Annual report [Section 13 and 15(d), not S-K Item 405]

Equity-Based Compensation

v3.25.0.1
Equity-Based Compensation
 12 Months Ended
Dec. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Equity-Based Compensation
Note S – 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 December 31, 2024, Tranches I and III were fully vested and Tranche II is still subject to the market-based vesting condition.

2021 Omnibus Incentive Plan
Shares of the Company’s stock reserved for grants under the 2021 Omnibus Incentive Plan (the “Plan”) were 11,786,489 and 10,475,566 as of December 31, 2024 and December 31, 2023, respectively. Incentive stock options may only be granted to employees and officers employed by the Company. The Plan appoints the Board, the Compensation Committee or such other committee consisting of two or more individuals (collectively, the “Committee”) appointed by the Board to administer the Plan.

Stock Options
The Company’s 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 Company did not grant any options under the Plan during the years ended December 31, 2024 and 2023, respectively.

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, 2022
 2,153,591  $ 2.70  $ 7.22  8.60
Expired (13,001) 3.28  9.86 
Forfeited (37,999) 2.81  7.74 
Outstanding as of December 31, 2023 2,102,591  $ 2.69  $ 7.20  7.42
Exercised (188,751) 1.87  8.24 
Expired (105,568) 1.77  9.99 
Forfeited (65,330) 2.43  5.98 
Outstanding as of December 31, 2024
 1,742,942  $ 2.64  $ 6.96  7.04

As of December 31, 2024, the total unrecognized compensation cost related to unvested stock options granted under the Plan was $0.2 million and is expected to be recognized over a weighted-average period of 0.5 years. As of December 31, 2024, there were 1,487,468 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 (67,500) 3.50 
Outstanding as of December 31, 2024
 1,459,962  $ 8.48  1.6 $ 24,031 

As of December 31, 2024, total unrecognized compensation cost related to unvested PSUs granted under the Plan was $9.2 million and is expected to be recognized over a weighted-average period of 1.6 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, with the exception of the awards granted on August 30, 2024, which vest on the one year anniversary of the grant date, subject to the grantees continued employment or service to the Company.
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, 2022 2,282,778  $ 6.30  1.3 $ 4,520 
Granted 1,846,112  2.62 
Vested (979,810) 6.44 
Forfeited (297,865) 6.33 
Unvested as of December 31, 2023 2,851,215  $ 3.89  1.2 $ 8,126 
Granted 1,296,910  6.89 
Vested (1,367,827) 4.76 
Forfeited (338,327) 4.38 
Unvested as of December 31, 2024
 2,441,971  $ 4.93  1.1 $ 40,195 

As of December 31, 2024, total unrecognized compensation cost related to unvested restricted stock units granted under the Plan was $9.2 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 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. Shares of the Company’s stock reserved for grants under the ESPP were 2,680,999 and 2,025,537 as of December 31, 2024 and December 31, 2023, respectively. The ESPP appoints the Compensation Committee to administer the ESPP. 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 December 31, 2024, the Company had two completed and no 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 December 31, 2024, 276,538 shares had been purchased and 2,404,461 shares were available for future sales under the ESPP.
The table below presents the equity-based compensation expense recorded for the following periods:
Year Ended
December 31, 2024 December 31, 2023
Cost of sales
ESPP
 $ 237  $ — 
Stock options
 15  117 
Restricted stock units
 1,903  2,540 
Performance-based restricted stock units
 43  13 
Total cost of sales $ 2,198  $ 2,670 
Selling, general and administrative expenses
ESPP
 $ 142  $ — 
Stock options
 1,155  1,578 
Restricted stock units
 5,117  3,982 
Performance-based restricted stock units
 2,714  428 
Total selling, general and administrative expenses $ 9,128  $ 5,988 
Total equity-based compensation expense $ 11,326  $ 8,658