Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company grants share-based compensation awards to participants under the 2016 Equity Incentive Plan (the “2016 Plan”) and the 2018 Omnibus Incentive Plan (the “2018 Plan”). Share-based compensation expense is included in selling, general, and administrative expenses in the Consolidated Statements of Operations and was as follows:


	Years Ended December 31,
(in thousands)	2021		2020		2019
Share-based compensation expense	$	61,237	$	96,013	$	85,626

2016 Plan

As of December 31, 2021, the Company is authorized to issue no more than approximately 5 million shares of Common Stock by the exercise or vesting of granted awards under the 2016 Plan. The Company does not expect to issue additional awards under the 2016 Plan. Unrecognized share-based compensation expense as of December 31, 2021 and share-based compensation expense during 2021, 2020, and 2019 for awards granted under the 2016 Plan were not material.

Distributed Shares and Class B Unit Redemption

In connection with the IPO, each holder of Class B awards (“Class B Units”), which were issued to certain participants by Ultimate Parent prior to the IPO, had their entire Class B interest in Ultimate Parent redeemed for the number of shares of the Company’s Common Stock (the “Distributed Shares”) that would have been distributed to such holder under the terms of Ultimate Parent’s operating agreement in a hypothetical liquidation on the date and price of the IPO (the “Class B Unit Redemption”).

The Class B Unit Redemption resulted in a modification of the Class B Units, whereby each holder received both vested and unvested Distributed Shares in the same proportion as the holder’s vested and unvested Class B Units held immediately prior to the IPO. As a result of the Class B Unit Redemption, holders of Class B Units received a total of 20.6 million shares of the Company’s Common Stock, of which 50% were subject to the same vesting conditions under the Class B Unit Service Tranche (the “Distributed Shares Service Tranche”), which were subject to ratable service-based vesting over a five-year period, and 50% were subject to the same vesting conditions under the Class B Unit Performance Tranche (the “Distributed Shares Performance Tranche”), which were based on the achievement of certain investment return thresholds by Apollo. The Distributed Shares also have certain other restrictions pursuant to the terms and conditions of the Company’s Amended and Restated Management Investor Rights Agreement (the “MIRA”).

The IPO triggered an acceleration of vesting of the unvested Distributed Shares Service Tranche causing them to become fully vested six months from the date of the IPO, which occurred in July 2018.

The Company recorded share-based compensation expense on the Distributed Shares Performance Tranche on a straight-line basis over the derived service period of approximately three years from the IPO date, as the vesting conditions were deemed probable following the consummation of the IPO. Share-based compensation expense associated with the Distributed Shares Performance Tranche was not material during 2021 and was $32 million and $47 million during 2020 and 2019, respectively.

The following table summarizes activity related to the Distributed Shares during 2021:


	Performance Tranche
	Number of Distributed Shares	Weighted-Average Grant Fair Value
Unvested as of December 31, 2020	9,583,754	$	13.10

Vested	—	—
Forfeited	(80,086)	13.42
Unvested as of December 31, 2021	9,503,668	$	13.08

2018 Plan

In January 2018, the Company approved the 2018 Plan, which became effective upon consummation of the IPO. The 2018 Plan authorizes the issuance of no more than approximately 38 million shares of Common Stock by the exercise or vesting of granted awards, which are generally stock options and restricted stock units (“RSUs”). During 2019, the Company amended the 2018 Plan, which increased the number of authorized shares of Common Stock to be issued to approximately 88 million shares. The Company satisfies the exercise of options and the vesting of RSUs through the issuance of authorized but previously unissued shares of Common Stock.

Awards issued under the 2018 Plan include retirement provisions that allow awards to continue to vest in accordance with the granted terms in its entirety or on a pro-rata basis when a participant reaches retirement eligibility, as long as 12 months of service have been provided since the date of grant. Accordingly, share-based compensation expense for service-based awards is recognized on a straight-line basis over the vesting period, or on an accelerated basis for retirement-eligible participants where applicable. The Company accounts for forfeitures as they occur.

Additionally, RSUs entitle the holder to dividend equivalent units (“DEUs”), which are granted as additional RSUs and are subject to the same vesting and forfeiture conditions as the underlying RSUs. DEUs are charged against accumulated deficit when dividends are paid.

In December 2019, the exercise price of all options granted under the 2018 Plan prior to the payment of the 2019 Special Dividend were adjusted downward by $0.70 in accordance with plan provisions, which allow for adjustments to the exercise price of options upon the occurrence of certain events, such as changes in capital or operating structure.

Top-up Options

In connection with the Class B Unit Redemption in 2018, the Company granted 12.7 million options to holders of Class B Units (the “Top-up Options”). The Top-up Options have an exercise price equal to the initial public offering price per share of the Company’s Common Stock, as adjusted in accordance with 2018 Plan provisions, and a contractual term of ten years from the grant date. Similar to the vesting conditions outlined above for the Distributed Shares, the Top-up Options contain a tranche subject to service-based vesting (the “Top-up Options Service Tranche”) and a tranche subject to vesting based upon the achievement of certain investment return thresholds by Apollo (the “Top-up Options Performance Tranche”). Recipients of the Top-up Options received both vested and unvested Top-up Options in the same proportion as the vested and unvested Class B Units held immediately prior to the IPO and Class B Unit Redemption. The Top-up Options vesting conditions are the same as those attributable to the Distributed Shares, including the condition that accelerated vesting of the unvested options in the Top-up Options Service Tranche causing them to become fully vested six months from the IPO. Any shares of the Company’s Common Stock acquired upon exercise of the Top-up Options will be subject to the terms of the MIRA.

The Company recorded share-based compensation expense associated with the Top-up Options Service Tranche on a straight-line basis over the requisite service period of six months from the IPO.

Share-based compensation expense associated with the Top-up Options Performance Tranche is recognized on a straight-line basis over the derived service period of approximately three years from the IPO date and was not material during 2021, 2020, and 2019.

The following table summarizes activity related to the 2018 Plan Top-up Options:


	Service Tranche			Performance Tranche
	Number of Top-up Options	Weighted-Average Exercise Price		Number of Top-up Options	Weighted-Average Exercise Price		Aggregate Intrinsic Value(a) (in thousands)	Weighted-Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2020	5,974,369	$	13.30	5,923,973	$	13.30

Exercised	—	—		—	—
Forfeited	—	—		(73,424)	13.30
Outstanding as of December 31, 2021	5,974,369	$	13.30	5,850,549	$	13.30	—	6.0
Exercisable as of December 31, 2021	5,974,369	$	13.30	—	$	13.30	—	6.0

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(a)The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2021.

Options

Options granted under the 2018 Plan are primarily service-based awards that vest over a three-year period from the date of grant, have an exercise price equal to the closing price per share of the Company’s Common Stock on the date of grant, as adjusted in accordance with 2018 Plan provisions, and have a contractual term of ten years from the date of grant.

The Company did not grant any options during 2021. During 2020 and 2019, the grant date fair values of options granted under the 2018 Plan were determined using the Black-Scholes valuation approach with the following assumptions:


	Years Ended December 31,
	2020	2019
Risk-free interest rate	0.51% - 1.40%	1.58% - 2.51%
Expected exercise term (years)	6	6.0 - 6.5
Expected dividend yield	2.2% - 2.7%	2.0% - 2.7%
Expected volatility	45% - 46%	41% - 42%

The risk-free interest rate was based on U.S. Treasury bonds with a zero-coupon rate. The Company did not have sufficient historical exercise data, and, as such, the Company estimated the expected exercise term based on factors such as vesting period, contractual period, and other share-based compensation awards with similar terms and conditions. The dividend yield was calculated by taking the annual dividend run-rate and dividing by the stock price at date of grant. The stock price volatility was implied based upon an average of historical volatility of publicly traded companies in industries similar to the Company, as the Company did not have sufficient trading history to use as a basis for actual stock price volatility, as well as consideration for the Company’s debt to equity ratio.

The weighted-average grant date fair values of options granted during 2020 and 2019 were $1.77 and $2.20, respectively.

The following table summarizes activity related to 2018 Plan options during 2021:


	Number of Options	Weighted-Average Exercise Price		Aggregate Intrinsic Value(a) (in thousands)		Weighted-Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2020	24,191,120	$	6.60
Granted	—	—
Exercised	(1,951,552)	5.55
Forfeited	(773,750)	7.49
Outstanding as of December 31, 2021	21,465,818	$	6.64	$	50,657	7.2
Exercisable as of December 31, 2021	10,611,711	$	8.33	$	19,089	6.8

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(a)The intrinsic value represents the amount by which the fair value of the Company’s Common Stock exceeds the option exercise price as of December 31, 2021.

Share-based compensation expense associated with options granted under the 2018 Plan was $12 million, $16 million, and $12 million during 2021, 2020, and 2019, respectively. The cash flow and the intrinsic value of options exercised were not material during 2021, 2020, and 2019.

As of December 31, 2021, unrecognized compensation cost related to options was not material.

Restricted Stock Units

RSUs granted under the 2018 Plan are primarily service-based awards with a three-year graded vesting period from the date of grant. The fair value is equal to the closing price per share of the Company’s Common Stock on the date of grant.

The following table summarizes activity related to the 2018 Plan RSUs (including DEUs) during 2021:


	Number of RSUs	Weighted-Average Grant Date Fair Value
Unvested as of December 31, 2020	16,763,274	$	6.56
Granted	6,585,882	8.09
Vested	(6,481,391)	7.14
Forfeited	(1,322,919)	7.32
Unvested as of December 31, 2021	15,544,846	$	6.90

Share-based compensation expense associated with RSUs granted under the 2018 Plan was $46 million, $39 million, and $14 million during 2021, 2020, and 2019, respectively.

The fair value of RSUs (including DEUs) that vested and converted to shares of Common Stock was approximately $52 million on the respective vesting dates during 2021 and was not material during 2020 and 2019.

As of December 31, 2021, unrecognized compensation cost related to RSUs granted under the 2018 Plan was $53 million, which will be recognized over a period of 1.8 years.