COMPENSATION PLANS

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock -Based Compensation

The Company’s 2021 Plan and 2022 Plan provide for the grant of incentive and non-qualified stock options, restricted stock, restricted stock units, and stock appreciation rights of the Company’s Class A common stock. Options to purchase shares of the Company’s Class A common stock generally vest over predetermined periods and expire ten years after the date of grant. Service-based restricted stock units of the Company’s Class A common stock generally vest over predetermined periods, typically two to four years after the date of grant. Market-based restricted stock units of the Company’s Class A common stock generally vest over two to five years based on a combination of service and market conditions. The actual number of shares issued will be determined based upon the proportionate achievement of specified hurdles of the Company’s stock price. The initial number of the Company’s Class A common stock authorized for issuance under the 2021 Plan and 2022 Plan were 16.5 million and 5 million shares, respectively.

The Company also had an ESPP Plan which allowed eligible employees to purchase shares of the Company's Class A common stock at 85% of the lower of the fair market value on the effective date of the subscription or the date of purchase. Under the ESPP, employees could authorize the Company to withhold up to 10% of their compensation for common stock purchases, subject to certain limitations. During the first quarter of 2024, the Company discontinued the ESPP Plan.

Prior to the IPO, the Company’s 2009 Incentive Equity Plan, 2012 Incentive Equity Plan, and 2015 Incentive Equity Plan (collectively, the “Plans”) provided for the granting of Class Z, Class Y, Class X, and Class W Common Units of LD Holdings to employees, managers, consultants, and advisors of the Company and its subsidiaries. Participants that received grants or purchased Class Z, Class Y, Class X, or Class W Common Units of LD Holdings pursuant to the Plans were required to become a party to the Limited Liability Company Agreement. As part of the IPO and reorganization any outstanding units were equitably adjusted and replaced with a single new class of LLC Units that were exchanged on a one-for-one basis for Holdco Units. No further awards will be granted under the Plans as both the Plans and LLC Agreement were terminated.

The stock-based compensation expense recognized on all share-based awards was $22.0 million, $20.6 million, and $67.1 million, for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, there was $37.9 million of unrecognized compensation related to all unvested stock options, restricted stock units, and employee stock purchase subscriptions which will be amortized over the weighted-average remaining requisite service period of 1.73 years.

The fair value of each option and ESPP subscription is estimated on the date of grant using the Black-Scholes option valuation model. The risk-free interest rate is estimated using term commensurate United States Treasury yields. The expected life of option awards is estimated from the vesting period. Since the Company does not have an extended history of actual exercises, the Company has estimated the expected life using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. The expected volatility was based on the historical and implied volatility of a public peer group of Companies’ stock price and options in the most recent period that was equal to, as available, the expected term of the unit grants that were being valued.

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted. There were no options granted prior to 2022.


	For the year ended December 31,
	2023	2022
Average risk-free interest rate	4.19%	3.69%
Expected dividend yield	N/A	N/A
Expected volatility	62%	70%
Expected life	5.74 years	5.61 years
Fair value per share	$1.25	$1.10

The Black-Scholes option pricing model was used with the following weighted-average assumptions for ESPP subscriptions.


	For the year ended December 31,
	2023	2022
Average risk-free interest rate	4.61%	3.77%
Expected dividend yield	N/A	N/A
Expected volatility	64%	70%
Expected life	0.50 years	0.50 years
Fair value per share	$1.75	$1.60

The fair value of market-based restricted stock units was determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements. The following weighted-average assumptions were used to determine the fair value of market-based restricted stock units. There were no market-based restricted stock units granted prior to 2022.


	For the year ended December 31,
	2023	2022
Average risk-free interest rate	4.37%	3.20%
Expected volatility	62%	70%

Stock option activity during the year ended December 31, 2023 under the 2022 Plan and 2021 Plan was as follows:


	Shares	Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of December 31, 2022	7,000,000	$	1.73	5.6 years	$	480
Granted	350,000	$	2.09

Forfeited/Cancelled	(2,000,000)	$	1.57
Outstanding as of December 31, 2023	5,350,000	$	1.82	4.9 years	9,102
Exercisable as of December 31, 2023	4,250,000	1.64		4.2 years	8,000
Vested and Expected to Vest as of December 31, 2023	1,100,000	$	2.52	7.6 years	1,102

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Restricted stock unit activity during the year ended December 31, 2023 under the 2022 Plan and 2021 Plan was as follows:




	Shares	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2022	25,103,600	$	3.43
Granted	6,371,638	2.21
Vested	(4,738,693)	3.63
Forfeited/Cancelled	(5,297,726)	3.63
Unvested as of December 31, 2023	21,438,819	2.97

Restricted stock unit activity during the year ended December 31, 2023 for Holdco Units was as follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2022	5,744,200	$	0.50

Vested	(2,978,054)	0.50
Forfeited/Cancelled	(564,274)	0.50
Unvested as of December 31, 2023	2,201,872	0.50

401(k) Plan

The Company’s employees are eligible to participate in a defined contribution plan (“401(k) Plan”). Effective July 2023, the Company reinstated its matching of 50% of participant contributions, up to 6% of each participant’s total eligible gross compensation, after temporarily suspending the program in October 2022. Matching contributions totaled approximately $2.7 million, $12.9 million and $25.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.