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Stock Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Share Based Compensation | NOTE 13. STOCK BASED COMPENSATION The Company accounts for equity-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). Equity instruments are measured at fair value on the grant date consistent with the terms of the award. We use an option pricing model to determine the fair value of stock options on the grant date. The Company has elected to account for forfeitures as they occur. The compensation expense is recorded in "Selling, general and administrative expenses" in the Condensed Consolidated Statements of Operations and Comprehensive Income. Stock-based compensation expense recorded was $10.9 million and $0.5 million for the three months ended September 30, 2024 and 2023, respectively and $11.8 million and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively. As described below, certain amounts of the Restricted Stock Awards ("RSAs"), Performance Unit Awards ("Performance Units"), Dril-Quip Restricted Stock Units ("Dril-Quip RSUs") and Director Stock Compensation Awards ("DSAs") awarded under the 2017 Omnibus Incentive Plan of Dril-Quip (the “Omnibus Incentive Plan”) vested upon the Merger and certain amounts of the RSAs, Performance Units, and Dril-Quip RSUs awarded under the Omnibus Incentive Plan remained outstanding and were assumed by the Company. All such share-based payments awards that were converted to the Company’s awards or settled in the Company’s shares are considered modified upon occurrence of the Merger. Modification accounting is not required for Legacy Innovex share-based payment awards as the fair value of the modified awards does not exceed the fair value of the original award immediately before the original award was modified, the vesting conditions of the modified awards are the same as the original award immediately before the original award is modified and the classification of the modified award is the same as the original award immediately before the original award is modified. As a result, there is no incremental compensation cost resulting from the modifications related to Legacy Innovex share-based payment awards. Restricted Stock Awards, Performance Unit Awards and Dril-Quip Restricted Stock Units On October 28, 2023 and 2022 and 2021, pursuant to the Omnibus Incentive Plan, Dril-Quip awarded officers, directors, and key employees RSAs, which is an award of common stock subject to time vesting. These RSAs are restricted as to transference, sale, and other disposition, and vest ratably over a three-year period. On October 28, 2023, 2022 and 2021, pursuant to the Omnibus Incentive Plan, Dril-Quip awarded Performance Units awards to officers and key employees. Under the terms of the Performance Units, participants may earn from 0% to 200% of their target award based upon the Company’s relative total share return (TSR) in comparison to the 15 component companies of the Philadelphia Oil Service Index and, starting with the 2020 grants, the S&P 500 Index. Starting with the 2022 grants, the Philadelphia Oil Service Index was replaced by the VanEck Oil Services ETF Index. On September 6, 2024, pursuant to the Omnibus Incentive Plan, Dril-Quip awarded certain employees with key roles related to a prior acquisition Dril-Quip RSUs, which is an award of common stock subject to time vesting. These Dril-Quip RSUs are restricted as to transference, sale, and other disposition, and vest ratably over a two-year period. As per the grant agreement, all 135,588 RSAs and Performance Units granted in 2021 become fully vested upon a Change of Control event, and the Merger qualified as a Change of Control event. As such, these shares became fully vested as of the date of the Merger. The remaining RSAs, Performance Units and Dril-Quip RSUs granted in 2022, 2023 and 2024 remained outstanding and to the extent earned, will be settled in shares of Company Common Stock, subject to appropriate adjustments to the number of shares related to each award. As of September 6, 2024, 493,048 shares of Company Common Stock subject to RSAs were outstanding under the Omnibus Incentive Plan; $4.9 million of their fair value is attributable to post-Merger services and will be recognized as equity-based compensation expense in the post-combination period to the extent earned. As of September 6, 2024, 303,827 shares of Company Common Stock subject to Performance Units were outstanding under the Omnibus Incentive Plan; $2.4 million of their fair value is attributable to post-Merger services and will be recognized as equity-based compensation expense in the post-combination period to the extent earned. As of September 6, 2024, 103,014 shares of Company Common Stock subject to Dril-Quip RSUs were assumed under the Omnibus Incentive Plan; $1.6 million of their fair value is attributable to post-Merger services and will be recognized as equity-based compensation expense in the post-combination period to the extent earned. Director Stock Compensation Awards Under the DSA program, the directors of Dril-Quip were allowed to elect to receive all or a portion of their fees in the form of director restricted stock awards (DSAs) in an amount equal to 125% of the fees in lieu of cash. The awards are made quarterly on the first business day after the end of each calendar quarter and vest on January 1 of the second year after the grant date. As per the grant agreement, all 75,537 DSAs become fully vested upon a Change of Control event, and the Merger qualified as a Change of Control event. As such, these shares became fully vested as of the date of the Merger. Stock Options Legacy Innovex previously granted stock options which generally vest in equa l increments over four years and have a ten-year term. Pursuant to the Merger Agreement, each stock option became fully vested and settled immediately prior to the effective time of the Merger. Due to the accelerated vesting, the Company recognized all remaining unamortized compensation expense of $0.6 million upon close of the Merger. Restricted Stock Units (RSUs) Legacy Innovex previously granted RSUs subject to vesting and forfeiture conditions during applicable restriction periods. During the three and nine months ended September 30, 2024, after adjustment for the Exchange Ratio, we granted 617,275 of equity-classified RSUs, respectively. During the three and nine months ended September 30, 2023, after adjustment for the Exchange Ratio, we granted 0 and 309,133 equity-classified RSUs, respectively. The RSUs granted in 2024 will vest on two different vesting schedules. Immediately upon close of the Merger, 224,521 RSUs vested; as a result, the Company recorded $3.9 million of compensation expense related to these RSUs on the Closing D ate. The remaining 388,407 RSUs granted in 2024, net of forfeitures, will vest over 2 years beginning from the date of the merger. RSUs granted in 2023 vest ratably over a three or four year period. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period for awards expected to ultimately vest.

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