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Equity-Based Compensation | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Equity-Based Compensation | Note S – Equity-Based Compensation The Company has three equity-based compensation plans, which are described below. The Company’s former parent, Redwire, LLC (“Holdings”), adopted a written compensatory benefit plan (the “Class P Unit Incentive Plan”) to provide incentives to existing or new employees, officers, managers, directors, or other service providers of the Company or its subsidiaries in the form of Holdings’ Class P Units (“Incentive Units”). Incentive Units have a participation threshold of $1.00 and are divided into three tranches (“Tranche I,” “Tranche II,” and “Tranche III”): Tranche I, Tranche II, and Tranche III Incentive Units were subject to performance-based, service-based, and market-based conditions. On September 2, 2021, the Company’s Board of Directors (the “Board”) adopted the Redwire Corporation 2021 Omnibus Incentive Plan (the “Plan”) which authorizes the grant of stock options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units, and other cash or share-based awards to employees, officers, non-employee directors and consultants of the Company. The Company initially reserved an aggregate of 7,936,136 shares (subject to annual increases on January 1 of each year beginning in 2022 and ending with a final increase on January 1, 2031) of the Company’s common stock for grants under the Plan. Shares of the Company’s stock reserved for grants under the Plan were 10,475,566 and 9,189,953 as of December 31, 2023 and December 31, 2022, respectively. Incentive stock options may only be granted to employees and officers employed by the Company. The Plan appoints the Board, the Compensation Committee or such other committee consisting of two or more individuals (collectively, the “Committee”) appointed by the Board to administer the Plan. Awards under the Plan will contain such terms and conditions not inconsistent with the Plan as the Committee in its discretion approves. The Committee has discretion to administer the Plan in the manner which it determines, from time to time, is in the best interest of the Company. On September 2, 2021, the Company’s Board adopted the Redwire Corporation 2021 Employee Stock Purchase Plan (the “ESPP”) which authorizes the grant of rights to purchase common stock of the Company to employees, officers and directors (if they are otherwise employees) of the Company. The Company initially reserved an aggregate of 755,822 shares (subject to annual increases on January 1 of each year beginning in 2022 for a period of up to 10 years) of the Company’s common stock for grants under the ESPP. Shares of the Company’s stock reserved for grants under the ESPP were 2,025,537 and 1,382,731 as of December 31, 2023 and December 31, 2022, respectively. The ESPP appoints the Compensation Committee to administer the ESPP. Awards under the ESPP will contain such terms and conditions not inconsistent with the ESPP as the Compensation Committee in its discretion approves. The Compensation Committee has discretion to administer the ESPP in the manner which it determines, from time to time, is in the best interest of the Company. As of December 31, 2023, no shares had been issued under the ESPP. Incentive Units On March 24, 2021 (“modification date”), Holdings amended the Class P Unit Incentive Plan so that the Tranche I and the Tranche III Incentive Units became fully vested, upon the closing of the Merger. Holdings also amended the Class P Unit Incentive Plan so that the Tranche II Incentive Units would vest on any liquidation event, as defined in the Class P Unit Incentive Plan, rather than only upon consummation of the sale of Holdings, subject to the market-based condition stipulated in the Class P Unit Incentive Plan prior to its amendment. As a result of the Merger, Tranches I and III Incentive Units vested on September 2, 2021 (“vesting date”) and the performance vesting condition was met for the Tranche II Incentive Units. The fair value determined at the date of the amendment of the Class P Unit Incentive Plan was immediately recognized as compensation expense on the vesting date for Tranches I and III. Compensation expense for the Tranche II Incentive Units was recognized over the derived service period of twelve months from the modification date. All compensation expense related to Incentive Units was recognized during 2021 and 2022. As of December 31, 2023, Tranches I and III were fully vested, while Tranche II is still subject to the market-based vesting condition. 2021 Omnibus Incentive Plan Stock Options The Plan authorizes the grant of stock options (incentive and non-qualified) to purchase shares of the Company’s common stock with a contractual term of 10 years. The options vest over a three-year term as follows: 33.3% on the first anniversary of the grant date, 33.3% on the second anniversary of the grant date, and 33.4% on the third anniversary of the grant date. Vesting is contingent upon continued employment or service to the Company; both the vested and unvested portion of an option will be immediately forfeited and canceled if employment or service ceases to the Company. The Company recognizes equity-based compensation expense for the options equal to the fair value of the awards on a straight-line basis over the requisite service period and recognizes forfeitures as they occur. The fair value of options granted under the Plan was estimated on the grant date under the Black-Scholes OPM using the following assumptions:
|  |  | 2022 Grants |  |
Expected option term (years) |  |  | 6 |  |
Expected volatility |  |  | 59.50% to 72.20% |  |
Risk-free rate of return |  |  | 2.90%-3.95% |  |
Expected annual dividend yield |  |  | — | % |  |
The table below presents the activity of stock options under the Plan:
|  | Shares |  | Weighted-Average Grant Date Fair Value per Share |  | Weighted-Average Exercise Price per Share |  | Weighted-Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2021 |  | 1,546,400 |  |  | $ | 3.32 |  |  | $ | 10.00 |  |  | 9.67
Granted |  | 995,118 |  |  | 1.78 |  |  | 3.09 |  |  |
Expired |  | (33,834) |  |  | 3.31 |  |  | 10.00 |  |  |
Forfeited |  | (354,093) |  |  | 2.76 |  |  | 7.48 |  |  |
Outstanding as of December 31, 2022 |  | 2,153,591 |  |  | $ | 2.70 |  |  | $ | 7.22 |  |  | 8.60
Granted |  | — |  |  | — |  |  | — |  |  |
Expired |  | (13,001) |  |  | 3.28 |  |  | 9.86 |  |  |
Forfeited |  | (37,999) |  |  | 2.81 |  |  | 7.74 |  |  |
Outstanding as of December 31, 2023 |  | 2,102,591 |  |  | $ | 2.69 |  |  | $ | 7.20 |  |  | 7.42
As of December 31, 2023, the total unrecognized compensation cost related to unvested stock options granted under the Plan was $1.6 million and is expected to be recognized over a weighted-average period of 1.2 years. As of December 31, 2023, there were 1,185,319 stock options that were vested and exercisable. Performance-based Restricted Stock Units The Plan authorizes the grant of performance-based restricted stock units (“PSUs”). The PSUs generally vest upon completion of a three-year period (“performance period”). The number of shares, if any, that are ultimately awarded is contingent upon the Company’s closing price per share at the end of the performance period and continued employment or service to the Company. The performance share payout is based on a market condition, and as such, the awards are valued using a Monte Carlo simulation model (“model”). The model generates the fair value of the award at the grant date, which is then recognized as expense on a straight-line basis over the vesting period. The Company recognizes forfeitures as they occur. On July 3, 2023 and July 31, 2023, the Company granted 701,097 shares and 5,000 shares, respectively, of PSUs to certain officers, managers and other eligible employees pursuant to the Plan. The PSU award allows the grantee to earn between 0% and 200% of the award based on the Company’s closing price per share at December 31, 2025. The grant date fair value of these awards was $3.15 per share. The fair value of PSUs granted under the Plan was estimated on the grant date using the Monte Carlo simulation model with the following assumptions:
| 2023 Grants |  |
Valuation date stock price | $ | 2.63 |  |  |
Remaining term of performance period | 2.49 years |  |
Expected volatility | 81.00 | % |  |
Risk-free rate of return | 4.70 | % |  |
Expected annual dividend yield | — | % |  |
As of December 31, 2023, total unrecognized compensation cost related to unvested PSUs granted under the Plan was $1.8 million and is expected to be recognized over a weighted-average period of 2.0 years. The Company had 706,097 PSUs outstanding as of December 31, 2023. There were no forfeitures related to PSUs during the year ended December 31, 2023. Restricted Stock Units Restricted stock units awarded under the Plan follow the same vesting conditions as the options described above and are generally subject to forfeiture in the event of termination of employment prior to vesting dates. The Company recognizes equity-based compensation expense for the restricted stock units equal to the fair value of the awards on a straight-line basis over the requisite service period and recognizes forfeitures as they occur. On May 25, 2023, the Company granted 205,765 restricted stock units of the Company’s common stock to non-employee directors. The restricted stock units vest on the one year anniversary from the grant date, subject to the director’s continued service on the Board. The weighted average grant date fair value of these awards was $2.43 per share. On July 3, 2023, the Company granted 1,640,347 restricted stock units to certain officers, managers and other eligible employees. The restricted stock units follow the same vesting conditions as the options described above. The grant date fair value of these awards was $2.63 per share. The table below presents the activity of restricted stock units under the Plan:
| Restricted Shares |  | Weighted-Average Grant Date Fair Value per Share |  | Weighted-Average Remaining Contractual Term (in Years) |  | Aggregate Intrinsic Value
Unvested as of December 31, 2021 | 1,717,950 |  |  | $ | 11.66 |  |  | 1.8 |  | $ | 11,596 |
Granted | 1,710,596 |  |  | 3.27 |  |  |  |  |
Vested | (694,153) |  |  | 9.91 |  |  |  |  |
Forfeited | (451,615) |  |  | 8.81 |  |  |  |  |
Unvested as of December 31, 2022 | 2,282,778 |  |  | $ | 6.30 |  |  | 1.3 |  | $ | 4,520 |
Granted | 1,846,112 |  |  | 2.62 |  |  |  |  |
Vested | (979,810) |  |  | 6.44 |  |  |  |  |
Forfeited | (297,865) |  |  | 6.33 |  |  |  |  |
Unvested as of December 31, 2023 | 2,851,215 |  |  | $ | 3.89 |  |  | 1.2 |  | $ | 8,126 |
As of December 31, 2023, total unrecognized compensation cost related to unvested restricted stock units granted under the Plan was $8.8 million and is expected to be recognized over a weighted-average period of 1.9 years. The table below presents the equity-based compensation expense recorded for the following periods:
|  |  | Year Ended |  |  |
|  |  |  |  | December 31, 2023 |  | December 31, 2022 |  |  |
Cost of sales |  |  |  |  |  |  |  |  |  |
Incentive units |  |  |  |  | $ | — |  |  | $ | 181 |  |  |  |
Stock options |  |  |  |  | 117 |  |  | 63 |  |  |  |
Restricted stock units |  |  |  |  | 2,540 |  |  | 2,386 |  |  |  |
Performance-based restricted stock units |  |  |  |  | 13 |  |  | — |  |  |  |
Total cost of sales |  |  |  |  | $ | 2,670 |  |  | $ | 2,630 |  |  |  |
Selling, general and administrative expenses |  |  |  |  |  |  |  |  |  |
Incentive units |  |  |  |  | $ | — |  |  | $ | 2,171 |  |  |  |
Stock options |  |  |  |  | 1,578 |  |  | 1,578 |  |  |  |
Restricted stock units |  |  |  |  | 3,982 |  |  | 4,407 |  |  |  |
Performance-based restricted stock units |  |  |  |  | 428 |  |  | — |  |  |  |
Total selling, general and administrative expenses |  |  |  |  | $ | 5,988 |  |  | $ | 8,156 |  |  |  |
Total equity-based compensation expense |  |  |  |  | $ | 8,658 |  |  | $ | 10,786 |  |  |  |

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