Common Stock and Stock Compensation

12 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Common Stock and Stock Compensation

NOTE 10: COMMON STOCK AND STOCK COMPENSATION

Common Stock Repurchase Program

On May 3, 2022, our Board of Directors (the “Board”) authorized the repurchase of up to $50 million of our Class A Common Stock over three years (the “Common Stock Repurchase Program”). Execution of the program will be responsive to fluctuating market conditions and valuations, liquidity needs and the expected return on investment compared to other opportunities.

The amount and timing of purchases will be dependent on a variety of factors, including stock price, trading volume, general market conditions, legal and regulatory requirements, general business conditions, the level of cash flows, and corporate considerations determined by management and the Board, such as liquidity and capital needs and the availability of attractive alternative investment opportunities. The Board has reserved the right to modify, suspend or terminate the program at any time. As of September 30, 2023, we had repurchased and retired 1,627,045 shares of our Class A Common Stock for $14.0 million under the Common Stock Repurchase Program, of which 1,389,102 shares were repurchased and retired for $12.0 million during fiscal year ended September 30, 2023. The repurchase amount is allocated between “Additional paid-in capital” and “Retained earnings” in our Consolidated Balance Sheets.

Other Common Stock Repurchases

During December 2022, we used approximately $5.0 million of the net proceeds from the 2029 Convertible Notes offering to repurchase for cash 578,703 shares of our Class A Common Stock from purchasers of the notes in privately negotiated transactions. Such transactions were authorized separately from, and not considered a part of, the publicly announced Common Stock Repurchase Program discussed above. The repurchase amount is allocated between “Additional paid-in capital” and “Retained earnings” in our consolidated balance sheets.

Stock Compensation

We utilize equity-based awards as a long-term incentive to attract and retain qualified employees, consultants and directors and motivate them to achieve long-term goals, thereby promoting the long-term financial interests of the Company and enhancing long-term stockholder return.

2022 LTI Plan

On March 1, 2022, we adopted the 2022 Long-Term Incentive Plan (the “2022 LTI Plan”), which gives us the ability to grant equity-based incentive compensation awards, in the form of restricted stock or restricted stock units, to its employees, members of the Board of Directors and consultants, independent contractors or advisors who are determined to have a direct and significant effect on the Company’s performance. The total number of shares of Class A Common Stock that may be issued pursuant to awards under the 2022 LTI Plan (“Authorized Shares”) is such number that is from time to time approved by the holder of the Company’s Class B Voting Common Stock (the “Voting Stockholder”). At the time the 2022 LTI Plan was adopted, 400,000 shares of our Class A Common Stock were added as Authorized Shares. That number was increased to 1,900,000 in October 2022 and to 3,300,000 in November 2023. At any time, the number of shares that are available for issuance under future awards (“Available Shares”) is equal to the number of Authorized Shares reduced by the number of shares previously issued and the number of shares that may be issued under outstanding awards. The number of Available Shares is increased for shares covered by awards that are forfeited, cancelled or otherwise terminated without the issuance of shares or shares that are withheld at the request of a participant to satisfy such participant’s tax withholding obligations.

The 2022 LTI Plan is administered by the People and Compensation Committee of the Board of Directors (the “Committee”). The Committee generally determines and recommends the type, recipient, amount and terms for all awards issued under the 2022 LTI Plan, but each award issuance requires the approval of the full Board of Directors.

Restricted stock awards are generally subject to continued service over a specified period (typically one-to-three years) and expensed straight-line over the service period. Restricted stock units are generally subject to the achievement of performance goals in addition to continued service, and they are expensed, on a tranche-by-tranche basis, ratably over the service period beginning with the start of the measurement of performance.

2010 LTI Plan

The 2022 LTI Plan replaced the 2010 Long-Term Incentive Plan (the “2010 LTI Plan”) for all long-term incentive awards issued from and after January 1, 2022. The 2010 LTI Plan remains effective, but only with respect to LTI awards issued and outstanding as of December 31, 2021, and any authorized but unissued shares remaining in the 2010 LTI Plan are available only to satisfy such awards.

Under the 2010 LTI Plan, we granted awards of restricted stock or restricted stock units to employees and non-employee directors. Awards granted to employees were typically subject to performance and service conditions. Awards granted to non-employee directors were time-based awards subject only to service conditions. Awards were measured at the grant date fair value with compensation costs associated with the awards recognized over the requisite service period, usually the vesting period, on a straight-line basis.

Board of Director Awards

Immediately after our 2023 Annual Meeting of Stockholders in March 2023, we granted each of the five non-employee directors a restricted stock award covering 18,038 shares (90,190 shares in total). Those shares are scheduled to vest on the day immediately preceding the 2024 Annual Meeting of Stockholders (but in no event later than March 31, 2024), subject only to service conditions.

In March 2022, we granted each of the five non-employee directors a restricted stock award covering 26,490 shares (132,450 shares in total). Those shares vested on the day immediately preceding the 2023 Annual Meeting of Stockholders in March 2023.

In February 2021, we granted each of the four non-employee directors serving at that time a restricted stock award covering 31,936 shares (127,744 shares in total). Those shares vested on the day immediately preceding our 2022 Annual Meeting of Stockholders in March 2022.

In December 2020, we granted each of the nine non-employee directors serving at that time a restricted stock award covering 15,905 shares (143,145 shares in total). Those shares were scheduled to vest on March 31, 2021, subject only to service conditions. The vesting of 79,525 of such shares was accelerated to February 18, 2021 (the date of the 2021 Annual Meeting of Stockholders) when the term of service for five of the non-employee directors ended. The remaining 63,620 shares vested on March 31, 2021.

Employee Awards

FY23 Awards — In October 2022, we granted restricted stock unit awards covering a total of 912,524 shares to our executive officers and other key employees. These awards were issued as part of our annual LTI program for fiscal 2023. The awards have a three-year performance period consisting of fiscal 2023, fiscal 2024 and fiscal 2025. For each award, 60% of the total number of shares was allocated equally among the three fiscal years in the performance period (20% each), with each tranche having separate performance conditions. In addition, 20% of the total number of shares was allocated to a three-year cumulative performance condition applicable to the entire three-year performance period, and 20% was subject only to continued service. The number of shares available to vest from each performance-based tranche can range from 0 to 150% and is dependent on the achievement of the performance conditions for that tranche. All of the performance-based shares that become available to vest based on the achievement of the performance conditions, along with the time-based tranche, will vest on September 30, 2025, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2023 tranche and the three-year cumulative tranche were determined and communicated at the time of grant. Grant dates for the fiscal 2024 and fiscal 2025 tranches will be determined when the applicable performance targets are established for those tranches. As of September 30, 2023, we considered the performance targets for the fiscal 2023 tranche to be probable of achievement at the 147.3% level and the cumulative performance target for the three-year cumulative tranche to be probable of achievement at the 100% level. During fiscal 2023, we granted restricted stock unit awards covering an additional 8,036 shares to key employees in connection with promotions or new hires. These additional awards carry the same terms as those granted in October 2022.

FY22 Awards — In October and November 2021, we granted restricted stock unit awards covering a total of 981,327 shares to our executive officers and other key employees. These awards were issued as part of our annual LTI program for fiscal 2022. The awards have a three-year performance period consisting of fiscal 2022, fiscal 2023 and fiscal 2024. For each award, the total number of shares was allocated equally among the three fiscal years in the performance period, with each tranche having separate performance conditions. The number of shares available to vest from each tranche can range from 0 to 150% and is dependent on the achievement of the performance condition for that tranche. All of the shares that become available to vest based on the achievement of the performance conditions will vest on September 30, 2024, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2022 tranche were determined and communicated at the time of grant. Grant dates for the other two tranches will be determined when the applicable performance targets are established for these tranches. As of September 30, 2022, we considered the performance targets for the fiscal 2022 tranche to be probable of achievement at the 150% level, and as of September 30, 2023, we considered the performance targets for the fiscal 2023 tranche to be probable of achievement at the 147.3% level. During fiscal 2022, we granted restricted stock unit awards covering an additional 161,265 shares to executive officers and other key employees in connection with promotions or new hires. These additional awards carry the same terms as those granted in October and November 2021.

In October 2021, we granted a restricted stock award covering 29,722 to an executive officer as a special performance and retention award. This awards vests ratably over three years (fiscal 2022, fiscal 2023 and fiscal 2024), subject only to continued service.

FY21 Awards — In February 2021, we granted restricted stock units covering a total of 1,177,214 shares to our executive officers and other key employees. The awards have a three-year performance period consisting of fiscal 2021, fiscal 2022 and fiscal 2023. For each award, the total number of shares was allocated equally among the three fiscal years in the performance period, with each tranche having separate performance conditions. The number of shares available to vest from each tranche can range from 0 to 150% and is dependent on the achievement of the performance condition for that tranche. All of the shares that become available to vest based on the achievement of the performance conditions will vest on September 30, 2023, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2021 tranche were determined and communicated in February 2021, and performance targets for the fiscal 2022 tranche were determined and communicated in October 2021. The grant date for the fiscal 2023 tranche will be determined when the applicable performance targets are established for that tranche. As of September 30, 2021, we considered the performance targets for the fiscal 2021 tranche to be probable of achievement at the 150% level, as of September 30, 2022, we considered the performance targets for the fiscal 2022 tranche to be probable of achievement at the 150% level, and as of September 30, 2023, we considered the performance targets for the fiscal 2023 tranche to be probable of achievement at the 135.4% level. During fiscal 2021, we granted restricted stock unit awards covering an additional 4,722 shares of restricted stock to employees in connection with promotions or new hires. These additional awards carry the same terms as those granted in February 2021.

FY20 Awards — In January 2020, the Committee approved restricted stock unit awards for executive officers and key employees, but did not finalize the performance targets at that time. In January 2021, the Committee approved the applicable performance targets and we granted restricted stock unit awards covering a total of 550,224 shares of restricted stock to employees. We consider the awards to have a three-year performance period consisting of fiscal 2020, fiscal 2021 and fiscal 2022, with a service condition applicable to fiscal 2020 and then separate performance conditions applicable to fiscal 2021 and 2022. For each award, the total number of shares was allocated equally among fiscal 2021 and fiscal 2022, with each tranche having separate performance conditions. The number of shares available to vest from each tranche is dependent on the achievement of the performance condition for that tranche and can range from 0 to 100%. All of the shares that become available to vest based on the achievement of the performance conditions will vest on September 30, 2022, so long as the recipient continues active employment with the Company through that date. Performance targets for the fiscal 2021 tranche were communicated in January 2021, and performance targets for the fiscal 2022 tranche were determined and communicated in October 2021. As of September 30, 2021, we considered the performance targets for the fiscal 2021 tranche to be probable of achievement at the 100% level, and as of September 30, 2022, we considered the performance targets for the fiscal 2022 tranche to be probably of achievement at the 100% level. All of these awards vested in November 2022, after the Committee determined that the performance condition had been met.

FY19 Awards — In December 2018, we granted restricted stock unit awards covering a total of 971,615 shares to executive officers and other key employees. The awards had a three-year performance period consisting of fiscal 2019, fiscal 2020 and fiscal 2021, and were subject to a single three-year performance condition as well as a service condition through the end of the performance period. In November 2020, the Committee determined that the stated performance target for such awards was not probable of achievement and approved a modification of such awards that reduced the number of shares available for vesting and established a new one-year performance condition (in addition to the continuing service condition) applicable to the vesting of the remaining shares. We treated this modification as a cancellation of the existing awards and the grant of new awards subject to a new performance condition, which resulted in (1) the cancellation of awards covering 458,960 shares and the reversal of $2.9 million of previously recognized stock compensation expense and (2) the grant of 358,883 shares of restricted stock. During fiscal 2021, we granted restricted stock unit awards covering an additional 61,138 shares of restricted stock to employees in connection with promotions or new hires. These additional awards carried the same terms as those granted in December 2018. All of these awards vested in November 2021, after the Committee determined that the performance condition had been met.

As of September 30, 2023, the unamortized fair value of share awards to be amortized over their remaining vesting periods was approximately $10.6 million. The weighted-average period over which these costs will be amortized is approximately two years.

The following table presents amounts related to our stock compensation arrangements:

	Fiscal Year Ended September 30,
(in thousands)	2023		2022		2021
Share-based compensation costs	$	9,539	$	5,053	$	3,946
Income tax (benefit) expense on share-based compensation	(1,125)		(557)		561

The following table presents a summary of stock compensation activity:

	Shares	Weighted Average Grant Date Fair Value
Outstanding as of September 30, 2022	2,113,323	$	5.88
Granted	1,010,750	7.82
Released (a)	(490,145)	4.94
Cancelled	(78,029)	6.70
Outstanding as of September 30, 2023	2,555,899	$	6.80

(a) 118,011 shares were withheld to satisfy related income tax withholding.

The following table presents a summary of the fair value of shares granted:

	Fiscal Year Ended September 30,
(in millions except per share amounts)	2023		2022		2021
Weighted average grant date fair value per share granted (a)	$	7.82	$	7.24	$	4.92
Total market value of shares released	$	4.7	$	3.7	$	3.4

(a) Awards with performance and time-based vesting provisions are generally valued based upon the underlying share price as of the issuance date.

Other

We have not declared or paid any dividends and currently do not anticipate paying any dividends in the immediate future. As described in Note 9: Debt, payment of a dividend requires an adjustment to the conversion rate of our Convertible Notes. Should we pay dividends in the future, our certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid at the same per share amounts on both classes of stock. Any future determination to pay cash dividends will be at the discretion of our Board of Directors.