Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION:

Stock Incentive Plans

The 2019 Plan was approved by Quanta’s stockholders in May 2019 and 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, the maximum number of shares available for issuance under the 2019 Plan is 7,466,592 shares, plus any shares underlying share-settling awards previously awarded pursuant to the 2011 Plan that are ultimately forfeited, canceled, expired or settled in cash subsequent to stockholder approval of 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. Awards made under the 2011 Plan prior to approval of the 2019 Plan remain subject to the terms of the 2011 Plan and applicable award agreements.

RSUs to be Settled in Common Stock

A summary of the activity for RSUs to be settled in common stock for the years ended December 31, 2021, 2020 and 2019 is as follows (shares in thousands):


	2021		2020		2019
	Shares	Weighted Average Grant Date Fair Value (Per share)	Shares	Weighted Average Grant Date Fair Value (Per share)	Shares	Weighted Average Grant Date Fair Value (Per share)
Unvested at January 1	3,869	$37.57	3,265	$35.34	2,634	$33.50
Granted	1,642	$94.83	2,029	$39.91	2,142	$35.62
Vested	(1,476)	$37.03	(1,269)	$35.69	(1,349)	$32.22
Forfeited	(155)	$48.52	(156)	$36.67	(162)	$35.20
Unvested at December 31	3,880	$61.64	3,869	$37.57	3,265	$35.34

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 or over a period of five to ten years 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 entitled to cash dividend equivalent payments 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. The approximate fair values of RSUs settled in common stock during the years ended December 31, 2021, 2020 and 2019 were $125.7 million, $51.6 million and $48.7 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, Quanta recognized $67.3 million, $55.7 million and $45.5 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 December 31, 2021, there was $139.5 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 4.54 years.

PSUs to be Settled in Common Stock

A summary of the activity for PSUs to be settled in common stock for the years ended December 31, 2021, 2020 and 2019 is as follows (shares in thousands):


	2021		2020		2019
	Shares	Weighted Average Grant Date Fair Value (Per share)	Shares	Weighted Average Grant Date Fair Value (Per share) (1)	Shares	Weighted Average Grant Date Fair Value (Per share)
Unvested at January 1	1,047	$37.65	848	$40.04	775	$34.72
Granted	174	$90.44	437	$34.60	358	$40.15
Vested	(268)	$38.28	(238)	$41.87	(236)	$22.73
Forfeited	(22)	$41.86	—	N/A	(49)	$40.07
Unvested at December 31	931	$47.27	1,047	$37.65	848	$40.04

(1) Certain weighted average grant date fair value per share amounts related to the year ended December 31, 2020 have been recast to conform to the correction of the valuation of PSUs described below.

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 company performance metrics established by the Compensation Committee of Quanta’s Board of Directors, including financial and operational goals and 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 the Compensation Committee of Quanta’s Board of Directors. Holders of PSUs are entitled to cash dividend equivalent payments 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.

The grant date fair values of the PSUs were determined as follows: (i) for the portion of the awards based on company financial and operational performance metrics, by utilizing the closing price of Quanta’s common stock on the date of grant and (ii) for the portion of the awards based on total shareholder return, by utilizing a Monte Carlo simulation valuation methodology. The Monte Carlo simulation valuation methodology applied the following key inputs:


	2021		2020		2019
Valuation date price based on March 25, 2021, March 26, 2020 and March 8, 2019 closing stock prices of Quanta common stock	$83.48		$31.49		$35.19
Expected volatility	36	%	34	%	25	%
Risk-free interest rate	0.26	%	0.35	%	2.43	%
Term in years	2.77		2.76		2.81

Quanta recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of the company financial and operational performance metrics and forecasted performance with respect to relative total shareholder return, 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. During the years ended December 31, 2021, 2020 and 2019, Quanta recognized $21.0 million, $35.9 million and $6.5 million in compensation expense associated with PSUs. Such expense is recorded in “Selling, general and administrative expenses.” Included in compensation expense associated with PSUs during the year ended December 31, 2020 was a charge of $14.0 million to correct the valuation of certain PSUs during the years 2017 to 2019, $7.2 million of which related to 2019. Quanta assessed the materiality of the prior period error and determined that the error was immaterial to both the current and prior period financial statements. As of December 31, 2021, there was $17.5 million of total unrecognized compensation expense related to unvested PSUs to be settled in common stock granted to both employees and non-employees based on currently estimated levels of attainment of established performance goals. The compensation expense related to outstanding PSUs can vary from period to period based on changes in forecasted achievement of established performance goals and the total number of shares of common stock that Quanta anticipates will be issued upon vesting of such PSUs. Compensation cost related to PSUs outstanding at December 31, 2021 is expected to be recognized over a weighted average period of 1.66 years.

During the year ended December 31, 2021, 2020 and 2019, 0.5 million, 0.5 million and 0.4 million shares of common stock were earned and either issued or deferred for future issuance in connection with PSUs. The approximate fair values of

PSUs settled in common stock during the years ended December 31, 2021, 2020 and 2019 were $45.2 million, $18.3 million and $13.1 million, respectively.

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 stock 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 $17.4 million, $9.4 million and $5.9 million for the years ended December 31, 2021, 2020 and 2019. 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 $13.2 million, $4.3 million and $5.4 million to settle liabilities related to cash-settled RSUs in the years ended December 31, 2021, 2020 and 2019. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $11.1 million and $8.7 million at December 31, 2021 and 2020.