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Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

Stock-Base Compensation

Stock-Base Compensation

20. Stock–Based Compensation

We recognize stock-based compensation expense related to restricted stock awards, restricted stock units, performance-based restricted stock units and shares issued under our ESPP. We account for forfeitures as they occur.


		Year Ended December 31,
(in thousands)		2024			2023			2022
Equity award expense		$	14,646		$	12,998		$	11,928
Liability award expense			18,393			7,910			2,569
Total stock-based compensation expense		$	33,039		$	20,908		$	14,497

Stock Incentive Plans

The 2020 Plan was adopted in April 2020 and provides for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock-based awards and dividend equivalent rights to employees, directors and consultants of Archrock. The 2020 Plan is administered by the Compensation Committee of our Board of Directors. Under the 2020 Plan, the maximum number of shares of common stock available for issuance is 8,500,000. Each stock-settled award granted under the 2020 Plan reduces the number of shares available for issuance by one share. Cash-settled awards are not counted against the aggregate share limit. Shares subject to awards granted under the 2020 Plan that are subsequently canceled, terminated, settled in cash or forfeited, excluding shares withheld to satisfy tax withholding obligations or to pay the exercise price of an option, are available for future grant under the 2020 Plan.

The 2020 Plan allows us to withhold shares upon vesting of restricted stock at the then–current market price to cover taxes required to be withheld on the vesting date. During the years ended December 31, 2024, 2023 and 2022, we withheld 392,177 shares valued at $6.6 million, 383,128 shares valued at $3.8 million and 283,024 shares valued at $2.4 million, respectively, to cover tax withholding.

On February 19, 2025, the Compensation Committee approved an amendment to the 2020 Plan that provides for the delegation to a subcommittee, which may be comprised of one or more officers of the Company, the authority to grant awards to employees who are not subject to Section 16 of the Exchange Act, subject to certain award size and other limitations.

Restricted Stock Awards and Performance–Based Restricted Stock Units

Grants of restricted stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in three equal installments following the date of grant. Compensation expense is recognized over the vesting period equal to the fair value of our common stock at the grant date. Our restricted stock includes rights to receive dividends or dividend equivalents.

Grants of performance–based restricted stock units are three–year equity settled awards linked to the performance of our common stock. The awards also include dividend equivalent rights that accumulate during the vesting period.

We have performance–based restricted stock units whose vesting is dependent on the satisfaction of a combination of certain service–related conditions and our total shareholder return ranked against that of a predetermined peer group over a three–year performance period, as well as performance–based restricted stock units whose vesting is contingent on meeting various horsepower utilization targets over a three–year performance period. The awards vest in their entirety on the date specified in the award agreement following the conclusion of the performance period. The final number of shares of common stock issuable upon vesting can range from 0% to 250% of the initial grant depending on the level of achievement as determined by the Compensation Committee of our Board of Directors.

The fair value of the horsepower utilization performance-based restricted stock units is equal to the fair value of our common stock at the grant date. The fair value of the total shareholder return performance–based restricted stock units, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model. Expected volatilities for us and each peer company utilized in the model are estimated using a historical period consistent with the awards’ remaining performance period as of the grant date. The risk–free interest rate is based on the yield on U.S. Treasury Separate Trading of Registered Interest and Principal Securities for a term consistent with the remaining performance period. The dividend yield used is 0.0% to approximate accumulation of earnings.

The assumptions that were used to estimate the fair value of our restricted stock units and performance–based stock units are as follows:


		Year Ended December 31,
		2024			2023			2022
Remaining performance period as of grant date (in years)			2.9			2.9			2.9
Risk-free interest rate used			4.1	%		3.9	%		1.4	%
Grant-date fair value		$	23.67		$	15.68		$	11.96

Activity related to our restricted stock and performance–based restricted stock units is as follows:


				Weighted
				Average
				Grant Date
				Fair Value
(in thousands, except per share amounts)		Shares		Per Share
Non-vested restricted stock and performance-based restricted stock units, December 31, 2023		2,625		$	10.19
Granted		864			17.44
Adjustment for performance		13			14.30
Vested		(1,188)			10.22
Canceled		(38)			12.08
Non-vested restricted stock and performance-based restricted stock units, December 31, 2024		2,276		$	12.81

The grant date fair value of the restricted stock and performance–based restricted stock units granted during the years ended December 31, 2024, 2023 and 2022 was $15.1 million, $15.3 million and $14.3 million, respectively. The fair value of the restricted stock and performance–based restricted stock units vested during the years ended December 31, 2024, 2023 and 2022 was $20.2 million, $12.4 million and $9.3 million, respectively.

As of December 31, 2024, we expect $14.5 million of unrecognized compensation cost related to our non–vested restricted stock and performance–based restricted stock units to be recognized over the weighted–average period of 1.7 years.

Cash Settled Performance Units

Grants of cash–settled performance units vest at the end of the three-year vesting period and are payable in an amount of cash equivalent to the value of our common stock at the vesting date for each unit vested. These awards are subject to one or more performance conditions and are accounted for as liability awards with expense based on the fair value measured at the end of each reporting period. These awards also include dividend equivalent rights that accumulate during the vesting period. At the end of each reporting period, the Compensation Committee of our Board of Directors approves the determination of achievement for each performance measure, which can range from 0% to 200%.

Activity related to our cash–settled performance units is as follows:


				Weighted
				Average
				Grant Date
				Fair Value
(in thousands, except per share amounts)		Shares		Per Share
Non-vested cash-settled performance units, December 31, 2023		548		$	9.37
Granted		134			16.00
Adjustment for performance		92			10.70
Vested		(235)			10.70
Canceled		—			—
Non-vested cash-settled performance units, December 31, 2024		539		$	10.67

The grant date fair value of the cash settled performance units granted during the years ended December 31, 2024, 2023 and 2022 was $2.1 million, $1.9 million and $2.5 million, respectively. The performance criteria for the cash settled performance units granted during the year ended December 31, 2020, were not met over the performance period; therefore, the Compensation Committee of our Board of Directors determined that no payout was earned, and no cash was paid upon vesting during the year ended December 31, 2023. Cash paid upon vesting of the cash settled performance units during the years ended December 31, 2024 and 2022 was $4.3 million and $1.2 million, respectively.

As of December 31, 2024, we expect $8.4 million of unrecognized compensation cost related to our non–vested liability awards to be recognized over the weighted–average period of 1.5 years.

Time-Based Cash or Equity Settled Performance Units

In 2024, we issued time-based equity awards that vest in three equal installments following the grant date. These awards are payable in either cash or restricted stock units, at the employees’ option, based on the value of the Company’s common stock at the vesting date. These awards are subject to certain qualifying retirement provisions, are classified as liability awards and expense recognized based on the fair value measured at the end of each reporting period. These awards also include dividend equivalent rights that accumulate during the vesting period.

During the year ended December 31, 2024, 187,500 restricted stock units were granted, with a total grant date fair value of $3.0 million, none of which vested during the year. As of December 31, 2024, we expect $1.8 million of unrecognized compensation cost related to non-vested restricted stock units over a weighted-average period of 1.5 years.

Employee Stock Purchase Plan

Our ESPP provides employees with an opportunity to participate in our long–term performance and success through the purchase of shares of common stock at a price that may be less than fair market value. Each quarter, eligible employees may elect to withhold a portion of their salary up to the lesser of $25,000 per year or 10% of their eligible pay at a price equal to 85% to 100% of the fair market value of the stock as defined by the plan. For the year ended December 31, 2023 and for prior years, the purchase discount under the ESPP was 5% of the fair market value of our common stock on the first or last trading day of the quarter, whichever is lower. Effective on January 1, 2024, the purchase discount under the ESPP increased to 10% of the fair market value of our common stock on the first or last trading day or the quarter, whichever is lower. Our ESPP is compensatory and, as a result, we record an expense in our consolidated statements of operations related to the ESPP.

The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, unless it is extended. The maximum number of shares of common stock available for purchase under the ESPP is 1.0 million. As of December 31, 2024, 281,067 shares remained available for purchase under the ESPP.

Directors’ Stock and Deferral Plan

Our DSDP provides non–employee members of the Board of Directors with an opportunity to elect to receive our common stock as payment for a portion or all of their retainer. The number of shares paid each quarter is determined by dividing the dollar amount of fees elected to be paid in common stock by the closing sales price per share of the common stock on the last day of the quarter. In addition, directors who elect to receive a portion or all of their fees in the form of common stock may also elect to defer, until a later date, the receipt of a portion or all of their fees to be received in common stock. In this case, we issue restricted stock units and the rights to receive dividends or dividend equivalents is accrued and paid when the shares are issued.

There are 100,000 shares reserved under the DSDP and, as of December 31, 2024, 37,771 shares remained available to be issued under the plan.