Note 9 - Stock-based Compensation

12 Months Ended

Sep. 27, 2025

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(9) Stock-Based Compensation

Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 11, 2025, the shareholders of the Company approved the 2025 Equity Incentive Plan of Insteel Industries Inc. (the “2025 Plan”), which authorizes the issuance of up to 800,000 shares of our common stock, plus any shares remaining available for grant under the 2015 Equity Incentive Plan of Insteel Industries Inc. (as amended, the “2015 Plan”) as of the effective date of the 2025 Plan and any shares subject to an award granted under the 2015 Plan which are forfeited, cancelled, terminated, lapsed or expired without the issuance of shares. The 2025 Plan, which expires on February 10, 2035, replaces the 2015 Plan, which expired on February 17, 2025. As of September 27, 2025, there were 905,000 shares of our common stock available for future grants under the 2025 Plan, which is our only active equity incentive plan.

Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under the plan generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $1.4 million in 2025, $1.4 million in 2024 and $1.0 million in 2023. As of September 27, 2025, there was $712,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 2.20 years.

The fair value of each option award granted is estimated on the date of grant using a Monte Carlo valuation model. The weighted-average estimated fair values of stock options granted during 2025, 2024 and 2023 were $12.70, $13.01 and $13.27 per share, respectively, based on the following weighted-average assumptions:

	Year Ended
	September 27,			September 28,			September 30,
	2025			2024			2023
Expected term (in years)		4.62			4.20			4.35
Risk-free interest rate		4.29	%		4.12	%		4.27	%
Expected volatility		39.32	%		44.83	%		49.61	%
Expected dividend yield		0.38	%		0.36	%		0.40	%

The assumptions utilized in the Monte Carlo valuation model are evaluated and revised, as necessary, to reflect market conditions and actual historical experience. The expected term for options was based on the results of a Monte Carlo simulation model, using the model’s estimated fair value as an input to the Black-Scholes-Merton model, and then solving for the expected term. The risk-free interest rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was derived using a term structure based on historical volatility and the volatility implied by exchange-traded options on our common stock. The dividend yield was calculated based on our annual dividend as of the option grant date.

The following table summarizes stock option activity:

						Contractual		Aggregate
	Options			Weighted		Term - Weighted		Intrinsic
	Outstanding			Average		Average		Value
	(in thousands)			Exercise Price		(in years)		(in thousands)
Outstanding at October 1, 2022		365		$	30.00
Granted		97			30.63
Exercised		(32	)		21.29			$	350
Forfeited		(19	)		33.22
Outstanding at September 30, 2023		411			30.68
Granted		101			33.22
Exercised		(38	)		30.79				194
Forfeited		(8	)		41.86
Outstanding at September 28, 2024		466			31.03
Granted		112			33.63
Exercised		(54	)		26.95				568
Outstanding at September 27, 2025		524			32.01		6.89		3,549
Vested and anticipated to vest in the future at September 27, 2025		512			31.98		6.84		3,490
Exercisable at September 27, 2025		314			31.30		5.46		2,409

Stock option exercises include “net exercises” for which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on the date of exercise less exercise price) reduced by any applicable withholding taxes.

Restricted stock units. Restricted stock units (“RSUs”) granted under our equity incentive plan are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally one year from the date of the grant for RSUs granted to directors and three years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. RSU grants and compensation expense are as follows:

	Year Ended
	September 27,		September 28,		September 30,
(In thousands)	2025		2024		2023
Restricted stock unit grants:
Units		68		52		57
Market value	$	2,230	$	1,769	$	1,738
Compensation expense		2,070		1,730		1,392

As of September 27, 2025, there was $1.3 million of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.59 years.

The following table summarizes RSU activity:

				Weighted		Aggregate
	Restricted			Average		Intrinsic
	Stock Units			Grant Date		Value
(Unit amounts in thousands)	Outstanding			Fair Value		(in thousands)
Balance, October 1, 2022		120		$	29.88
Granted		57			30.53
Forfeited		(10	)		30.36
Vested		(62	)		25.71	$	1,911
Balance, September 30, 2023		105			35.07
Granted		52			33.56
Vested		(38	)		33.02		1,322
Balance, September 28, 2024		119			32.96
Granted		68			32.77
Vested		(40	)		35.05		1,323
Balance, September 27, 2025		147			32.31