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SHARE-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2024
Share-Based Payment Arrangement [Abstract] |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION 2021 Equity Incentive Plan On September 17, 2021, the Company adopted the Olaplex Holdings 2021 Omnibus Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options, non-qualified stock options, SARs, restricted stock, unrestricted stock, stock units, including RSUs, performance awards, and other stock-based awards to employees, directors and consultants of the Company and its subsidiaries. The number of shares of common stock originally authorized under the 2021 Plan (subject to adjustment as described in the next paragraph below) was 92,292,025 shares of common stock, plus the number of shares of common stock underlying awards granted under the Penelope Holdings Corp. 2020 Omnibus Equity Incentive Plan (the “2020 Plan”) that on or after September 17, 2021 expire or become unexercisable, are forfeited to, or repurchased for cash by, the Company, are settled in cash, or otherwise become available again for grant. As of December 31, 2024, a total of 131,616,724 shares have been authorized for issuance under the 2020 Plan and 2021 Plan, with 90,293,640 shares available for issuance under the 2021 Plan and no shares available for issuance under the 2020 Plan. The total number of shares of common stock of the Company available for issuance under the 2021 Plan will increase automatically on January 1 of each year beginning in 2023 and continuing through and including 2031 by the lesser of (i) three percent (3%) of the number of shares of common stock outstanding as of such date and (ii) the number of shares of common stock determined by the Company’s Board of Directors on or prior to such date for such year. The number of shares available for issuance under the 2021 Plan will not be increased by any shares of common stock delivered under the 2021 Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises. 2020 Equity Incentive Plan On August 2, 2023, the Company adopted the Amended and Restated 2020 Omnibus Equity Incentive Plan, effective September 27, 2021, which amended and restated the 2020 Plan solely to reflect the Reorganization Transactions and the assumption by the Company of the 2020 Plan. Converted Cash-Settled Units On February 23, 2022 (the “modification date”), the Company modified the settlement terms of its outstanding unvested time- and performance-based cash-settled units from net cash settlement to net stock-settled SARs. In addition, the vesting condition that the weighted average closing price per share over the thirty (30) consecutive trading days ending on the day immediately prior to the applicable vesting date equals or exceeds the IPO price of $21 on each applicable vesting date was removed for such SARs. Under the amended award agreements, the Company will settle all vested SARs with shares of Company common stock measured as the difference between the stock price on the date of settlement and the base price per share of $2.97. All performance conditions were removed concurrently with the modification of the settlement terms. Other terms of the SAR grants remain unchanged. The modification resulted in a change of the awards’ classification from liability to equity. The modified awards were accounted for as equity awards going forward from the modification date with a fair value measured on the modification date and recognized on a straight-line basis over the remaining requisite service period. The Company compared the fair value of the awards granted immediately before the modification date to the fair value of the modified awards and determined there was no change in the fair value at the modification date. Performance awards prior to the modification date were not expensed, given they were contingent upon achieving a market condition, until such market condition was achieved. Therefore, on the modification date, the Company reclassified the amounts previously recorded as a share-based compensation liability to a component of equity in the form of a credit to additional paid-in capital (“APIC”). As of the modification date, the Company converted 585,900 time-based and 301,050 market and performance-based cash-settled units into solely time-based stock-settled SARs. For the period through the modification date, the Company had recognized $1.6 million as compensation expense in selling, general, and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income with a corresponding recording to liability which was reclassified to APIC on the modification date. On the modification date, the Company used the Black-Scholes valuation model in determining the fair value of the outstanding SARs, which required the application of certain assumptions, including the expected life of the SARs, stock price volatility, dividend rate and risk-free interest rate. The assumptions used in determining the fair value of the SARs on the modification date were as follows:
| Time-Based |  | Market and Performance-Based
Expected term (in years) | 2.50 |  | 1.85
Expected volatility | 30 | % |  | 30 | %
Risk-free interest rate | 1.68 | % |  | 1.58 | %
Expected dividend yield | — |  |  | — |
Share price on valuation date | $ | 17.06 |  |  | $ | 17.06 |
These modified SARs are included in the weighted average diluted shares outstanding calculation set forth below in “Note 15 - Net Income Per Share”. Through the modification date, the Company recognized a recovery of cash-settled expense of $1.0 million as a result of decline in the fair value of the awards since December 31, 2021. Outstanding Option Grants and SARs The following table summarizes the stock options and stock-settled SARs activity for the year ended December 31, 2024:
| Time-based options and stock-settled SARs |  |  |  |  |  | Performance-based options
| Number of options and stock-settled SARs |  | Weighted Average Exercise Price Per Share |  | Weighted-Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value |  |  |  |  |  | Number of options |  | Weighted Average Exercise Price Per Share |  | Weighted-Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value
Outstanding at December 31, 2023 | 15,026,406 |  |  | $ | 2.35 |  |  |  |  |  |  |  |  |  |  | 760,095 |  |  | $ | 2.03 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  |  |  |
Cancelled/Forfeited | (2,583,647) |  |  | 5.30 |  |  |  |  |  |  |  |  |  |  | (240,054) |  |  | 3.34 |  |  |  |  |
Options Exercised and Issued for Shares | (1,199,319) |  |  | 0.76 |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  |  |  |
Outstanding at December 31, 2024 | 11,243,440 |  |  | $ | 2.51 |  |  | 6.3 |  | $ | 2,547 |  |  |  |  |  |  | 520,041 |  |  | $ | 1.51 |  |  | 3.7 |  | $ | 269 |
Vested and Exercisable | 5,674,547 |  |  | $ | 2.61 |  |  | 5.8 |  | $ | 1,304 |  |  |  |  |  |  | 520,041 |  |  | $ | 1.51 |  |  | 3.7 |  | $ | 269 |
The following table summarizes additional information with respect to stock options and SARs:
| Year Ended
| December 31, 2024 |  | December 31, 2023 |  | December 31, 2022
Weighted average grant date fair value per share of options granted | $ | — |  |  | $ | 2.58 |  |  | $ | 8.83 |
Intrinsic value of options and stock-settled SARs exercised | $ | 1,421 |  |  | $ | 39,098 |  |  | $ | 9,797 |
The intrinsic value represents the difference between the fair value of the Company’s common stock on the date of exercise and the exercise price of each option. The fair value of time-based options granted was calculated using the following assumptions during the years ended December 31, 2024, 2023 and 2022:
| Year Ended
| December 31, 2024 |  | December 31, 2023 |  | December 31, 2022
Expected term (years) | — |  |  | 6.25 |  | 6.25
Expected volatility (%) | — |  |  | 38 - 40% |  | 37 - 42%
Risk-free interest rate (%) | — |  |  | 4.22 - 4.26% |  | 1.58 - 2.82%
Expected dividend yield (%) | — |  |  | — |  |  | — |
Expected term The expected term of the options represents the period of time that the options are expected to be outstanding. Options granted have a maximum contractual life of 10 years. The Company estimates the expected term based upon the simplified method described in Staff Accounting Bulletin No. 107, as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded. Expected volatility As the Company does not have sufficient trading history for its common stock, the expected stock price volatility for the common stock was estimated by taking the average historic price volatility for certain industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public companies within the same industry. The Company intends to continue to consistently apply this process using the same or similar set of industry peers until a sufficient amount of historical information regarding the volatility of its own share price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be used in the calculation. Risk-free interest rate The risk-free interest rate was based on the U.S. Constant Maturity Treasury rate, with maturities similar to the expected term. Expected dividend yield The Company does not anticipate paying any dividends in the foreseeable future. As such, the Company uses an expected dividend yield of zero. RSUs During the year ended December 31, 2024, the Company issued time-based RSUs to its non-employee directors pursuant to the 2021 Plan. The RSUs granted to the Company’s non-employee directors vest on the first anniversary of the date of grant, subject to the non-employee director’s continued service through such date. Upon vesting, one share of the Company’s common stock is issued for each RSU. Additionally during the year ended December 31, 2024 the Company issued RSUs to eligible employees. The vesting period of these awards range from one to four years. Upon vesting, one share of the Company’s common stock is issued for each RSU. The table below summarizes the status of the Company’s time-based RSUs activity for the year ended December 31, 2024:
| Time-based RSUs
| Number of Awards |  | Weighted Average Grant-Date Fair Value Per Share
Unvested Shares at December 31, 2023 | 6,814,357 |  |  | $ | 2.96 |
Granted | 12,496,544 |  |  | 1.77 |
Vested | (2,293,639) |  |  | 3.00 |
Forfeited | (3,984,015) |  |  | 2.15 |
Unvested Shares at December 31, 2024 | 13,033,247 |  |  | $ | 2.07 |
The following table summarizes additional information with respect to RSUs:
| Year Ended
| December 31, 2024 |  | December 31, 2023 |  | December 31, 2022
Weighted average grant date fair value per share of RSUs granted | $ | 1.77 |  |  | $ | 3.00 |  |  | $ | 17.27 |
Total grant date fair value of RSUs vested | $ | 6,872 |  |  | $ | 1,450 |  |  | $ | — |
The Company presents share-based compensation expense in Selling, general and administrative expenses on the Company’s Consolidated Statements of Income and Comprehensive Income. The following table summarizes share-based compensation expense for the years ended December 31, 2024, 2023 and 2022:
|  | Year Ended
|  | December 31, 2024 |  | December 31, 2023 |  | December 31, 2022
Share-based compensation expense |  | $ | 11,123 |  |  | $ | 9,072 |  |  | $ | 7,275 |
Income tax benefit |  | $ | 1,836 |  |  | $ | 2,015 |  |  | $ | 1,428 |
The following table summarizes unrecognized compensation costs from share-based compensation related to non-vested awards as of December 31, 2024:
| Unrecognized share-based compensation expense |  | Weighted-Average Remaining Recognition Period (in years)
Options | $ | 4,887 |  |  | 2.6
RSUs | 22,972 |  |  | 3.0
SARs | 992 |  |  | 1.2
Total unrecognized share-based compensation expense | $ | 28,851 |  |  |

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