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Note 16 - Share-based Compensation

3 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(16)

Share-Based Compensation

We recognized total share-based compensation expense of $0.3 million and $0.4 million during the three months ended September 30, 2025 and 2024, respectively. These amounts have been included in the consolidated statements of comprehensive income within SG&A expenses. At September 30, 2025, $2.5 million of total unrecognized compensation expense related to non-vested stock-based awards is expected to be recognized over a weighted average period of 2.2 years. There was no share-based compensation capitalized during the three months ended September 30, 2025 and 2024.

At September 30, 2025, there were 1,075,457 shares of common stock available for future issuance pursuant to The Ethan Allen Interiors Inc. Stock Incentive Plan (the “Plan”), which provides for the grant of stock-based awards including stock options, restricted stock and stock units. All stock-based awards are approved by the Compensation Committee of the Board of Directors after consideration of recommendations proposed by the Chief Executive Officer. Company policy requires an additional one-year holding period beyond the service vest date for executive officers and Board of Directors.

Stock Option Activity

Employee Stock Option Grants. There were no stock option awards granted to employees during the three months ended September 30, 2025 and 2024.

Non-Employee Stock Option Grants. The Plan also provides for the grant of stock-based awards to non-employee directors of the Company. During the first three months of fiscal 2026, we granted 16,905 stock options at an exercise price of $29.58 to our non-employee directors. In the prior year period, we granted 16,650 stock options at an exercise price of $30.03. These stock options vest in three equal annual installments beginning on the first anniversary of the date of grant so long as the director continues to serve on the Company’s Board of Directors. All options granted to directors have an exercise price equal to the fair market value of our common stock on the date of grant and remain exercisable for a period of up to ten years, subject to continuous service on our Board of Directors. At September 30, 2025, $0.2 million of total unrecognized compensation expense related to unvested non-employee stock options is expected to be recognized over a weighted average remaining period of 2.2 years.

During the first three months of fiscal 2026, 3,481 options expired, leaving a total of 120,844 stock options outstanding at September 30, 2025, with a weighted average exercise price of $26.15 and a weighted average grant date fair value of $6.24.

Restricted Stock Unit Activity

During the first three months of fiscal 2026, we granted 20,789 non-performance based restricted stock units (“RSUs”), with a weighted average grant date fair value of $23.69. The RSUs granted to employees entitle the holder to receive the underlying shares of common stock as the unit vests over the relevant vesting period. The RSUs do not entitle the holder to receive dividends declared on the underlying shares while the RSUs remain unvested and vest in three equal annual installments on the anniversary of the date of grant. In the prior year period, we granted 23,399 RSUs with a weighted average grant date fair value of $24.04 which vest in three equal annual installments on the anniversary date of the grant.

During the first three months of fiscal 2026, 26,862 RSUs vested, leaving at total of 40,190 RSUs unvested and outstanding at September 30, 2025, with a weighted average grant date fair value of $24.51. At September 30, 2025, $0.9 million of total unrecognized compensation expense related to unvested RSUs is expected to be recognized over a weighted average remaining period of 2.2 years.

Performance Stock Unit Activity

Payout of performance stock units (“PSUs”) depends on our financial performance (80%) and a market-based condition based on the total return our shareholders receive on their investment in our stock relative to returns earned through investments in other peer public companies (20%). The performance share opportunity ranges from 62% of the employee's target award if minimum performance requirements are met to a maximum of 138% of the target award based on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally three fiscal years.

During the first three months of fiscal 2026, we granted 88,526 PSUs with a weighted average grant date fair value of $22.77 compared with 92,669 PSUs at a weighted average grant date fair value of $23.06 in the prior year. The number of awards that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring employees to remain employed with us through the end of the three-year performance periods. We account for PSU awards as equity-based awards because upon vesting, they will be settled in common shares. We expense as compensation cost the fair value of the PSUs as of the grant date and amortize expense ratably over the total performance and time vest period, considering the probability that we will satisfy the performance goals.

During the first three months of fiscal 2026, 50,479 PSUs vested, leaving 375,053 PSUs unvested and outstanding at September 30, 2025, with a weighted average grant date fair value of $24.41. Unrecognized compensation expense at September 30, 2025, related to PSUs, was $1.4 million based on the current estimates of the number of awards that will vest, and is expected to be recognized over a weighted average remaining period of 2.2 years.