Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

15. Stock-Based Compensation

Long-term incentive plan

During 1995, we established the 1995 Long-Term Incentive Stock Option Plan (the “Plan”), which permits the granting of stock options (including incentive stock options and nonqualified stock options) stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards or any combination of these to employees, directors or consultants. The Plan was amended and restated effective April 22, 2016 and expires on April 21, 2026; the total number of shares that could be issued under the Plan is 750,000. As of December 31, 2023, we have issued 585,163 shares under the Plan, zero stock options and 164,837 non-cash settled restricted stock units (RSUs) were outstanding under the Plan, while zero shares remain for future grants under the Plan.

We recognize compensation expense on a pro rata straight-line basis over the requisite service period for stock-based compensation awards with both graded and cliff vesting terms. We recognize the cumulative effect of a change in the number of awards expected to vest in compensation expense in the period of change. We have not capitalized any portion of our stock-based compensation. Our forfeiture rate is based on actuals.

During the years ended December 31, 2023 and 2022, we recognized $1.2 million and $2.0 million, respectively, of stock-based compensation expense under the fair value method. Accordingly, we recognized associated deferred income tax expense of $179 thousand and $140 thousand before valuation allowance, respectively, during the years ended December 31, 2023 and 2022.

During the years ended December 31, 2023 and 2022, we issued RSUs and PRSUs to employees which vest upon the achievement of specific market-based or time-based measures. The fair value of RSU’s is calculated using the stock price on the grant date and expensed ratably over the service period. The fair value for PRSU’s is determined using a Monte Carlo simulation model and expensed ratably over the derived service period, which typically ranges between one year and five years.

The following table summarizes the information about vested and unvested restricted stock units for the years ended December 31, 2023 and 2022.

	Number of Shares			Weighted Average Fair Value

Nonvested RSUs at January 1, 2022		159,567		$	17.70
RSUs granted		179,025			14.89
RSUs forfeited		(47,297	)		21.34
RSUs vested		(78,870	)		16.82

Nonvested RSUs at December 31, 2022		212,425		$	13.99

Nonvested RSUs at January 1, 2023		212,425		$	13.99
RSUs granted		199,810			2.17
RSUs forfeited		(60,612	)		11.01
RSUs vested		(176,786	)		7.87

Nonvested RSUs at December 31, 2023		174,837		$	7.29

As of December 31, 2023, we had $0.6 million of unrecognized compensation expense related to the RSUs expected to be recognized on a pro-rata straight line basis over a weighted average remaining service period of approximately 0.9 years.

GSE’s 1995 long-term incentive program (“LTIP”) provides for the issuance of performance-vesting and time-vesting restricted stock units to certain executives and employees. Vesting of the performance-vesting restricted stock units (“PRSU”) is contingent upon the employee’s continued employment and the Company’s achievement of certain performance goals during designated performance periods as established by the Compensation Committee of the Company’s Board of Directors. We recognize compensation expense, net of estimated forfeitures, for PRSUs on a straight-line basis over the performance period based on the probable outcome of achievement of the financial targets. At the end of each reporting period, we estimate the number of PRSUs that are expected to vest, based on the probability and extent to which the performance goals will be met, and take into account these estimates when calculating the expense for the period. If the number of shares expected to be earned changes during the performance period, we make a cumulative adjustment to compensation expense based on the revised number of shares expected to be earned.

Restricted Stock Units

During the year ended December 31, 2023, we granted approximately 140,044 RSUs with an aggregate fair value of approximately $0.4 million. During the year ended December 31, 2022, we granted approximately 99,025 time-based RSUs with an aggregate fair value of approximately $1.5 million. During the year ended December 31, 2023, we forfeited 5,575 RSUs compared to 10,583 RSUs forfeited for the year ended December 31, 2022. During the year ended December 31, 2023, we vested 156,786 RSUs compared to 58,870 RSUs vested during the year ended December 31, 2022. A portion of the time-based RSUs vest quarterly in equal amounts over the course of eight quarters, and the remainder vest annually in equal amounts over the course of one to three years.

Performance Restricted Stock Units

During the year ended December 31, 2023, we granted 59,767 PRSUs. These grants are subject to multiple vesting criteria including reaching a 20-day VWAP of $15.0 prior to the expiration of the awards, and a time-vesting restriction, which will vest in equal parts over the next 15 quarters ending December 31, 2026. During the year ended December 31, 2023, we forfeited 55,037 PRSUs and vested (20,000) PRSUs of which, (5,000) PRSUs were cash-settled, respectively.

During the year ended December 31, 2022, we granted 80,000 PRSUs including 20,000 cash-settled grants to employees. These grants are subject to multiple vesting criteria including reaching a 20-day VWAP of $19.4 prior to the expiration of the awards, and a time-vesting restriction, which will vest in equal portions over the next 15 quarters ending December 31, 2025. During the year ended December 31, 2022, we forfeited 36,714 PRSUs and vested (20,000) PRSUs, of which, (5,000) PRSUs were cash-settled, respectively.