Compensation Plans |
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| Compensation Plans | COMPENSATION PLANS Equity-based compensation cost is measured at the grant date for all equity-based awards made to employees based on the fair value of the awards and is attributed on a straight-line basis for awards with service conditions and on an accelerated attribution basis for awards with performance conditions over the requisite service period, which is generally the vesting period.
We account for grants of equity awards to employees in accordance with ASC 718, Compensation-Stock Compensation. We use the Black-Scholes option-pricing model to determine the fair value of the stock option awards. We estimate the expected volatility by using a weighted average of the historical volatility of our common stock and the historical volatilities of a peer group comprised of publicly-traded companies in the same industry. The risk-free interest rate is based on United States Treasury zero-coupon issues with remaining terms similar to the expected term of the stock option awards. The expected term for stock options granted is estimated using the “simplified” method, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock option due to our lack of sufficient historical data.
2019 Equity Incentive Plan
On April 17, 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides eligible participants with compensation opportunities in the form of cash and equity incentive awards. The 2019 Plan is designed to enhance our ability to attract, retain and motivate our executive officers and other key management and incentivizes executives to increase our long-term growth and equity value in alignment with the interests of our stockholders. Under the 2019 Plan, we may grant up to 5,000,000 stock options and other equity-based awards to employees, directors and officers.
In connection with the IPO, we granted an aggregate of 176,784 options to our directors and certain employees. The stock options were granted with an exercise price of $17.00 per share and vest ratably over a zero to four-year period. Additionally, we granted an aggregate of 477,500 options to certain employees on August 20, 2019. The stock options were granted with an exercise price of $6.42 per share and vest ratably over a five to ten-year period. During the year ended December 31, 2019, we recorded compensation expense of approximately $1.1 million related to stock options, which was included within "salaries, benefits and payroll taxes" in our consolidated statement of operations and comprehensive loss. Total unrecognized compensation expense related to unvested stock options was approximately $3.0 million, which we expect to recognize over a weighted-average period of 4.2 years.
The fair value of the stock option awards during the year ended December 31, 2019 was determined on the grant dates using the Black-Scholes valuation model based on the following ranges of weighted-average assumptions:
(1)Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.
(2)We assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.
(3)Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.
(4)The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.
A summary of stock option activity for the year ended December 31, 2019 is as follows:
The weighted-average grant date fair value of options granted for the year ended December 31, 2019 was $6.70. There were no stock options granted for the year ended December 31, 2018. The total fair value of stock options vested during the year ended December 31, 2019 was approximately $0.1 million.
Common Units of the Operating Company Granted as Equity-Based Compensation
In connection with the closing of the IPO, we consummated certain organizational transactions with the Operating Company, as described in further detail in “Note 1—Business Operations and Organization,”, among which, the Operating Company reclassified unvested Class B membership interests and profits interests which had been granted as equity-based compensation into Common Units of the Operating Company.
During the year ended December 31, 2019, we recorded compensation expense of approximately $6.9 million related to Common Units granted as equity-based compensation awards, which is included within "salaries, benefits and payroll taxes" in our consolidated statement of operations and comprehensive loss. The grant date fair value of equity-based compensation awards granted prior to 2019 was de minimis, and therefore we did not record any equity-based compensation expense during the year ended December 31, 2018. As of December 31, 2019, total unrecognized compensation expense related to unvested Common Units granted as equity-based compensation was approximately $5.2 million, which we expect to recognize over a weighted-average period of 2.2 years.
The following table provides a summary of the unvested Common Units outstanding and related transactions:
401(k) Plan
We have a 401(k) retirement savings plan. Eligible employees must be at least 18 years of age and have completed six months of service. Participants are eligible to receive a matching contribution from us up to the first 3% of compensation plus 50% of participant contributions between 3% and 5% of compensation. Matching contributions, other than safe-harbor contributions, vest 33% per year and are 100% vested after three years of service. Safe harbor matching contributions are 100% vested as of the date of the contribution. Our matching contributions to the plan were approximately $0.3 million and $0.2 million for the years ended December 31, 2019 and 2018, respectively.
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