Redwire Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation

Equity-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Equity-Based Compensation

Note N – Equity-Based Compensation

Incentive Units

The Company’s former parent, AE Red Holdings, LLC (formerly known as Redwire Holdings, LLC) (“Holdings”) 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 in 2021. 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 was recognized during 2021 and 2022 and as of September 30, 2024, Tranches I and III were fully vested and 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 requisite service period and recognizes forfeitures as they occur. The fair value of options granted under the Plan is estimated on the grant date under the Black-Scholes OPM.

The table below presents the activity of stock options under the Plan:


	Number of Options	Weighted-Average Grant Date Fair Value per Share		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (Years)















Outstanding as of December 31, 2023	2,102,591	$	2.69	$	7.20	7.42
Granted	—	—		—
Exercised	(48,452)	1.10		3.13
Expired	(105,568)	1.77		9.99
Forfeited	(63,997)	2.44		6.04
Outstanding as of September 30, 2024	1,884,574	$	2.60	$	7.18	6.90

As of September 30, 2024, the total unrecognized compensation cost related to unvested stock options granted under the Plan was $0.3 million and is expected to be recognized over a weighted-average period of 0.7 years. As of September 30, 2024, there were 1,618,439 stock options that were vested and exercisable.

Performance-based Restricted Stock Units

The Plan authorizes the grant of performance-based restricted stock units (“PSUs”). The PSUs generally vest upon completion of a three-year period (“Performance Period”). The number of shares, if any, that are ultimately awarded is contingent upon the Company’s closing price per share at the end of the Performance Period and continued employment or service to the Company. The performance share payout is based on a market condition, and as such, the awards are valued using a Monte Carlo simulation model on the grant date. The model generates the fair value of the award at the grant date, which is then recognized as expense on a straight-line basis over the vesting period. The Company recognizes forfeitures as they occur.

On July 11, 2024, the Company granted 821,365 shares of PSUs to certain officers, managers and other eligible employees pursuant to the Plan. The PSU award allows the grantee to earn between 0% and 200% of the award based on the Company’s closing price per share at December 31, 2025. The grant date fair value of these awards was $12.66 per share.

The fair value of PSUs granted under the Plan was estimated on the grant date using the Monte Carlo simulation model with the following assumptions:


	2024 Grants			2023 Grants
Valuation date stock price	$	7.45		$	2.63
Remaining term of performance period	2.47 years			2.49 years
Expected volatility	71.50		%	81.00		%
Risk-free rate of return	4.34		%	4.70		%
Expected annual dividend yield	—		%	—		%

The table below presents the activity of performance-based restricted stock units under the Plan:


	Number of PSUs	Weighted-Average Grant Date Fair Value per Share		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2023	706,097	$	3.15	2.0	$	2,012
Granted	821,365	12.66
Vested	—	—
Forfeited	(62,500)	3.15
Outstanding as of September 30, 2024	1,464,962	$	8.48	1.8	$	10,064

As of September 30, 2024, total unrecognized compensation cost related to unvested PSUs granted under the Plan was $10.5 million and is expected to be recognized over a weighted-average period of 1.8 years.

Restricted Stock Units

Restricted stock units awarded under the Plan follow the same 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 requisite service period and recognizes forfeitures as they occur.

On May 23, 2024, the Company granted 125,526 restricted stock units of the Company’s common stock to non-employee directors. The restricted stock units vest on the one year anniversary of the grant date, subject to the director’s continued service on the Board. The weighted average grant date fair value of these awards was $4.78 per share.

On July 11, 2024 and August 30, 2024, the Company granted 958,035 and 148,148 restricted stock units, respectively, to certain officers, managers and other eligible employees with a grant date fair value of $7.45 and $6.75 per share, respectively. The restricted stock units follow the same vesting conditions as the options described above.

The table below presents the activity of restricted stock units under the Plan:


	Number of RSUs	Weighted-Average Grant Date Fair Value per Share		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value












Unvested as of December 31, 2023	2,851,215	$	3.89	1.2	$	8,126
Granted	1,296,910	6.89
Vested	(1,054,339)	2.75
Forfeited	(307,849)	4.38
Unvested as of September 30, 2024	2,785,937	$	5.66	1.2	$	19,139

As of September 30, 2024, total unrecognized compensation cost related to unvested restricted stock units granted under the Plan was $11.1 million and is expected to be recognized over a weighted-average period of 1.7 years.

Employee Stock Purchase Plan

On September 2, 2021, the Company’s Board adopted the Redwire Corporation 2021 Employee Stock Purchase Plan (the “ESPP”) which authorizes the grant of rights to purchase common stock of the Company to employees, officers and directors (if they are otherwise employees) of the Company. Under the ESPP, there is an enrollment period for each offering, when each eligible employee for that offering period has the option to enroll for that offering period, which allows the eligible employee to purchase shares of the Company’s common stock at the end of the offering period. Each offering period under the ESPP is generally for five months, which can be modified from time to time. Subject to limitations, each participant will be permitted to purchase a number of shares determined by dividing the employee’s accumulated payroll deductions for the offering period by the applicable purchase price, which is equal to 85% of the fair market value of the Company’s common stock at the beginning or end of each offering period, whichever is less. A participant must designate in the enrollment package the percentage (if any) up to 15% of compensation to be deducted during that offering period for the purchase of stock under the ESPP, subject to certain limitations. As of September 30, 2024, the Company had one completed and one active offering period.

The ESPP is considered a compensatory plan with the related compensation cost expensed over the five month offering period. The Company utilizes the Black-Scholes OPM to compute the fair market value of shares under the ESPP for each offering period. As of September 30, 2024, 153,090 shares had been purchased and 2,527,909 shares were available for future sales under the ESPP.

The table below presents the equity-based compensation expense recorded for the following periods:



	Three Months Ended				Nine Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Cost of sales
ESPP	$	60	$	—	$	130	$	—
Stock options	1		13		16		105
Restricted stock units	459		681		1,576		1,952
Performance-based restricted stock units	19		6		28		6
Total cost of sales	$	539	$	700	$	1,750	$	2,063

Selling, general and administrative expenses

ESPP	$	42	$	—	$	88	$	—
Stock options	311		417		1,040		1,161
Restricted stock units	1,588		1,124		3,692		2,883
Performance-based restricted stock units	1,113		210		1,476		210
Total selling, general and administrative expenses	$	3,054	$	1,751	$	6,296	$	4,254

Total equity-based compensation expense	$	3,593	$	2,451	$	8,046	$	6,317