Accounting for Stock Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Note 17 — Accounting for Stock Based Compensation

On May 16, 2013, the Compensation Committee of the Company’s Board of Directors (the “Board”) approved the Gentherm Incorporated 2013 Equity Incentive Plan (the “2013 Plan”), covering 3,500,000 shares of our Common Stock. The 2013 Plan was amended on May 19, 2017 to increase the number of available shares by 2,000,000 and further amended on May 21, 2020 to increase the number of available shares by 2,450,000. The 2013 Plan permits the granting of various awards including stock options (including both nonqualified options and incentive options), stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”) shares and certain other awards to employees, outside directors and consultants and advisors of the Company. As of December 31, 2022, the Company had an aggregate of 2,216,324 shares of Common Stock available to issue under the 2013 Plan. All equity plans are administered by the Compensation and Talent Management Committee of the Board.

During the three-year period ended December 31, 2022, the Company has outstanding stock options, SARs, restricted stock awards and restricted stock units to employees, directors and consultants. These awards become available to the recipient upon the satisfaction of a vesting condition, either based on a period of service or based on the performance of a specific achievement. For equity-based awards with a service condition, the requisite service period typically ranges between three to four years for employees and consultants and one year for directors. As of December 31, 2022, there were 320,449 PSUs outstanding. These awards cliff vest after three-years based on the Company’s achievement of either a target return on invested capital ratio (“ROIC”), as defined in the award agreement, for a specified fiscal year a target three year cumulative Adjusted EBITDA (“Adjusted EBITDA”), as defined in the award agreement, or the Company’s relative total shareholder return (“TSR”), as defined in the award agreement, during a specific three-year measurement period. In each case, awards will be earned at 50% of the target number of shares for achieving a minimum threshold or up to 200% of the target number of shares for exceeding the target, with a linear adjustment between threshold and target or between target and stretch performance goals. All other outstanding, unvested equity-based awards were service based. Equity-based award vesting may be accelerated at the discretion of the Board under conditions specified in the 2013 Plan.

Under FASB ASC Topic 718, the provisions of the PSUs that vest upon the achievement of relative TSR are considered a market condition, and therefore the effect of that market condition is reflected in the grant date fair value for this portion award. A

third party was engaged to complete a Monte Carlo simulation to account for the market condition. That simulation takes into account the beginning stock price of our common stock, the expected volatilities for the relative TSR comparator group, the expected volatilities for the Company’s stock price, correlation coefficients, the expected risk-free rate of return and the expected dividend yield of the Company and the comparator group. The single grant-date fair value computed by this valuation method is recognized by the Company in accounting for the awards regardless of the actual future outcome of the relative TSR feature. The grant date fair value of the other PSUs and RSUs are calculated as the closing price of our common stock as quoted on Nasdaq on the grant date multiplied by the number of shares subject to the award. Each of ROIC and Adjusted EBITDA is considered a performance condition and the grant-date fair value for ROIC PSUs and Adjusted EBITDA PSUs corresponds with management's expectation of the probable outcome of the performance condition as of the grant date.

The total recognized and unrecognized stock-based compensation expense is as follows:


Stock-Based Compensation Expense	2022			2021		2020		Unrecognized Stock-Based Compensation Expense at December 31, 2022		Remaining Weighted Average Vesting Period
RSUs	$	5,551		$	4,594	$	3,137	$	8,724		1.80
PSUs		954			5,535		3,361		6,745		1.97
Restricted Shares		888			1,198		1,495		419		0.42
SARs		(794	)		2,721		5,494		-		-
Stock options		-			482		836		-		-
Total Stock-Based Compensation	$	6,599		$	14,530	$	14,323	$	15,888		1.84

The related deferred tax (expense) benefit for the years ended December 31, 2022, 2021 and 2020 was $(444), $2,725, and $3,002, respectively. If Gentherm were to realize expired share-based payment arrangements, they would be reported as a forfeit in the activity roll forward tables below.

RSUs

The following table summarizes restricted stock unit activity during the years ended December 31, 2022, 2021 and 2020:


Unvested Restricted Stock Units	Time Vesting Shares			Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2019		141,741		$	42.16
Granted		132,864			34.41
Vested		(50,953	)		42.13
Forfeited		(14,747	)		39.16
Outstanding at December 31, 2020		208,905		$	37.26
Granted		93,539			79.79
Vested		(88,296	)		38.49
Forfeited		(20,522	)		48.76
Outstanding at December 31, 2021		193,626		$	56.02
Granted		117,507			66.86
Vested		(95,692	)		49.85
Forfeited		(13,863	)		70.52
Outstanding at December 31, 2022		201,578		$	64.27

The total intrinsic value of restricted stock units vested during the years ended December 31, 2022, 2021 and 2020 was $4,774, $3,398 and $2,214, respectively.

PSUs

The following table summarizes performance stock unit activity during the years ended December 31, 2022, 2021 and 2020:


Unvested Performance Stock Units	Relative TSR Target Shares			Weighted-Average Grant Date Fair Value		ROIC Target Shares			Weighted-Average Grant Date Fair Value		Adjusted EBITDA Target Shares			Weighted-Average Grant Date Fair Value		Total
Outstanding at December 31, 2019		95,041		$	61.77		95,039		$	42.78		—		$	—		190,080
Granted		77,967			49.25		77,967			33.72		—			—		155,934
Vested		—			—		—			—		—			—		—
Forfeited		(15,090	)		56.84		(15,090	)		39.96		—			—		(30,180	)
Outstanding at December 31, 2020		157,918		$	56.06		157,916		$	38.58		—		$	—		315,834
Granted		20,626			118.08		40,580			78.98		39,930			79.49		101,136
Performance Adjustment		30,828			69.18		(30,830	)		44.92		—			—		(2	)
Vested		(61,656	)		69.18		—			—		—			—		(61,656	)
Forfeited		(16,148	)		61.10		(17,374	)		44.32		(2,454	)		79.49		(35,976	)
Outstanding at December 31, 2021		131,568		$	62.09		150,292		$	47.52		37,476		$	79.49		319,336
Granted		21,324			103.31		42,640			68.63		42,640			68.63		106,604
Performance Adjustment		45,004			57.46		(2,258	)		41.61		—			—		42,746
Vested		(90,371	)		57.46		(43,106	)		41.61		—			—		(133,477	)
Forfeited		(4,724	)		68.67		(6,493	)		56.87		(3,543	)		75.10		(14,760	)
Outstanding at December 31, 2022		102,801		$	65.20		141,075		$	55.18		76,573		$	73.66		320,449

The total intrinsic value of performance stock units vested during the years ended December 31, 2022, 2021 and 2020 was $6,986, $4,265 and $0, respectively.

Restricted Shares

The following table summarizes restricted stock activity during the years ended December 31, 2022, 2021 and 2020:


Unvested Restricted Shares	Shares			Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2019		34,920		$	38.31
Granted		32,406			39.96
Vested		(32,420	)		38.33
Forfeited		—			—
Outstanding at December 31, 2020		34,906		$	39.82
Granted		13,742			70.18
Vested		(37,272	)		41.70
Forfeited		—			—
Outstanding at December 31, 2021		11,376		$	70.33
Granted		13,600			73.54
Vested		(11,376	)		70.33
Forfeited		—			—
Outstanding at December 31, 2022		13,600		$	73.54

The compensation cost associated with restricted shares is estimated on the date of grant using quoted market prices (Level 1 input). The total fair value of restricted shares vested in 2022, 2021 and 2020 was $800, $1,554 and $1,499, respectively.

SARs

The following table summarizes SARs activity during the years ended December 31, 2022, 2021 and 2020:


Stock Appreciation Rights	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2019		554,250		$	39.41		2.84	$	2,981
Granted		—			—
Exercised		(342,150	)		38.22
Forfeited		(40,500	)		44.39
Outstanding at December 31, 2020		171,600		$	40.60		2.44	$	4,224
Granted		—			—
Exercised		(116,000	)		40.34
Forfeited		—			—
Outstanding at December 31, 2021		55,600		$	41.15		1.28	$	2,544
Granted		—			—
Exercised		(40,850	)		42.27
Forfeited		—			—
Outstanding at December 31, 2022		14,750		$	38.05		1.15	$	402
Exercisable at December 31, 2022		14,750		$	38.05		1.15	$	402

There have been no SARs granted since the year ended December 31, 2017 and all SARs are currently vested. The total intrinsic value of SARs exercised during the years ended December 31, 2022, 2021 and 2020 was $1,348, $4,301 and $4,164, respectively.

Stock Options

The following table summarizes stock option activity during the years ended December 31, 2022, 2021 and 2020:


Options	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2019		869,000		$	37.87		3.51	$	5,172
Granted		—			—
Exercised		(434,250	)		38.12
Forfeited		(6,750	)		38.05
Outstanding at December 31, 2020		428,000		$	37.61		3.20	$	11,815
Granted		—			—
Exercised		(215,250	)		38.46
Forfeited		(6,000	)		38.05
Outstanding at December 31, 2021		206,750		$	36.72		2.60	$	10,375
Granted		—			—
Exercised		(44,116	)		37.87
Forfeited		-			-
Outstanding at December 31, 2022		162,634		$	36.41		2.68	$	8,212
Exercisable at December 31, 2022		162,634		$	36.41		2.68	$	8,212

There have been no stock options granted since the year ended December 31, 2017 and all stock options are currently vested. The total intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $1,582, $8,269 and $5,317, respectively.