SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors (“the Board”) may grant stock options, restricted stock, stock units, stock appreciation rights, common stock or performance awards to officers, directors and key employees. At March 31, 2022, there were approximately 1.1 million restricted stock units, performance awards and stock options outstanding to officers, directors and key employees. 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 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 of Common Stock. Shares issued in connection with our share-based compensation are issued out of authorized but unissued common stock.

Compensation expense related to share-based compensation totaled a credit of $0.6 million and $2.3 million for the three months ended March 31, 2022 and 2021, respectively. The Company incurred a credit in the current period related to unvested share-based compensation associated with executive departures which exceeded the total costs expensed for the three month period ended March 31, 2022. Share-based compensation expense reflects an estimate of expected forfeitures. At March 31, 2022, $3.7 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.5 years.

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 or 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 $0.6 million and $1.5 million for the three months ended March 31, 2022 and 2021. The weighted-average grant date fair value related to stock units and director stock grants during the periods ended March 31, 2022 and 2021 was $1.64 and $0.00, respectively, as no stock units were granted during the prior year period.

Transactions involving our stock units and director stock grants for the three months ended March 31, 2022 are summarized below:


	Three Months Ended March 31, 2022
	(unaudited)
	No. of Stock Units	Weighted Average Fair Value
	(in thousands)
Stock and stock units, beginning of year	804	$	7.27
Changes during the period:
Granted	219	$	1.64

Vested and settled	—	$	—
Forfeited and cancelled	(39)	$	6.28
Stock and stock units, end of period	984	$	6.05

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 granted in 2019 (the “2019 Awards”), in 2020 (the “2020 Awards”) and in 2021 (the “2021 Awards”) are subject to a two-year performance period and a concurrent two-year service period. For the LTPSU awards, the performance goal is 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 2019 Awards 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.

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 a credit of $1.2 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.

Transactions involving our performance awards during the three months ended March 31, 2022 are summarized below:


	Three Months Ended March 31, 2022
	(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	684	$	6.30	219	$	9.91
Changes during the period:
Granted	—	$	—	—	$	—
Vested and settled	—	$	—	—	$	—
Cancelled	(653)	$	6.04	(188)	$	9.61
Performance stock units, end of period	31	$	11.69	31	$	11.69

_________________

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

Stock Options. We determine the fair value of each stock option at the grant date using a Black-Scholes model and recognize the resulting expense of our stock option awards over the period during which an employee is required to provide services in exchange for the awards, usually the vesting period. There was no compensation expense related to stock options for the periods ended March 31, 2022 or December 31, 2021. Our options typically vest in equal annual installments over a four-year service period. Expense related to an option grant is recognized on a straight-line basis over the specified vesting period for those options. Stock options generally have a ten-year term.

No stock options were granted during the periods ended March 31, 2022 or March 31, 2021, and no options were exercised, cancelled, or expired during the period ended March 31, 2022. Approximately 17 thousand options were exercisable at March 31, 2022 had a weighted-average remaining contractual life of 0.8 years, and exercise price of $37.27.