17. Equity Compensation Plans

2017 Equity Incentive Plan

The 2017 Equity Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock and other stock-based awards. Directors, officers and other employees and subsidiaries and affiliates, as well as others performing consulting or advisory services for the Company and its subsidiaries, will be eligible for grants under the 2017 Incentive Plan. The aggregate number of shares of Common Stock which may be issued or used for reference purposes under the 2017 Incentive Plan or with respect to which awards may be granted may not exceed 7.9 million shares. As of December 31, 2023, 2.8 million shares remain available for issuance under the 2017 Incentive Plan. During the years ended December 31, 2023, 2022 and 2021, stock-based compensation associated with equity awards issued under the 2017 Incentive Plan totaled $4.9 million, $3.4 million and $3.4 million, respectively, while the related tax benefits recognized on these awards were $1.5 million, $0.9 million and $3.9 million, respectively.

Class A Common Stock Awards

In June 2023, the Company granted stock awards under the 2017 Incentive Plan to non-executive directors on the Board. The stock awards vested immediately and the Company issued 0.2 million shares of Class A common stock and recognized $0.6 million in expense during the year ended December 31, 2023, which represented the fair value of the stock awards on the grant date.

In May 2022, the Company granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Board. The stock awards vested immediately and the Company issued 0.1 million shares of Class A common stock and recognized $0.6 million in expense during the year ended December 31, 2022, which represented the fair value of the stock awards on the grant date.

In May 2021, the Company granted stock awards under the Company’s 2017 Equity Incentive Plan to independent directors on the Board. The stock awards vested immediately and the Company recognized $0.6 million in expense during year ended December 31, 2021, which represented the fair value of the stock award on the grant date.

Amended and Restated Grant Agreements

On March 15, 2023, in accordance with the 2017 Incentive Plan, the Company entered into amended and restated grant agreements relating to stock options and restricted stock unit awards previously granted to the Company’s chief executive officer in March 2022 and June 2022. The amended agreements revised the vesting schedule of the awards included in each grant. Pursuant to these agreements, 0.3 million of restricted stock units and stock options fully vested on March 25, 2023, another 0.3 million of restricted stock units and stock options, which included conditionally granted awards that were approved by shareholders at the 2023 Annual Meeting, will vest on March 25, 2024, and the remaining 0.3 million of conditionally granted awards approved by shareholders at the 2023 Annual Meeting will vest in full on March 25, 2025. These amendments resulted in the acceleration of $0.8 million of stock-based compensation expense into fiscal 2023 compared to the expense that would have been recorded based on vesting under the original agreements.  

Employee Stock Options

In June 2023, the 0.3 million of conditionally granted stock options to the Company’s chief executive officer were approved by shareholders. These stock options have an exercise price of $6.82 per option, expire in four years and vest over a two-year period. The fair value of this award, which was determined to be $0.1 million on the effective date, is being expensed over the vesting period on a straight-line basis.

In March and June 2022, the Company granted 0.5 million and 0.1 million stock options, respectively, under the 2017 Equity Incentive Plan to its chief executive officer at an exercise price of $6.82 per option. The stock options expire in five years and were to vest over a three-year period. In April 2022, with the chief executive officer’s consent, the Company rescinded and cancelled 0.4 million of the stock options granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan. The Company determined the fair value of the net award of 0.2 million stock options to be $0.4 million which was expensed on a straight-line basis over the vesting period.

During the year ended December 31, 2021, the Company granted 0.2 million stock options under the Company’s 2017 Equity Incentive Plan to certain management of the Company. These stock options have exercise prices ranging from $22.57 to $32.28. The stock options expire in five years and vest over a four-year period. The estimated fair value of the stock options is amortized over the options vesting period on a straight-line basis. The Company determined the fair value of the 0.2 million options granted during the year ended December 31, 2021 to be $2.0 million which will be expensed over the vesting period. Included in that amount were 0.2 million stock options with a fair value of $1.4 million that were subsequently forfeited in December 2021.

The following are the weighted average assumptions used in calculating the fair value of the total stock options granted in 2023, 2022 and 2021 using the Black-Scholes method:

In December 2021, 0.6 million of vested stock options related to the former Chief Executive Officer had the post-termination exercise period extended from 90 days to 352 days upon his resignation and departure from the Company. The $0.5 million of additional cost associated with this modification was recorded as stock-based compensation expense in the 2021 consolidated statement of operations.

The following table summarizes the Company’s total stock option activity for the year ended December 31, 2023:

Outstanding and exercisable stock options as of December 31, 2023 are as follows:

The following table summarizes the Company’s unvested stock option activity for the year ended December 31, 2023:

The Company recognized $0.5 million, $0.7 million and $2.1 million in stock-based compensation expense related to stock options during the years ended December 31, 2023, 2022 and 2021, respectively.

For stock options outstanding as of December 31, 2023, there was $0.1 million of total unrecognized stock compensation cost with a remaining recognition period of 0.8 years.

Cash received from the exercise of stock options was $0.2 million and $1.4 million in 2022 and 2021, respectively. The tax benefit associated with the exercise of these stock options was $0.4 million and $1.6 million in 2022 and 2021, respectively. The total intrinsic value of stock options exercised in 2022 and 2021 was $0.1 million and $2.7 million, respectively. There were no stock options exercised in 2023. The fair value of stock options vested in 2023, 2022 and 2021 totaled $0.6 million, $0.7 million and $1.9 million, respectively.

Employee Restricted Stock Units

In 2023, the Company granted 2.4 million restricted stock units under the 2017 Incentive Plan to certain members of the Company’s management team. Approximately one-half of the restricted stock units granted included a market vesting condition. During 2022, the Company granted 1.1 million restricted stock units under the 2017 Equity Incentive Plan to certain management of the Company. Approximately one-half of these restricted stock unit grants included a market vesting condition. In 2021, the Company granted 0.2 million of restricted stock units under the Company’s 2017 Equity Incentive Plan to certain management of the Company. Approximately one-third of these restricted stock unit grants included a market vesting condition. The restricted stock awards granted in 2023, 2022 and 2021 that did not have a market vesting condition had weighted average grant date fair values of $2.75, $5.53 and $19.25 per share, respectively. The estimated fair value of these awards is recognized on a straight-line basis over the vesting period.

In March and June 2022, the Company granted 0.5 million and 0.1 million restricted stock units, respectively, under the 2017 Equity Incentive Plan to the Company’s chief executive officer. These restricted stock awards had a grant date fair value of $6.32 and $4.81 per share, respectively. In April 2022, with the chief executive officer’s consent, the Company rescinded and cancelled 0.4 million of the restricted stock units granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan. The Company determined the fair value of the net award of 0.2 million restricted stock units to be $1.2 million which will be expensed on a straight-line basis over the vesting period.

The restricted stock awards granted in 2023, 2022 and 2021 that did have a market vesting condition had weighted average grant date fair values of $1.92, $3.71 and $16.28 per share, respectively. For these awards, the estimated fair value was measured on the grant date and incorporated the probability of vesting occurring. The estimated fair value is recognized over the derived service period (as determined by the valuation model), with such recognition occurring regardless of whether the market condition is met. The Company determined the weighted average grant date fair value of these awards using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model with the following weighted average assumptions:

The following table summarizes the Company’s restricted stock unit activity for the year ended December 31, 2023:

The Company recorded restricted stock unit expense of $3.7 million, $2.1 million and $0.5 million during the years ended December 31, 2023, 2022 and 2021, respectively.

For restricted stock units outstanding as of December 31, 2023, there was $5.5 million of total unrecognized stock compensation cost with a remaining recognition period of 1.8 years. The weighted average grant date fair value of restricted stock units granted in 2022 and 2021 was $4.72 and $18.18, respectively.

Aggregate Non-Cash Stock Compensation

The Company has accounted for all stock-based compensation under the provisions of ASC 718 Compensation—Stock Compensation. This standard requires the Company to record a non-cash expense associated with the fair value of stock-based compensation over the requisite service period. The table below summarizes the aggregate non-cash stock compensation recognized in the statement of operations for stock awards, employee stock options and the distribution by InnoHold of Paired Securities (in thousands).