Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Equity and incentive plans

The Company operates two equity and incentive plan for the benefit of its employees and directors. In August 2020, the Company established the 2020 Equity and Incentive Plan (the “2020 Plan”) under which SHHL Share Appreciation Rights (“SARs”) and SHHL Growth Shares were issued to certain employees. In July 2021, the Company established its 2021 Equity and Incentive Plan (the "2021 Plan"). The 2021 Plan allows for grants of nonqualified stock options, SARs, and RSUs, or performance awards. There were 12,107,333 shares initially available for all awards under the 2021 Plan and the shares available is permitted to increase annually on the first day of each calendar year, beginning with the calendar year ended December 31, 2022, subject to approval by the board of directors. As of December 31, 2023, there were 3,812,339 shares available for future awards. The Company granted 1,023,030 new RSUs under the 2021 Plan during the fiscal year ended December 31, 2023.

Modifications of awards made under the plans

In December 2021, the Company granted 506,990 RSUs to certain employees that were scheduled to vest over a month under the 2021 Plan. On January 16, 2022, the vesting schedule of the RSUs was updated from one vesting end date of January 17, 2022 to a graded vesting schedule that vests 25% on each of January 24, January 31, February 7, and February 14, 2022, respectively. The Company accounted for the modification as a Type I modification and no incremental compensation cost was incurred related to the modification.

In September 2022, in conjunction with the departure of an employee, the Company modified the existing awards for this employee to allow continued vesting and issued 365,000 new RSUs under the 2021 Plan to the same former employee. The Company accounted for the modification of existing awards as a Type III modification.

In December 2022, the Company modified the exercise prices for the certain of the outstanding SARs to be $4.00 per share. As a result, the Company accounted for the modification as a Type I modification, resulting in $2.2 million of incremental fair value, of which $1.5 million was recorded immediately.

In August 2023, in conjunction with the anticipated departure of an employee, the Company modified the employee's outstanding SARs under the 2020 Plan and all outstanding RSUs to be accelerated as of the separation date of December 29, 2023. Management deemed the extension of contractual terms for vested SARs and the acceleration of vesting for SARs and RSUs to be a Type I and Type III modification, respectively, which resulted in $2 million of incremental compensation expense to be recognized through the separation date of December 29, 2023.

Awards outstanding under the plans

As of December 31, 2023 and January 1, 2023, there were 2,327,384 and 2,998,865 RSUs outstanding under the 2021 Plan, respectively. As of December 31, 2023 and January 1, 2023, there were 6,498,915 and 5,290,719 SARs outstanding under the 2020 Plan and 2021 Plan, respectively. As of December 31, 2023 and January 1, 2023, there were zero and 146,574 restricted stock awards outstanding under the 2020 Plan, respectively.

Share-based Compensation Expense

Share-based compensation during the fiscal years ended December 31, 2023, January 1, 2023 and January 2, 2022 was recorded in the consolidated statements of operations within a separate line item as shown in the following table:


	For the Fiscal Year Ended
(in thousands)	December 31, 2023		January 1, 2023		January 2, 2022
SARs	$	7,485	$	9,425	$	15,998
Restricted stock awards (Growth Shares)		1,101		2,285		5,246
RSUs		8,446		12,595		5,416
Type III modification		1,843		1,902		—
Employer-related payroll expense(1)		1,355		1,474		—
Total share-based compensation expense		20,230		27,681		26,660
Tax benefit for share-based compensation expense		—		—		—
Share-based compensation expense, net of tax	$	20,230	$	27,681	$	26,660

(1)

Relates to employment related taxes, including employer national insurance tax in the UK. These amounts were settled in cash and are not included in additional paid-in capital or as an adjustment to reconcile net loss to net cash used in operating activities in the consolidated statements of cash flows.

The weighted-average assumptions used in valuing SARs and restricted stock awards (previously zero granted as Growth Shares) granted during each period are set forth in the following table:


	For the Fiscal Year Ended
	December 31, 2023			January 1, 2023			January 2, 2022
Expected average life(1)	1.70 - 5.56 years			3.92 - 6.30 years			3.50 years
Expected volatility(2)	55% - 59%				56	%	50 – 55%
Risk-free interest rate(3)	3.54% - 5.01%			3.78 - 4.25%			0.32 – 0.43%
Expected dividend yield(4)		0.00	%		0.00	%		0.00	%

(1)

The expected life assumption is based on the Company's expectation for the period before exercise.

(2)

The expected volatility assumption is developed using leverage-adjusted historical volatilities for public peer companies for the period equal to the expected life of the awards.

(3)

The risk-free rate is based on the bootstrap adjusted US Treasury Rate Yield Curve Rate as of the valuation date, term matched with expected life of the awards.

(4)

The expected dividend yield is 0.0% since the Company does not expect to pay dividends.

The weighted-average grant date fair values for SARs granted during the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022 were $2.06, zero and $4.43, respectively.

The following table shows a summary of all SARs:


	Number of Shares			Weighted Average Exercise Price Per Share(1)		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding as of January 2, 2022		5,840,483		$	12.72		8.61		1,733,089
Granted		—			—
Forfeited (post-IPO conversion)		(549,764	)		12.60
Exercised		—			—
Outstanding as of January 1, 2023		5,290,719		$	7.49		5.66	$	—
Exercisable as of January 1, 2023		4,246,017			7.49		5.13		—
Vested and expected to vest as of January 1, 2023		5,290,719		$	7.49		5.66	$	—
Granted		3,113,109			5.00
Forfeited (post-IPO conversion)		(108,678	)		5.73
Exercised		(802,482	)		4.31
Expired		(993,753	)		12.55
Outstanding as of December 31, 2023		6,498,915		$	5.94		6.88	$	13,853,270
Exercisable as of December 31, 2023		4,426,827			5.62		5.88		10,664,618
Vested and expected to vest as of December 31, 2023		6,498,915		$	5.94		6.88	$	13,853,270

(1) In December 2022, the Company modified the exercise prices for certain outstanding SAR awards to be $4.00 per share. This contributed to the reduction in the weighted average exercise price per share to $7.49.

As of December 31, 2023, total compensation expense not yet recognized related to unvested SARs is approximately $3 million, which is expected to be recognized over a weighted average period of 1.15 years.

The following table shows a summary of all restricted stock awards (previously granted as Growth Shares) granted:


	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested as of January 2, 2022		390,865		$	13.28
Vested and not yet released as of January 2, 2022		390,866			13.28
Outstanding as of January 2, 2022		781,731		$	13.28
Granted		—			—
Vested		(260,577	)		11.26
Forfeited		—			—
Nonvested as of January 1, 2023		130,288		$	13.28
Vested and not yet released as of January 1, 2023		16,286			5.19
Outstanding as of January 1, 2023		146,574		$	12.38
Granted		—			—
Vested		(130,288	)		13.28
Forfeited		—			—
Nonvested as of December 31, 2023		—		$	—
Vested and not yet released as of December 31, 2023		—			—
Outstanding as of December 31, 2023		—		$	—

As of December 31, 2023, there is no compensation expense not yet recognized related to unvested restricted stock awards (Growth Shares).

The following table shows a summary of all RSUs granted under the 2021 Plan:


	Number of Shares			Weighted Average Grant Date Fair Value(1)
Nonvested as of January 2, 2022		2,622,877		$	10.98
Vested and not yet released as of January 2, 2022		—			—
Outstanding as of January 2, 2022		2,622,877		$	10.98
Granted		1,535,975			4.79
Vested		(1,975,679	)		8.11
Forfeited		—			—
Nonvested as of January 1, 2023		2,183,173		$	8.44
Vested and not yet released as of January 1, 2023		815,692			4.76
Outstanding as of January 1, 2023		2,998,865		$	7.44
Granted		1,023,030			6.50
Vested		(1,437,153	)		7.29
Forfeited		—			—
Nonvested as of December 31, 2023		1,769,050		$	8.57
Vested and not yet released as of December 31, 2023		558,334			4.72
Outstanding as of December 31, 2023		2,327,384		$	8.57

(1)

The amount of share-based compensation for the RSUs is based on the fair value of our Class A common stock at the grant date.

As of December 31, 2023, total compensation expense not yet recognized related to unvested RSUs under the 2021 Plan is approximately $12 million, which is expected to be recognized over a weighted average period of 1.83 years.