Equity-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

EQUITY-BASED COMPENSATION

Overview

At the time of the IPO on September 23, 2021, the 2021 Incentive Award Plan and the 2021 Employee Stock Purchase Plan (the “2021 Plans”) were adopted to attract, retain, and motivate selected employees, consultants, and directors through the granting of equity-based compensation awards and cash-based performance bonus awards. The compensation committee or its approved designees, as defined, administer the 2021 Plans. Subject to the terms and conditions of the 2021 Plans, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2021 Plans.

Under the 2021 Incentive Award Plan, 10,923,912 shares of common stock were reserved for issuance pursuant to a variety of equity-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards, and other equity-based awards. In addition, 1,638,586 shares of Class A common stock were reserved for issuance under our Employee Stock Purchase Plan. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2021 Incentive Award Plan will be increased by an annual increase on the first day of each fiscal year beginning in 2022 and ending in 2031, equal to the lesser of (A) 5% of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by the board of directors; provided, however, that no more than 81,929,342 shares of stock may be issued upon the exercise of incentive stock options. As of December 31, 2021, 7,888,617 shares of common stock are available for future grant under the 2021 Incentive Award Plan. All of the shares of Class A common stock reserved for issuance remain available. Vesting is subject to certain change in control provisions as provided in the award agreements.

Prior to the IPO, Class M Units were granted to certain employees at the Company’s discretion in consideration of services provided by employees. The agreements generally provide for 25% vesting on the first anniversary from the date of grant (or a shorter period at the Company's board of directors' discretion), with the remainder vesting monthly over the subsequent three years. Compensation cost related to these Class M Units was measured as of the grant date based on the fair value of the award and is being expensed ratably over the service period. Class M Units were issued and outstanding as of the date of grant. As discussed in Note 1, Business and organization, under Conversion of Class F, P and M units at time of IPO, at the time of the IPO, the LLC Agreement was amended and restated to recapitalize all 2,006,212 unvested Class M Units into 2,046,008 unvested LLC Units after applying a conversion ratio of 1.8588 with a further adjustment for a distribution threshold (which impacted their allocation of value) so the economic effect of the exchange was a like-for-like value. The unamortized compensation and remaining vesting period for these awards prior to the IPO has been carried forward after the IPO without adjustment. The number of unvested Class M Units presented in these financial statements for periods prior to the IPO have been retroactively adjusted to reflect the conversion ratio similar to the presentation of a stock-split.

Grants of Restricted Stock Units

RSUs have a time-based vesting requirement (based on continuous employment). Upon vesting, the RSUs convert into Class A common stock; unvested RSUs are not considered outstanding shares of Class A common stock. The agreements generally provide for 25% vesting at the first anniversary of the date of the grant (or a shorter period at the Company’s board of director’s discretion), with the remainder vesting quarterly over the following three years.

The following table summarizes the activity related to the Company’s RSUs for the year ended December 31, 2021:


	Number of Restricted Stock Units	Weighted average grant date fair value
Balance as of December 31, 2020, unvested	—	$	—
Granted	1,417,231	$	13.14
Vested	(4,751)	$	12.00
Forfeited	(34,752)	$	13.12
Balance as of December 31, 2021, unvested	1,377,728	$	13.15

Of the total RSUs vested, 1,613 RSUs were withheld to fund employee withholding taxes.

The fair value of the RSUs was based on the fair value of a Class A share of common stock at the time of grant. Total compensation expense for RSUs was approximately $1.0 million for the period from September 23, 2021 to December 31, 2021, and is included in selling, general and administrative expenses in the consolidated statements of operations. No tax benefit was associated with the equity-based compensation expense for RSUs.

The unamortized compensation cost related to RSUs of $17.1 million as of December 31, 2021 is expected to be recognized over a weighted-average period of approximately 3.8 years.

Grants of Stock Options

The following table summarizes the activity related to the outstanding and exercisable stock options:


	Number of options	Weighted average exercise price		Weighted average grant date fair value		Weighted average remaining contractual term (years)
Outstanding as of December 31, 2020	—	$	—	$	—	—
Granted	1,618,064	$	12.00	$	4.28
Forfeited	(5,931)	$	12.00	$	4.29
Outstanding as of December 31, 2021	1,612,133	$	12.00	$	4.28	9.7

Exercisable as of December 31, 2021	162,952	$	12.00	$	4.20	9.7
Unvested as of December 31, 2021	1,449,181	$	12.00	$	4.29	9.7
Vested and expected to vest as of December 31, 2021	1,612,133	$	12.00	$	4.28	9.7

On September 22, 2021, options to purchase 1,618,064 shares of Class A common stock with a strike price of $12.00 (per share underlying the option) were granted to certain executives, employees and members of the Board with the number of shares underlying the options determined based on the number of Class M Units reduced in the conversion of LLC Units. The awards have a time-based vesting requirement (based on continuous employment). Upon vesting, the stock options are exercisable into Class A common stock. Vesting is generally over four years from the date of grant of the related Class M Units and options may be exercised up to 10 years from the date of issuance.

As of December 31, 2021, the vested stock options had an aggregated intrinsic value of $1.0 million. The stock option awards have weighted average remaining contractual terms of 9.7 years with an aggregate intrinsic value of $9.8 million.

Since options represent equity awards, such awards are fair valued as of the grant date for the purposes of measurement and recognition under U.S. GAAP. To measure the fair value of an option, the Black Scholes valuation model was utilized. The value of the common stock underlying the award is based on the fair value of a share of Class A common stock. The valuation model requires the input of other highly subjective assumptions. Inputs to model for awards granted during the period from September 22, 2021 through December 31, 2021, are as follows:


Expected volatility	35.0	%
Expected dividend yield	Nil
Expected term (in years)	5 to 6.3 Years
Risk free interest rate	0.9	%

Total compensation expense for stock options was approximately $1.4 million for the period from September 22, 2021 to December 31, 2021, and is included in selling, general and administrative expenses in the consolidated statements of operations. No tax benefit was associated with the equity-based compensation expense for stock options.

As of December 31, 2021, total compensation expense related to unvested option awards not yet recognized was $5.5 million and the weighted-average period over which the compensation is expected to be recognized is 3.1 years.

Class M Units

Prior to being recapitalized into Outstanding Restricted LLC Units as discussed in Note 1, Business and Organization, Summary of the Restructuring, Offering and Other Transactions Completed in connection with the IPO, Class M Units were profit interests granted to certain employees at the Company’s discretion without consideration. The agreements granted to date generally provide for 25.0% vesting on the first anniversary from the date of grant (or shorter period at management’s discretion), with the remainder vesting monthly over the subsequent three years. Compensation cost related to these Class M Units was measured as of the grant date based on the fair value of the award and was expensed ratably over the service period. Class M Units were deemed issued and outstanding as they vested.

The fair value of grants of restricted Class M Units was based on the fair value of an unrestricted Class M Unit underlying the award until the recapitalization which occurred on September 22, 2021 as discussed in the table within the subsection "Outstanding Restricted LLC Units (formerly M Units)" below.

Vested Class M Units were subject to repurchase at the option of the Company upon termination of the holder’s employment based on the then fair value of the units. No units had been repurchased through September 22, 2021.

Outstanding Restricted LLC Units (formerly M Units)

As discussed above, restricted LLC Units were granted to certain executives, employees and members of the Board prior to the IPO and have been retroactively adjusted as described in Note 1, Business and Organization, Conversion of Class F, P and M Units at Time of IPO. The awards have a time-based vesting requirement (based on continuous employment). Upon grant, the awards are issued and outstanding common LLC Units but subject to forfeiture in the event of a termination of service; unvested awards are outstanding LLC units. Vesting is generally over four years from the date of grant.

The following table summarizes the activity related to the unvested LLC Units:


	Number of LLC Units	Weighted average grant date fair value
Balance, January 1, 2019, unvested	487,091	$	0.21
Granted	177,346	$	0.29
Forfeited	(24,385)	$	0.27
Vested	(182,825)	$	0.24
Balance, January 1, 2020, unvested	457,227	$	0.16
Granted	1,444,831	$	0.29
Forfeited	(241,265)	$	0.27
Vested	(174,847)	$	0.27
Balance, December 31, 2020, unvested	1,485,946	$	0.28
Granted prior to September 22, 2021	1,515,276	$	0.67
Forfeited	(398,768)	$	0.22
Vested	(700,477)	$	0.46
Balance, December 31, 2021, unvested	1,901,977	$	0.52

The fair value of restricted LLC Units was based on the fair value of an unrestricted LLC Unit at the date of grant. Total compensation expense for LLC Units recorded in selling, general and administrative expenses in the consolidated statements of operations were approximately $0.3 million, less than $0.1 million, and less than $0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The unamortized LLC Unit compensation cost of $0.9 million as of December 31, 2021 is expected to be recognized over a weighted-average period of approximately 3.0 years.

The quantitative information about certain significant Level 3 unobservable inputs for the three valuation methods and for Black-Scholes are summarized in Note 9, Stockholders’ and Members’ Equity, Fair Value Measurement for Class P Unit Redemption Value, Warrants Exercisable into Class P Units, and Valuation as of the Grant Date of Class M Units for the period ended September 22, 2021 and the years ended December 31, 2020 and 2019, respectively.