Note 16 - Share-based Compensation

6 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(16) Share-Based Compensation

We recognized total share-based compensation expense of $0.8 million and $0.7 million during the six months ended December 31, 2024 and 2023, respectively. These amounts have been included in the consolidated statements of comprehensive income within SG&A expenses. At December 31, 2024, $2.6 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 2.0 years. There was no share-based compensation capitalized during the six months ended December 31, 2024 and 2023.

At December 31, 2024, there were 1,142,853 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 Plan also provides for the issuance of stock appreciation rights (“SARs”) on issued options; however, no SARs have been issued to date. All share-based awards are approved by the Compensation Committee of the Board of Directors after consideration of recommendations proposed by the Chief Executive Officer. 

Stock Option Activity

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

Non-Employee Stock Option Grants. The Plan also provides for the grant of share-based awards to non-employee directors of the Company. During the first six months of fiscal 2025, we granted 16,650 stock options at an exercise price of $30.03 to our non-employee directors. In the prior year period, we granted 14,330 stock options at an exercise price of $34.89. 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. 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 of Directors. At December 31, 2024, $0.2 million of total unrecognized compensation expense related to unvested non-employee stock options is expected to be recognized over a weighted average remaining period of 2.0 years.

A total of 116,411 stock options were outstanding at December 31, 2024, with a weighted average exercise price of $25.73 and a weighted average grant date fair value of $6.64.

Restricted Stock Unit Activity

During the first six months of fiscal 2025, we granted 23,399 non-performance based restricted stock units (“RSUs”), with a weighted average grant date fair value of $24.04. 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 17,232 RSUs with a weighted average grant date fair value of $28.58 and vest in three equal annual installments on the anniversary date of the grant.

During the first six months of fiscal 2025, 20,282 RSUs vested and 3,162 were forfeited, leaving 46,263 RSUs unvested and outstanding at December 31, 2024, with a weighted average grant date fair value of $24.02. At December 31, 2024, $0.9 million of total unrecognized compensation expense related to unvested RSUs is expected to be recognized over a weighted average remaining period of 1.9 years.

Performance Stock Unit Activity

Payout of performance stock units (“PSUs”) 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 six months of fiscal 2025, we granted 92,669 PSUs with a weighted average grant date fair value of $23.06 compared with 73,095 PSUs at a weighted average grant date fair value of $27.58 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 six months of fiscal 2025, 68,250 PSUs vested and 5,237 were forfeited, leaving 385,023 PSUs unvested and outstanding at December 31, 2024, with a weighted average grant date fair value of $23.34. Unrecognized compensation expense at December 31, 2024, related to PSUs, was $1.5 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 2.1 years.