
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
Total intrinsic value exercised (in thousands)$63 $2,040 $3,054 
Total fair value that vested (in thousands)774 1,106 1,681 
Time-Based Restricted Stock Units
The Company granted RSUs to the Company's executives and directors on October 2, 2023. Additionally, the Company’s annual RSU grants for fiscal 2024 were awarded in December 2023. Aramark’s annual RSU grants for fiscal 2023 were awarded in November 2022, while Aramark’s annual RSU grants for fiscal 2022 were awarded in November 2021. For RSU grants awarded during fiscal 2024 and fiscal 2022, the RSU agreement provides that 33% of each grant will vest and be settled in shares on each of the first three anniversaries of the date of grant, subject to the participant’s continued employment through each such anniversary. For RSU grants awarded in fiscal 2023, the RSU agreement provides that 25% of each grant will vest and be settled in shares on each of the first four anniversaries of the grant date, subject to the participant’s continued employment through each such anniversary. The grant-date fair value of RSUs granted in fiscal 2024 is based on the fair value of the Company’s common stock. The grant-date fair value of RSUs granted in fiscal 2023 and 2022 is based on the fair value of Aramark’s common stock. Participants holding RSUs will receive the benefit of any dividends paid on shares in the form of additional RSUs. The unvested RSUs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the RSUs are nontransferable while subject to forfeiture.
Restricted Stock UnitsUnits
(000s)		Weighted Average Grant-Date Fair Value
Outstanding at October 2, 2023(1)
850$18.90 
Granted492$17.71 
Vested(369)$18.81 
Forfeited(135)$19.08 
Outstanding at September 27, 2024838$18.22 
__________________
(1)On October 2, 2023 our common stock began regular-way trading on the New York Stock Exchange (“NYSE”). The shares outstanding as of October 2, 2023 pertain to Aramark equity awards issued by Aramark in prior periods to employees of the Company that were converted to Vestis equity awards as part of the Separation.
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
Total fair value that vested (in thousands)$6,950 $9,396 $7,084 
Performance Stock Units
Under the LTIP, Vestis is authorized to grant PSUs to its employees. A participant is eligible to become vested in a number of PSUs equal to a percentage, higher or lower, of the target number of PSUs granted based on the level of Vestis’ achievement of the performance condition. During fiscal 2024, Vestis granted PSUs on October 2, 2023 subject to the level of achievement of adjusted EBITDA margin percentage and revenue growth (measured as compound annual growth rate) over three years with no additional market conditions. Additionally, on October 2, 2023 and December 6, 2023 Vestis granted PSUs subject to the level of achievement of cumulative adjusted EBITDA, cumulative adjusted free cash flow conversion rate and a total shareholder return modifier for the cumulative performance period of three years and the participant’s continued employment with Vestis. Vestis is accounting for the October 2, 2023 grants that do not include a market condition as performance-based awards, with grant date fair value based on the fair value of Vestis' common stock. Vestis is accounting for the October 2, 2023 and December 6, 2023 grants that include a market condition as performance-based awards, with a market condition, valued utilizing the Monte Carlo Simulation pricing model, which calculates multiple potential outcomes for an award and establishes fair value based on the most likely outcome. The unvested PSUs are subject to forfeiture if employment is terminated other than due to death, disability or retirement, and the PSUs are nontransferable while subject to forfeiture.
Performance Stock UnitsUnits
(000s)		Weighted Average Grant-Date Fair Value
Outstanding at October 2, 2023(1)
177$21.87 
Granted663$17.86 
Vested—$— 
Forfeited(142)$18.63 
Outstanding at September 27, 2024698$18.76 
__________________
(1)On October 2, 2023 our common stock began regular-way trading on the New York Stock Exchange (“NYSE”). The shares outstanding as of October 2, 2023 pertain to Aramark equity awards issued by Aramark in prior periods to employees of the Company that were converted to Vestis equity awards as part of the Separation.
Deferred Stock Units
DSUs are issued only to non-employee members of the Board of Directors and represent the right to receive shares of the Company's common stock in the future. Each DSU will be converted to one share of the Company's common stock on the first day of the seventh month after which such director ceases to serve as a member of the Board of Directors. The grant-date fair value of DSUs is based on the fair value of the Company's common stock. On October 2, 2023 the Company granted 65,850 DSUs which vested immediately and 19,208 DSUs which vested January 31, 2024. In addition, directors may elect to defer their cash retainer payable in the next calendar year into a fixed income fund which will be paid in cash no less than three years after the cash retainer is deferred or payable upon the first day of the seventh month after which such director ceases to serve as a member of the Board of Directors.