Equity-Based Compensation

6 Months Ended

Jun. 30, 2022

10.	Equity-Based Compensation

Restricted Stock

The majority of the Company’s restricted stock awarded to its employees were originally issued in December 2020 to exchange the Class B Profits Interest Unit (the “Class B Units”) of EQT.

Modification accounting was not required for the time-based vesting Class B Units for which the vesting conditions, classification and fair market value did not change as a result of the shares of restricted common stock that replaced them. The original grant date fair value will continue to be recognized on a straight-line basis. Modification accounting was required for the performance-based vesting Class B Units that were exchanged for time-based vesting restricted common stock, given the vesting conditions were changed.

Share-based compensation for the restricted stock exchanged for the time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years. Share-based compensation for the restricted stock exchanged for the performance-based Class B Units is recognized using the accelerated attribution approach.

In 2021, the Company granted 87,127 replacement shares of restricted stock in connection with the Pinnacle business acquisition under which equity-based awards are outstanding. The fair value of the restricted stock awarded was initially based on the fair value of our common stock on the date of grant, then adjusted for time restrictions due to unregistered

shares and lack of marketability. Total grant date fair value was $2,762. The restricted stock issued in 2021 generally have a three year vesting period except for one holder whose shares vests equally on a monthly basis for two years.


		WEIGHTED-
		AVERAGE
		GRANT DATE
	SHARES	FAIR VALUE
Non-vested restricted stock as of December 31, 2021	3,910,722	$	23.18
Granted	—		—
Vested	(582,762)		23.19
Forfeited	—		—
Non-vested restricted stock as of June 30, 2022	3,327,960	$	23.18

The Company did not authorize or issue any restricted stock during the six-month period ended June 30, 2022. The number of the restricted stock vested includes 3,478 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation expenses related to the restricted stock exchanged for performance-based Class B Units were $1,957 and $4,077 for the three and six months ended June 30, 2022, respectively. At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $7,561, which is expected to be recognized over a weighted-average period of 22.6 months.

Equity-based compensation expenses related to the restricted stock exchanged for time-based Class B Units were $766 and $1,531 for the three and six months ended June 30, 2022, respectively. At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $4,862, which is expected to be recognized over a weighted-average period of 29.6 months.

Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition were $292 and $584 for the three and six months ended June 30, 2022. At June 30, 2022, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $1,886, which is expected to be recognized over a weighted-average period of 21.1 months.

2020 Incentive Plan

In order to align the Company’s equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan. The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, restricted stock units (RSUs), and performance stock units (PSUs) to employees, directors and officers, and consultants or advisors of the Company. The 2020 Incentive Plan allows for 20,000,000 shares (the “plan share reserve”) of common stock to be issued. No more than the number of shares of common stock equal to the plan share reserve may be issued in the aggregate pursuant to the exercise of incentive stock options. The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $1,000,000 in total value, except for certain awards made to a non-executive chair of our Board of Directors.

Restricted Stock Units

Restricted stock units (“RSUs”) represent the right to receive shares of the Company’s common stock at a specified date in the future. The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant.

A summary of the Company’s RSU activity is as follows:


		WEIGHTED-
		AVERAGE
		GRANT DATE
	UNITS	FAIR VALUE
Non-vested RSUs as of December 31, 2021	1,288,724	$	29.28
Granted*	1,375,817		22.09
Vested**	(326,077)		27.34
Forfeited	(45,197)		24.83
Non-vested RSUs as of June 30, 2022	2,293,267	$	25.33

* The shares granted during 2022 were primarily issued on April 1, 2022 under the 2020 Incentive Plan.

** The number of the RSUs vested includes 104,417 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements. The vested shares included 7,059 shares vested but deferred in connection with our director deferral plan.

Equity-based compensation expenses related to the RSUs were $5,838 and $9,226 for three and six months ended June 30, 2022, respectively. At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding RSUs was $49,967, which is expected to be recognized over a weighted-average period of 28.2 months.

Performance Stock Units

Performance stock units (“PSUs”) granted in April 2021 and 2022 were issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds for individual PSU plans including year over year revenue growth and unlevered free cash flow growth.

Share-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach. The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost. The following table presents a summary of activity on the PSUs for the period ended June 30, 2022.

A summary of the Company’s PSU activity is as follows:


		WEIGHTED-
		AVERAGE
		GRANT DATE
	UNITS	FAIR VALUE
Non-vested PSUs as of December 31, 2021	406,575	$	27.35
Granted	361,147		22.25
Vested	(12,291)		24.83
Forfeited	—		—
Non-vested PSUs as of June 30, 2022	755,431	$	24.95

Equity-based compensation expenses related to the PSUs were $648 and $1,595 for the three and six months ended June 30, 2022. At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding PSUs was $5,293, which is expected to be recognized over a weighted-average period of 17.4 months.

The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss for each period presented:


	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
	2022		2021		2022		2021
Cost of revenues	$	2,657	$	1,456	$	4,380	$	2,296
Sales and marketing		850		636		1,510		1,034
Research and development		1,785		615		3,158		1,014
General and administrative		4,209		4,823		7,966		8,337
Total	$	9,501	$	7,530	$	17,014	$	12,681

2020 Employee Stock Purchase Plan

On December 10, 2020, stockholders approved the 2020 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). Under the Employee Stock Purchase Plan, employees, and those of the Company’s subsidiaries, may purchase shares of common stock, during pre-specified offering periods. Named executive officers will be eligible to participate in the Employee Stock Purchase Plan on the same terms and conditions as all other participating employees. The maximum number of shares authorized for sale under the Employee Stock Purchase Plan is 1,700,000 shares.

As of June 30, 2022, no shares of common stock have been purchased under the Employee Stock Purchase Plan and no offering has been made to eligible employees under the Plan.