Note 17 - Share-based Compensation

9 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(17) Share-Based Compensation

We recognized total share-based compensation expense of $1.1 million during both the nine months ended March 31, 2024 and 2023. These amounts have been included in the consolidated statements of comprehensive income within SG&A expenses. As of March 31, 2024, $1.8 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 1.7 years. There was no share-based compensation capitalized during the nine months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, there were 1,249,786 shares of common stock available for future issuance pursuant to the Ethan Allen Interiors Inc. Stock Incentive Plan (the “Plan”), which provides for the grant of stock options, restricted stock and stock units. The number and frequency of share-based awards granted are based on competitive practices, our operating results and other factors.

Stock Option Activity

Employee Stock Option Grants. There were no stock option awards granted to employees during the nine months ended March 31, 2024 and 2023.

Non-Employee Stock Option Grants. The Plan also provides for the grant of share-based awards, including stock options, to non-employee directors of the Company. During the first quarter of fiscal 2024, we granted 14,330 stock options at an exercise price of $34.89 to our non-employee directors. In the prior year period, we granted 23,970 stock options at an exercise price of $25.03. These stock options vest in three equal annual installments beginning on the first anniversary of the date of grant so long as the director continues to serve on the Company’s Board of Directors (the “Board”). All options granted to directors have an exercise price equal to the fair market value of our common stock on the date of grant and remain exercisable for a period of up to ten years, subject to continuous service on our Board.

As of March 31, 2024, $0.2 million of total unrecognized compensation expense related to non-vested employee and non-employee stock options is expected to be recognized over a weighted average remaining period of 1.9 years. A total of 104,147 stock options were outstanding as of March 31, 2024, at a weighted average exercise price of $24.92 and a weighted average grant date fair value of $6.68.

Restricted Stock Unit Activity

During the first nine months of fiscal 2024, we granted 17,232 non-performance based restricted stock units (“RSUs”), with a weighted average grant date fair value of $28.58. The RSUs granted to employees entitle the holder to receive the underlying shares of common stock as the unit vests over the relevant vesting period. The RSUs do not entitle the holder to receive dividends declared on the underlying shares while the RSUs remain unvested and vest in three equal annual installments on the anniversary of the date of grant. In the prior year period, we granted 21,257 RSUs with a weighted average grant date fair value of $19.48 and vest in three equal annual installments on the anniversary date of the grant.

During the first nine months of fiscal 2024, 22,037 RSUs vested and 2,750 RSUs forfeited, leaving 46,308 RSUs unvested and outstanding as of March 31, 2024, with a weighted average grant date fair value of $23.42.

As of March 31, 2024, $0.8 million of total unrecognized compensation expense related to non-vested RSUs is expected to be recognized over a weighted average remaining period of 1.8 years.

Performance Stock Unit Activity

Payout of performance stock unit (“PSU”) grants depend on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally three fiscal years. The number of awards that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring employees to remain employed with us through the end of the three-year performance periods.

During the first nine months of fiscal 2024, we granted 73,095 PSUs with a weighted average grant date fair value of $27.58 compared with 103,096 PSUs at a weighted average grant date fair value of $18.75 in the prior year. We estimate, as of the date of grant, the fair value of PSUs with a discounted cash flow model, using as model inputs the risk-free rate of return as the discount rate, dividend yield for dividends not paid during the restriction period, and a discount for lack of marketability for a one-year post-vest holding period. The lack of marketability discount used is the present value of a future put option using the Chaffe model.

During the first nine months of fiscal 2024, 81,250 PSUs, that were previously granted in August 2020, vested and none were forfeited. As of March 31, 2024, a total of 378,841 PSUs were outstanding, with a weighted average grant date fair value of $22.08.

Unrecognized compensation expense as of March 31, 2024, related to PSUs, was $0.9 million based on the current estimates of the number of awards that will vest, and is expected to be recognized over a weighted average remaining period of 1.6 years.