Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation

v3.23.1
Equity-Based Compensation
 3 Months Ended
Mar. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Equity-Based Compensation
Note N – Equity-Based Compensation
Class P Unit Incentive Plan
Holdings, the Company’s former parent, adopted a written compensatory benefit plan (the “Class P Unit Incentive Plan”) to provide incentives to existing or new employees, officers, managers, directors, or other service providers of the Company or its subsidiaries in the form of Holdings’ Class P Units (“Incentive Units”). As amended, the Tranche I and the Tranche III Incentive Units became fully vested, upon the closing of the Merger. Holdings also amended the Class P Unit Incentive Plan so that the Tranche II Incentive Units would vest on any liquidation event, as defined in the Class P Unit Incentive Plan, rather than only upon consummation of the sale of Holdings, subject to the market-based condition stipulated in the Class P Unit Incentive Plan prior to its amendment. All compensation expense related to Incentive Units was recognized during 2021 and 2022. As of March 31, 2023, Tranches I and III were fully vested, while Tranche II is still subject to the market-based vesting condition.

2021 Omnibus Incentive Plan
Stock Options
The Company’s 2021 Omnibus Incentive Plan (the “Plan”) authorizes the grant of stock options (incentive and non-qualified) to purchase shares of the Company’s common stock with a contractual term of 10 years. The options vest over a three-year term as follows: 33.3% on the first anniversary of the grant date, 33.3% on the second anniversary of the grant date, and 33.4% on the third anniversary of the grant date. Vesting is contingent upon continued employment or service to the Company; both the vested and unvested portion of an option will be immediately forfeited and canceled if employment or service ceases to the Company. The Company recognizes equity-based compensation expense for the options equal to the fair value of the awards on a straight-line basis over the service based vesting period and recognizes forfeitures as they occur.
A summary of stock options activity under the Plan as of March 31, 2023 and changes during three months ended March 31, 2023 is presented as follows:
Shares Weighted-Average Grant Date Fair Value per Share Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (Years)
Outstanding at December 31, 2022
 2,153,591  $ 2.70  $ 7.22  8.60
Forfeited (37,999) 2.81  7.74 
Outstanding at March 31, 2023
 2,115,592  $ 2.70  $ 7.21  8.30

As of March 31, 2023, the total unrecognized compensation cost related to unvested stock options granted under the Plan was $2.8 million and there were 480,472 stock options that were vested and exercisable.

Restricted Stock Units
Restricted stock units awarded under the Plan follow the same contractual terms and vesting conditions as the options described above and are generally subject to forfeiture in the event of termination of employment prior to vesting dates. The Company recognizes equity-based compensation expense for the restricted stock units equal to the fair value of the awards on a straight-line basis over the service based vesting period and recognizes forfeitures as they occur.

A summary of restricted stock units activity under the Plan as of March 31, 2023 and changes during the three months ended March 31, 2023 is presented as follows:
Restricted Shares Weighted-Average Grant Date Fair Value per Share Weighted-Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value
Unvested at December 31, 2022
 2,282,778  $ 6.30  1.3 $ 4,520 
Forfeited (96,944) 7.19 
Unvested at March 31, 2023
 2,185,834  $ 6.26  1.1 $ 6,623 

As of March 31, 2023, total unrecognized compensation cost related to unvested restricted stock units granted under the Plan was $10.1 million and is expected to be recognized over a weighted-average period of 1.8 years.

The table below presents the equity-based compensation expense recorded during the following periods:
Three Months Ended
March 31, 2023 March 31, 2022
Cost of Sales
Incentive Units $ —  $ 181 
Stock Options 46  12 
Restricted Stock Units 673  627 
Total cost of sales $ 719  $ 820 
Selling, general and administrative expenses
Incentive Units —  2,171 
Stock Options 361  409 
Restricted Stock Units 878  1,011 
Total selling, general and administrative expenses $ 1,239  $ 3,591 
Total equity-based compensation expense $ 1,958  $ 4,411