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Note 20 - Stock-based Compensation

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

20.

Stock-based compensation

Management Incentive Plan

During October 2018, Legacy Expro’s board of directors approved the Management Incentive Plan (“MIP”) which was comprised of (a) stock options to non-executive directors and key management personnel and (b) restricted stock units. The outstanding awards under the MIP were assumed by the Company in connection with the Merger.

MIP Stock options

Stock options issued under the MIP vest over a three or four year vesting period as defined in the award agreement, subject to the fulfilment of continued service and a performance condition related to the occurrence of a Liquidity Event (as defined in the MIP). Additionally, a portion of the management options are subject to performance conditions linked to an internal rate of return.

Due to the nature of the performance conditions, recognition of compensation expense for the stock options was deferred until the occurrence of a Liquidity Event as the performance condition was deemed to be improbable. On October 1, 2021, the MIP stock options were modified to redefine the occurrence of the Liquidity Event to the closing of the Merger. Upon Closing, the MIP stock options were exchanged for options to purchase Company Common Stock based on the post-reverse stock split Exchange Ratio of 1.2120 to 1 (as provided in the Merger Agreement). As of the modification date, there were 6.9 million MIP stock options issued and outstanding.

The aforementioned event was accounted for as an improbable-to-probable modification and as a result, the fair value of all of the issued and outstanding MIP stock options was determined as of the Closing Date. Compensation expense was immediately recognized upon the Merger closing for all MIP stock options in which the service period was fulfilled. For the stock options in which the service period was not fulfilled, stock-based compensation expense is to be recognized based on the total modification date fair value of the associated awards on a straight-line basis over the remaining service period.

The Company recognized stock-based compensation expense related to the MIP stock options of $0.9 million, $3.6 million and $39.5 million during the years ended December 31, 2023, 2022 and 2021 respectively. As of December 31, 2023, there was no unrecognized stock compensation expense relating to MIP stock options.

As of December 31, 2023, 2022 and 2021, there were 2.9 million, 6.7 million and 6.9 million, respectively, MIP stock options issued and outstanding with a weighted average exercise price of $17.17, $17.19 and 17.20, respectively. There were no stock options granted during 2021, 2022 or 2023 and there are no plans to grant stock options in 2024. During the year ended December 31, 2023 there were 3.5 million options expired unvested at a weighted average exercise price of $17.21, 0.3 million options exercised at a weighted average exercise price of $17.25 and no options forfeited. As of December 31, 2023, there were 2.9 million exercisable MIP stock options with a weighted average exercise price of $17.17 per option.

The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option. The total intrinsic value of options exercised was $1.8 million during 2023. The total intrinsic value of options exercised was not material during 2022 and there were no stock option exercises during 2021. As of December 31, 2023, options outstanding and exercisable had no intrinsic value and a weighted-average remaining life of 4.1 years.

The key assumptions used to estimate the fair value of the MIP stock options were as follows:

Risk free interest rate			0.04	%
Expected volatility			55	%
Dividend yield			0.0	%
Stock price on valuation date		$	18.90

MIP Restricted stock units (“MIP RSUs”)

RSUs granted under the MIP were subject to vesting over a three year period. There were 0.1 million outstanding MIP RSUs as of December 31, 2020. No stock-based compensation expense attributable to the MIP RSUs was recognized during the year ended December 31, 2020 as the performance conditions within the agreements were deemed to be improbable. In February 2021, the MIP RSU awards were modified so that upon the closing of the Merger, the MIP RSUs would convert to RSUs of the Company based on the post-reverse stock split Exchange Ratio of 1.2120 to 1 and would immediately vest pursuant to the terms of the Merger Agreement. As the MIP RSUs were fully vested on the closing of the Merger, the Company recognized $2.6 million of stock-based compensation expense attributable to the MIP RSUs during the year ended December 31, 2021 and had no further expenses outstanding to be recognized for the MIP RSUs as of December 31, 2021 or during the years ended December 31, 2022 and December 31, 2023.

Expro Group Holdings N.V. Long-Term Incentive Plan

Effective October 1, 2021, in connection with the consummation of the Merger, the Company amended its 2013 Long-Term Incentive Plan to the Expro Group Holdings N.V. Long-Term Incentive Plan, as amended and restated. Further, effective May 25, 2022, the Expro Group Holdings N.V. Long-Term Incentive Plan, as amended and restated was terminated and the Expro Group Holdings N.V. 2022 Long-Term Incentive Plan (the “2022 LTIP” plan) was adopted and established by the Board and approved by the Company’s stockholders. Pursuant to the 2022 LTIP, stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other types of equity and cash incentive awards may be granted to employees, non-employee directors and consultants. The LTIP expires after 10 years, unless prior to that date the maximum number of shares available for issuance under the plan has been issued or our Board terminates the plan. There are approximately 13.2 million shares of common stock reserved for issuance under the LTIP. As of December 31, 2023, approximately 10.1 million shares remained available for issuance.

LTIP Restricted Stock Units (“LTIP RSUs”)

All RSUs granted under the LTIP vest ratably over a period of one to three years. Shares withheld from employees to settle personal tax obligations that arose as a result of RSUs that vested are included in our treasury stock. Certain RSU awards provide for accelerated vesting for qualifying terminations of employment or service.

Employees granted LTIP RSUs are not entitled to dividends declared on the underlying shares while the RSU is unvested. As such, the grant date fair value of the award is measured by reducing the grant date price of our common stock by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, discounted at the appropriate risk-free interest rate.

Stock-based compensation expense relating to LTIP RSUs was $13.3 million, $11.2 million and $6.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. The total fair value of LTIP RSUs vested during the years ended December 31, 2023, 2022 and 2021 was $11.1 million, $13.0 million and $2.0 million respectively. As of December 31, 2023, unrecognized stock compensation expense relating to LTIP RSUs totaled approximately $20.2 million, which will be expensed over a weighted average period of 1.3 years.

The following is a summary of RSU information and weighted-average grant-date fair values for Expro’s LTIP RSUs:

		*Number of Shares*				*Weighted Average Grant Date Fair Value*
Non-vested on Closing Date			883,079			$	21.97
Granted			458,258				17.64
Vested			(93,688	)			21.80
Forfeited			(12,549	)			22.59
Non-vested at December 31, 2021			1,235,100				20.49
Granted			913,034				16.51
Vested			(593,037	)			21.91
Forfeited			(70,899	)			18.80
Non-vested at December 31, 2022			1,484,198				17.51
Granted			940,176				19.07
Vested			(640,145	)			17.37
Forfeited			(67,415	)			18.07
Non-vested at December 31, 2023			1,716,814			$	18.39

Performance Restricted Stock Units (“PRSUs”)

The purpose of the PRSUs is to closely align the incentive compensation of the executive leadership team for the duration of the performance cycle with returns to the Company’s shareholders and thereby further motivate the executive leadership team to create sustained value to the Company shareholders. The design of the PRSU grants effectuates this purpose by placing a material amount of incentive compensation for each executive at risk by offering an extraordinary reward for the attainment of extraordinary results.

Design features of the PRSU grant that in furtherance of this purpose include the following: (1) The vesting of the PRSUs is based on total shareholder return (“TSR”) based on a comparison to the returns of a peer group, which is the SPDR S&P Oil & Gas Equipment and Services ETF. (2) TSR performance is calculated separately with respect to certain achievement periods included in the performance period as defined for each specific agreement. For certain PRSUs, TSR for the Company and the peer group shall be calculated using a 30-day averaging period for the 30 calendar days prior to the start of the applicable performance period and the last 30 calendar days of the applicable performance period to mitigate the effect of stock price volatility. The TSR calculation will assume reinvestment of dividends. (3) The ultimate number of shares to be issued pursuant to the PRSU awards will vary in proportion to the actual TSR achieved as a percentile compared to the peer group during the Performance Period as follows: (i) no shares will be issued if the Company’s performance falls below the 25th percentile; (ii) 50% of the Target Level (as defined below) if the Company achieves a rank in the 25th percentile (the threshold level); (iii) 100% of the Target Level if the Company achieves a rank in the 50th percentile (the target level); (iv) 150% of the Target Level if the Company achieves a rank in the 75th percentile; and 200% of the Target Level if the Company achieves a rank in the 90th percentile and above (the maximum level). (4) Unless there is a qualifying termination as defined in the PRSU award agreement, the PRSUs of an executive will be forfeited upon an executive’s termination of employment during the Performance Period.

Though the value of the PRSU grant may change for each participant, the compensation expense recorded by the Company is determined on the date of grant. Expected volatility is based on historical equity volatility of our stock-based on 50% of historical and 50% of implied volatility weighting commensurate with the expected term of the PRSU. The expected volatility considers factors such as the historical volatility of our share price and our peer group companies, implied volatility of our share price, length of time our shares have been publicly traded, and split- and dividend-adjusted closing stock prices.

In 2023, we granted 260,762 PRSUs (“Target Level”) which have a performance period of the three-year period from January 1, 2023 to December 31, 2025 and a single three-year achievement period for the same time period. In 2022, no shares were granted under the PRSU program. In 2021, we granted 354,275 PRSUs (“Target Level”) which have a performance period of the three-year period from January 1, 2022 to December 31, 2024, but with separate one-year achievement periods from January 1, 2022 to December 31, 2022, January 1, 2023 to December 31, 2023, and January 1, 2024 to December 31, 2024, resulting in a weighted average payout at the end of the applicable performance period.

The weighted average assumptions for the PRSUs granted in 2023 and 2021 were as follows:

		*2023*		*2021*
Total expected term (in years)		2.85		3.25
Expected volatility		65.7		84.2
Risk-free interest rate		4.56%		0.54%
Correlation range		48.7% to 76.2%		21.2% to 79.5%

In the event of death or disability, the restrictions related to forfeiture as defined in the performance awards agreement will lapse with respect to 100% of the PRSUs at the target level effective on the date of such event. In the event of involuntary termination except for cause, the Company may enter into a special vesting agreement with the executive under which the restrictions for forfeiture will not lapse upon such termination. In the event of a termination for any other reason prior to the end of the Performance Period, all PRSUs will be forfeited.

Stock-based compensation expense related to PRSUs was $5.0 million, $3.2 million and $5.2 million, respectively, for the years ended December 31, 2023, 2022 and 2021. The total fair value of PRSUs vested during the years ended December 31, 2023, 2022 and 2021, was $0.5 million, $9.9 million and $0.1 million respectively. As of December 31, 2023, unrecognized stock compensation expense relating to PRSUs totaled approximately $8.7 million, which will be expensed over a weighted average period of 1.4 years.

The following is a summary of PRSU information and weighted-average grant-date fair values for Expro’s PRSUs:

		*Number*				*Weighted Average*
		of				*Grant Date*
		*Shares*				*Fair Value*
Non-vested on Closing Date			340,071			$	32.38
Granted			354,275				23.34
Vested			(2,715	)			29.72
Non-vested on December 31, 2021			691,631				27.75
Vested			(305,119	)			32.50
Non-vested at December 31, 2022			386,512				24.00
Granted			260,762				33.03
Vested			(18,222	)			26.63
Forfeited			(14,471	)			20.55
Non-vested at December 31, 2023			614,581			$	27.83

Employee Stock Purchase Plan

As of July 1, 2023, the Expro Group Holdings N.V. 2023 Employee Stock Purchase Program (“ESPP”) replaced the Expro Group Holdings N.V. Employee Stock Purchase Program. Under the ESPP eligible employees have the right to purchase shares of common stock at the lesser of (i) 85% of the last reported sale price of our common stock on the last trading date immediately preceding the first day of the option period, or (ii) 85% of the last reported sale price of our common stock on the last trading date immediately preceding the last day of the option period. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. We have reserved 5,000,000 shares of our common stock for issuance under the ESPP; all shares were available for issuance as of December 31, 2023. For the years ended December 31, 2023, 2022 and 2021, we recognized $0.4 million, $0.5 million and $0.1 million of compensation expense related to stock purchased under the ESPP, respectively.