Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

The fair value of RSUs with a TSR component granted during the years ended December 31, 2022, 2021 and 2020, were estimated on the date of grant using the Monte Carlo simulation model using the following assumptions:


	Year Ended December 31, 2022	Year Ended December 31, 2021	Year Ended December 31, 2020
Expected volatility (1)	24.0%	29.0%	30.0%
Expected dividend yield (2)	—%	—%	—%
Performance period (years)	3.0 years	3.0 years	3.0 years
Risk-free rate (3)	1.3%	0.2%	1.5%

(1)The expected volatility assumption was calculated based on the actual volatility of Hostess Brands’ daily closing share price over the three year period to the valuation date.

(2)From its inception through December 31, 2022, the Company has not paid any dividends on its common stock. As of the RSU grant date, it was assumed that no dividends would be paid on common stock over the performance period.

(3)The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant which corresponds to the performance period.

Summary of the Activity of Unvested RSUs

The following table summarizes the activity of the Company’s unvested RSUs:


	Restricted Stock Units	Weighted Average Grant Date Fair Value




Unvested as of December 31, 2021	1,139,527	$	14.62
Total Granted	714,118	20.55
Forfeited	(91,573)	16.73
Vested (1)	(508,906)	14.47
Unvested as of December 31, 2022	1,253,166	$	17.90

(1) Includes 256,528 shares withheld to satisfy $5.2 million of employee tax obligations upon vesting.

Schedule of Assumptions

The following table includes the significant inputs used to determine the fair value of options issued under the 2016 plan.


						Year Ended December 31, 2020
Expected volatility (1)						26.3%
Expected dividend yield (2)						—%
Expected option term (3)						6.0 years
Risk-free rate (4)						1.6%

(1)The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period based on the expected term and ending on the grant date.

(2)From its inception through December 31, 2022, the Company has not paid any dividends on its common stock. As of the stock option grant date, it was assumed that no dividends would be paid on common stock over the term of the stock options. Option holders have no right to dividends prior to the exercise of the options.

(3)The Company utilized the simplified method to determine the expected term of the stock options since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

(4)The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant which corresponds to the expected term of the stock options.

Summary of the Activity of Unvested Stock Options

The following table summarizes the activity of the Company’s unvested stock options:


	Number of Options	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Aggregate Intrinsic Value




Outstanding as of December 31, 2021	1,461,885	6.98	$	13.26	$	10,467,312


Exercised	(236,422)	—	13.34		2,487,634
Forfeited	(22,596)	—	12.72
Outstanding as of December 31, 2022	1,202,867	6.02	$	13.25	11,048,766
Exercisable as of December 31, 2022	1,050,089	5.86	$	13.18	9,718,721