Somnigroup has a stock-based compensation plan which provides for grants of non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock unit awards, performance shares, stock grants and performance based awards to employees, non-employee directors, consultants and Company advisors. The plan under which equity awards may be granted in the future is the Amended and Restated 2013 Equity Incentive Plan (the "2013 Plan"). It is the policy of the Company to issue stock out of treasury shares upon issuance or exercise of share-based awards. The Company believes that awards and purchases made under this plan better align the interests of the plan participants with those of its stockholders.

On May 5, 2022, the Company's stockholders approved the amendment and restatement of the 2013 Plan, which had been previously amended and restated on May 11, 2017. The 2013 Plan provides for grants of stock options to purchase shares of common stock to employees and directors of the Company. The 2013 Plan may be administered by the Human Resources/Capital and Talent Committee of the Board of Directors, by the Board of Directors directly or, in certain cases, by an executive officer or officers of the Company designated by the Human Resources/Capital and Talent Committee. The shares issued or to be issued under the 2013 Plan may be either authorized but unissued shares of the Company's common stock or shares held by the Company in its treasury. Somnigroup may issue a maximum of 44.7 million shares of common stock under the 2013 Plan, subject to certain adjustment provisions.

In 2013, the Board of Directors approved the terms of another Long-Term Incentive Plan established under the 2013 Plan. Awards under the Long-Term Incentive Plan have typically consisted primarily of a mix of stock options, RSUs and PRSUs. Shares with respect to the PRSUs will be granted and vest following the end of the applicable performance period and achievement of applicable performance metrics and strategic initiatives as determined by the Human Resources/Capital and Talent Committee of the Board of Directors.

The Company's stock-based compensation expense for the year ended December 31, 2024, 2023 and 2022 included PRSUs, RSUs and stock options. A summary of the Company’s stock-based compensation expense is presented below:


	Year Ended December 31,
(in millions)	2024		2023		2022
RSU expense	$	17.9	$	20.6	$	21.0
PRSU expense	16.3		24.9		31.0
Stock option expense	2.2		2.2		1.1
Total stock-based compensation expense	$	36.4	$	47.7	$	53.1

The Company grants PRSUs to executive officers and certain members of management. The Company granted PRSUs during the years ended December 31, 2024, 2023 and 2022. Actual payout under the PRSUs is dependent upon the achievement of certain financial and qualitative goals. A summary of the Company's PRSU activity and related information for the years ended December 31, 2024 and 2023 is presented below:


(shares in millions)	Shares	Weighted Average Grant Date Fair Value
Awards unvested at December 31, 2022	3.8	$	25.85
Granted	0.4	37.22
Performance adjustments(1)	0.4	38.98
Vested	(1.6)	24.40
Forfeited	(0.1)	43.96
Awards unvested at December 31, 2023	2.9	29.53
Granted	0.3	50.34
Performance adjustments(1)	—	51.95
Vested	(1.6)	25.37
Forfeited	—	36.64
Awards unvested at December 31, 2024	1.6	$	39.95

During the first quarter of 2024, the Company granted 0.3 million PRSUs at target at a weighted average grant date fair value of $50.34 per share with a performance period of January 1, 2024 through December 31, 2024 as a component of the long-term incentive plan ("2024 PRSUs"). For the year ended December 31, 2024, the Company recognized stock-based compensation expense related to the 2024 PRSUs based on the Company's achievement of its performance targets for the performance period.

During the first quarter of 2023, the Company granted 0.4 million PRSUs at target at a weighted average grant date fair value of $37.22 per share with a performance period of January 1, 2023 through December 31, 2023 as a component of the long-term incentive plan ("2023 PRSUs"). For the year ended December 31, 2023, the Company recognized stock-based compensation expense related to the 2023 PRSUs based on the Company's achievement of its performance targets for the performance period.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options granted. During the year ended December 31, 2024 and 2023, no stock options were granted. The assumptions used in the Black-Scholes option-pricing model for the year ended December 31, 2022 are set forth in the following table. Expected volatility is based on the unbiased standard deviation of the Company's common stock over the option term. The expected life of the options represents the period of time that the Company expects the options granted to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option for the expected term of the instrument. The dividend yield reflects an estimate of dividend payouts over the term of the award. The Company uses historical data to determine these assumptions.

Year Ended December 31,

2024

2023

2022

Expected volatility of stock

N/A

53.2 %

Expected life of option, in years

N/A

Risk-free interest rate

N/A

2.9%

Expected dividend yield on stock

N/A

2.0%


(in millions, except per share amounts and years)	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2022	4.9	$	20.34
Granted	—	—
Exercised	(0.2)	15.89
Forfeited	(0.1)	14.06
Options outstanding at December 31, 2023	4.6	$	20.54
Granted	—	—
Exercised	—	14.22
Forfeited	—	12.97
Options outstanding at December 31, 2024	4.6	$	20.60	6.39	$	164.3

Options exercisable at December 31, 2024	4.0	$	19.17	6.22	$	148.3

A summary of the Company's unvested shares relating to stock options as of December 31, 2024 and 2023, and changes during the years ended December 31, 2024 and 2023, are presented below:


(shares in millions)	Shares	Weighted Average Grant Date Fair Value
Options unvested at December 31, 2022	1.2	$	30.00
Granted	—	—
Vested	(0.3)	30.00
Forfeited	—	—
Options unvested at December 31, 2023	0.9	$	30.00
Granted	—	—
Vested	(0.3)	30.00
Forfeited	—	—
Options unvested at December 31, 2024	0.6	$	30.00


(in millions, except per share amounts)	Shares	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Awards outstanding at December 31, 2022	2.3	$	22.99
Granted	0.5	35.11
Vested	(1.1)	18.70
Terminated	—	34.74
Awards outstanding at December 31, 2023	1.7	$	29.51	$	84.7
Granted	0.3	48.23
Vested	(0.6)	32.09
Terminated	—	39.55
Awards outstanding at December 31, 2024	1.4	$	33.29	$	77.9

A summary of total unrecognized stock-based compensation expense based on current performance estimates related to stock options, RSUs and PRSUs for the year ended December 31, 2024 is presented below:


(in millions, except years)	December 31, 2024		Weighted Average Remaining Vesting Period (Years)
Unrecognized stock option expense	$	3.4	1.51
Unrecognized RSU expense	19.7		2.33
Unrecognized PRSU expense	18.9		1.68
Total unrecognized stock-based compensation expense	$	42.0	1.97