Equity-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

EQUITY-BASED COMPENSATION:

Stock Incentive Plans

On May 23, 2019, Quanta’s stockholders approved the 2019 Plan. The 2019 Plan provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, RSUs, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Current and prospective employees, directors, officers, advisors or consultants of Quanta or its affiliates are eligible to participate in the 2019 Plan. Subject to certain adjustments, 7,466,592 shares of Quanta common stock are available for issuance in connection with awards under the 2019 Plan, which includes shares of Quanta common stock that remained available for issuance under the 2011 Plan as of the date stockholders approved the 2019 Plan. In addition, any share-settling awards previously awarded pursuant to the 2011 Plan that are ultimately forfeited, canceled, expired or settled in cash after May 23, 2019 will be added to the maximum number of shares available for issuance under the 2019 Plan. All awards subsequent to stockholder approval of the 2019 Plan have been and will

be made pursuant to the 2019 Plan and applicable award agreements, and no further awards have been or will be made under the 2011 Plan after such date. Awards made under the 2011 Plan prior to approval of the 2019 Plan remain subject to the terms of the 2011 Plan and the applicable award agreements.

RSUs to be Settled in Common Stock

During the three months ended September 30, 2019 and 2018, Quanta granted 0.5 million and 0.2 million of RSUs to be settled in common stock under the 2011 Plan and the 2019 Plan with weighted average grant date fair values of $34.07 and $33.73. During the nine months ended September 30, 2019 and 2018, Quanta granted 2.1 million and 1.5 million RSUs to be settled in common stock under the 2011 Plan and the 2019 Plan with weighted average grant date fair values of $35.45 and $34.43.The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant. RSU awards to be settled in common stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in three equal annual installments following the date of grant. Holders of RSUs to be settled in common stock awarded under the 2011 Plan generally are entitled to receive a cash dividend equivalent payment equal to any cash dividend payable on account of the underlying Quanta common stock on the payment date of any such dividend. Holders of RSUs to be settled in common stock awarded under the 2019 Plan are also entitled to cash dividend equivalents in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the RSUs vest, such that the dividend equivalent payments are subject to forfeiture.

During the three months ended September 30, 2019 and 2018, vesting activity consisted of 0.1 million RSUs settled in common stock with an approximate fair value at the time of vesting of $2.2 million and $1.5 million. During the nine months ended September 30, 2019 and 2018, vesting activity consisted of 1.3 million and 1.4 million RSUs settled in common stock with an approximate fair value at the time of vesting of $46.8 million and $47.7 million.

During the three months ended September 30, 2019 and 2018, Quanta recognized $12.3 million and $10.4 million of non-cash stock compensation expense related to RSUs to be settled in common stock. During the nine months ended September 30, 2019 and 2018, Quanta recognized $36.2 million and $32.4 million of non-cash stock compensation expense related to RSUs to be settled in common stock. Such expense is recorded in selling, general and administrative expenses. As of September 30, 2019, there was $72.1 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.66 years.

PSUs to be Settled in Common Stock

PSUs provide for the issuance of shares of common stock upon vesting, which occurs at the end of a three-year performance period based on achievement of certain performance metrics established by Quanta’s compensation committee, including company performance goals and, with respect to certain awards, Quanta’s total shareholder return as compared to a predetermined group of peer companies. The final number of shares of common stock issuable upon vesting of PSUs can range from 0% to 200% of the number of PSUs initially granted, depending on the level of achievement, as determined by Quanta’s compensation committee. Holders of PSUs are entitled to cash dividend equivalents in an amount equal to any cash dividend payable on account of the underlying Quanta common stock; however, payment of such amounts is not made until the PSUs vest, such that the dividend equivalent payments are subject to forfeiture.

During the three months ended September 30, 2019 and 2018, Quanta granted a nominal amount and no PSUs to be settled in common stock. During each of the nine months ended September 30, 2019 and 2018, Quanta granted 0.4 million PSUs to be settled in common stock under the 2011 Plan and the 2019 Plan with a weighted average grant date fair value of $15.49 and $12.24 per unit. The grant date fair values for awards of PSUs granted in the nine months ended September 30, 2019 and 2018, which included market-based metrics, were determined using a Monte Carlo simulation valuation methodology using the following key inputs:



	2019		2018
Valuation date price based on March 8, 2019 and February 28, 2018 closing stock prices of Quanta common stock	$35.19		$34.44
Expected volatility	25	%	34	%
Risk-free interest rate	2.43	%	2.39	%
Term in years	2.81		2.84

Quanta recognizes expense, net of estimated forfeitures, related to PSUs with market-based metrics based on the probability of achievement of the underlying performance metrics, multiplied by the completed portion of the three-year period and the fair

value of the total number of shares of common stock that Quanta anticipates will be issued based on such achievement. Quanta recognizes expense, net of estimated forfeitures, related to PSUs without market-based metrics based on the completed portion of the three-year period multiplied by the fair value of the total number of shares of common stock that Quanta anticipates will be issued. During the three months ended September 30, 2019 and 2018, Quanta recognized $1.3 million and $1.2 million in compensation expense associated with PSUs. During the nine months ended September 30, 2019 and 2018, Quanta recognized $4.9 million and $7.4 million in compensation expense associated with PSUs. Such expense is recorded in “Selling, general and administrative expenses.” During each of the three months ended September 30, 2019 and 2018, no PSUs vested, and no shares of common stock were issued in connection with PSUs. During the nine months ended September 30, 2019, 0.2 million PSUs vested, and 0.4 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs. During the nine months ended September 30, 2018, 0.1 million PSUs vested, and 0.1 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs.

RSUs to be Settled in Cash

Certain RSUs granted by Quanta are settled solely in cash. These cash-settled RSUs are intended to provide plan participants with cash performance incentives that are substantially equivalent to the risks and rewards of equity ownership in Quanta, typically vest in three equal annual installments following the date of grant, and are subject to forfeiture under certain conditions, primarily termination of service. Additionally, subject to certain restrictions, Quanta’s non-employee directors may elect to settle a portion of their RSU awards in cash. For RSUs settled in cash, the holders receive for each vested RSU an amount in cash equal to the fair market value of one share of Quanta common stock on the settlement date, as specified in the applicable award agreement.

Compensation expense related to RSUs to be settled in cash was $0.8 million and $1.2 million for the three months ended September 30, 2019 and 2018 and $4.5 million and $4.0 million for the nine months ended September 30, 2019 and 2018. Such expense is recorded in “Selling, general and administrative expenses.” RSUs that are anticipated to be settled in cash are not included in the calculation of weighted average shares outstanding for earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $0.4 million and $0.1 million to settle liabilities related to cash-settled RSUs in the three months ended September 30, 2019 and 2018 and $5.4 million and $6.1 million to settle liabilities related to cash-settled RSUs in the nine months ended September 30, 2019 and 2018. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $2.6 million and $3.4 million at September 30, 2019 and December 31, 2018.