SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors may grant awards which include, but are not limited to, stock options, stock units, common stock or performance awards to officers, directors and key employees. At September 30, 2021, there were approximately 1.8 million restricted stock units, performance awards and stock options outstanding. The exercise price, terms and other conditions applicable to each form of share-based compensation under our plans are generally determined by the Compensation Committee of our Board of Directors at the time of grant and may vary.

In May 2021, our shareholders approved the amendment and restatement to the 2018 Team, Inc. Equity Incentive Plan (the “2018 Plan”). The 2018 Plan replaced the 2016 Team, Inc. Equity Incentive Plan. The amendment and restatement to the 2018 Plan increased the shares available for issuance by 3.0 million shares. Shares issued in connection with our share-based compensation are issued out of authorized but unissued common stock.

Compensation expense related to all share-based awards totaled $5.6 million and $4.1 million for the nine months ended September 30, 2021 and 2020, respectively. Share-based compensation expense reflects an estimate of expected forfeitures. At September 30, 2021, $9.0 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.7 years.

Stock units

Stock units are settled with common stock upon vesting unless it is not legally feasible to issue shares, in which case the value of the award is settled in cash. We determine the fair value of each stock unit based on the market price on the date of grant. Stock units generally vest in annual installments over three to four years and the expense associated with the units is recognized over the same vesting period. We also grant common stock to our directors, which typically vests immediately. Compensation expense related to stock units and director stock grants totaled $3.6 million and $3.0 million for the nine months ended September 30, 2021 and 2020.

Transactions involving our stock units and director stock grants during the nine months ended September 30, 2021 are summarized below:


	Nine Months Ended September 30, 2021
	(unaudited)
	No. of Stock Units	Weighted Average Fair Value
	(in thousands)
Stock and stock units, beginning of period	854	$	12.55
Changes during the period:
Granted	86	$	8.12

Vested and settled	(87)	$	8.22
Forfeited and cancelled	(56)	$	12.48
Stock and stock units, end of period	797	$	12.56

Performance stock units

We have a performance stock unit award program whereby we grant Long-Term Performance Stock Unit (“LTPSU”) awards to our executive officers. Under this program, we communicate “target awards” to the executive officers during the first year of a performance period. LTPSU awards cliff vest with the achievement of the performance goals and completion of the required service period. Settlement occurs with common stock as soon as practicable following the vesting date. LTPSU awards are subject to a two-year performance period and a concurrent two-year service period. The performance goals are separated into two independent performance factors based on (i) relative shareholder return (“RTSR”) as measured against a designated peer group and (ii) results of operations over the two-year performance period, with possible payouts ranging from 0% to 200% of the target awards for each of the two performance factors. The LTPSU awards granted in 2019 vested as of March 15, 2021 at the RTSR performance target level of 25% and the results of operations performance metric at 0% of the target level. A total of 19,048 shares, net of shares withheld for taxes, were issued in connection with the achievement of the 25% performance target.

The RTSR and the stock price milestone factors are considered to be market conditions under GAAP. For performance units subject to market conditions, we determine the fair value of the performance units based on the results of a Monte Carlo

simulation, which uses market-based inputs as of the date of grant to simulate future stock returns. Compensation expense for awards with market conditions is recognized on a straight-line basis over the longer of (i) the minimum required service period and (ii) the service period derived from the Monte Carlo simulation, separately for each vesting tranche. For performance units subject to market conditions, because the expected outcome is incorporated into the grant date fair value through the Monte Carlo simulation, compensation expense is not subsequently adjusted for changes in the expected or actual performance outcome. For performance units not subject to market conditions, we determine the fair value of each performance unit based on the market price of our common stock on the date of grant. For these awards, we recognize compensation expense over the vesting term on a straight-line basis based upon the performance target that is probable of being met, subject to adjustment for changes in the expected or actual performance outcome. Compensation expense related to performance awards totaled $1.9 million and $1.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Transactions involving our performance awards during the nine months ended September 30, 2021 are summarized below:


	Nine Months Ended September 30, 2021
	(unaudited)
	Performance Units Subject to Market Conditions			Performance Units Not Subject to Market Conditions
	No. of Stock Units1	Weighted Average Fair Value		No. of Stock Units1	Weighted Average Fair Value
	(in thousands)			(in thousands)
Performance stock units, beginning of period	553	$	13.69	273	$	12.55
Changes during the period:
Granted	576	$	6.70	110	$	11.69
Vested and settled	(28)	$	25.24	—	$	—
Forfeited and cancelled	(387)	$	14.91	(135)	$	16.65
Performance stock units, end of period	714	$	6.45	248	$	9.94

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1 Performance units with variable payouts are shown at target level of performance.