Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

We recorded the following total stock-based compensation expense (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Stock-based compensation expense	$	3,783	$	5,267	$	11,196	$	15,393

Stock Appreciation Rights Plan

During the quarter ended June 30, 2024, we adopted the 2024 Stock Appreciation Rights Plan (the "2024 Plan"), to enhance our ability to attract, retain, and motivate individuals who are expected to make significant contributions to our future financial and operating performance. The maximum number of Class A common stock that may be issued pursuant to awards of Stock Appreciation Rights ("SARs") granted under the 2024 Plan ("Awards") is 23.8 million shares.

Financial performance in the Plan is determined by the achievement of Adjusted EBITDA. The Plan defines Adjusted EBITDA as, with respect to any particular period, the Company’s net income (loss) before interest expense, income taxes, depreciation and amortization expense, stock-based compensation expenses, dividends or other distributions to equity holders, expense associated with revaluation of any warrants, costs associated with acquisitions or dispositions, deferred compensation, management fees, minority interest expense, restructuring charges, impairment and certain segment-specific adjustments, and such other adjustments as may be appropriate to accurately reflect performance, in each case, as determined by the Plan administrator.

In July 2024, we granted 22.4 million SARs in accordance with the Plan. Each Award is subject to the employee's continued service through the applicable Vesting Date (as defined in the Plan) and the term of any Stock Appreciation Right shall not exceed seven years. The SARs will vest in four equal tranches upon achieving trailing twelve month Adjusted EBITDA targets of $50.0 million, $60.0 million, $70.0 million, and $80.0 million.

Upon exercise, the SARs will be settled in shares of our Class A common stock or in cash at our election. We will assess whether it is probable that the award will vest for each of the four tranches at the end of every reporting period. If and when the award is deemed probable of vesting, we will recognize stock-based compensation expense for the award on a graded basis through the date of vesting. Unvested SARs are forfeited upon termination of service.

We use the Black-Scholes option pricing model to estimate the grant date fair value of each SARs award granted under the Plan. The expected term is estimated using the simplified method, which is the midpoint between the vesting date and the contractual term. Volatility is based on a blend of the historical volatility of our common stock and the peer-leveraged volatility. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The following table sets forth the key assumptions used to determine the fair value:


Input
Risk-free interest rate						4.01% - 4.56%
Term (in years)						2.5 - 7.0
Volatility factor						73.18% - 89.76%
Dividend yield						0.00%

The weighted-average grant date fair value of SARs granted during the three months ended September 30, 2024 was $0.94.

A summary of our SARs activity is as follows:


	Number of Shares (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2024	—	$	—	—	$	—
Granted	22,446	1.44
Forfeited/canceled	(135)	1.44
Outstanding at September 30, 2024	22,311	1.44		5.25

Expected to vest as of September 30, 2024	—	$	1.44	5.25	$	—

As of September 30, 2024, we determined that none of the performance conditions related to the SARs are probable of being achieved. Accordingly, no stock-based compensation expense for the three and nine months ended September 30, 2024 was recognized. As of September 30, 2024, the total unrecognized compensation cost related to unvested SARs was $21.0 million.