Stock-Based Compensation |
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| Stock-Based Compensation | Stock-Based Compensation Equity Incentive Plans
On October 22, 2018, the Company implemented the HireRight GIS Group Holdings LLC Equity Incentive Plan (“Equity Plan”) providing for the issuance of up to 4,573,463 of its Class A Units (“Units”) pursuant to awards made under the Equity Plan to members of the board of managers, officers and employees as determined by the Company’s compensation committee. Following the adoption of the Omnibus Incentive Plan (as defined below), the Company did not grant further awards under the Equity Plan. However, any outstanding awards granted under the Equity Plan remain subject to the Equity Plan and applicable award agreement. In connection with the Corporate Conversion, each option to purchase units of HireRight GIS Group Holdings LLC was converted into an option to purchase shares of common stock of HireRight Holdings Corporation.
On October 18, 2021, the Company’s stockholders adopted the Company’s 2021 Omnibus Incentive Plan (“Omnibus Incentive Plan”), which became effective on October 28, 2021. The Omnibus Incentive Plan provides for the grant of awards of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights,
restricted stock awards, restricted stock units (“RSU”), other stock-based awards, other cash-based awards or any combination of the foregoing to eligible employees, consultants, directors, and officers. At September 30, 2022, 6,332,851 shares were available for issuance under the Omnibus Incentive Plan.
Modification of Certain Pre-IPO Equity Awards
The stock option awards issued prior to the Company’s IPO pursuant to the Equity Plan had vesting schedules based either upon continued service (“Time-Vesting Options”), or upon attainment of specified levels of cash-on-cash return to the Company’s pre-IPO investors as a multiple of invested capital (“MOIC”) on their investments in the Company (“Performance-Vesting Options”). On March 19, 2022, the compensation committee of the Company’s Board of Directors approved a modification of outstanding Performance-Vesting Options to vest based solely on continued service rather than MOIC attainment. Under the modified vesting terms, the amended Performance-Vesting Options vest quarterly starting March 31, 2022 and ending December 31, 2024 based solely on continued service.
Stock-Based Compensation Expense
Stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows:
Equity Plan Awards (Pre-IPO)
For stock options issued under the Equity Plan that were outstanding and unvested as of September 30, 2022, the Company expects to recognize future compensation expense of $6.0 million over a weighted average remaining vesting period of 2.19 years.
Omnibus Incentive Plan Awards
During the three months ended September 30, 2022, the Company determined that it is no longer probable that the target performance conditions will be achieved for certain awards granted under the Omnibus Incentive Plan during the three months ended March 31, 2022. Accordingly, the Company reversed $1.8 million of previously recognized stock-based compensation expense and no stock-based compensation expense was recognized in the current period for these awards.
The Company granted 1,167,199 options during the nine months ended September 30, 2022 under the Omnibus Incentive Plan, with a weighted-average grant date fair value of $5.14 calculated using the Black-Scholes option valuation model. For options under the Omnibus Incentive Plan outstanding and unvested as of September 30, 2022, the Company expects to recognize future compensation expense of $14.2 million over a weighted average remaining vesting period of 2.70 years.
The Company granted 1,134,464 RSUs with a weighted-average grant date fair value of $15.30 per share during the nine months ended September 30, 2022 under the Omnibus Incentive Plan. For RSUs outstanding and unvested
as of September 30, 2022, the Company expects to recognize future compensation expense of $11.5 million over a weighted average remaining vesting period of 2.99 years.
On June 1, 2022, the Company approved a grant of a total of 422,143 RSUs with a grant-date fair value of $14.45 per unit. A portion of these RSUs may vest upon the achievement of a series of goal-based performance milestones, and the balance of these RSUs may vest based upon achievement of all aggregated milestones by a final target date, followed by subsequent continued service for a specified period of time. The fair value of these awards, until vested, is included in accrued expenses and other current liabilities and other non-current liabilities in the condensed consolidated balance sheets. The Company measures stock-based compensation cost for liability classified awards based on the fair value of the award at each quarterly reporting date and recognizes the expense over the vesting period. The expected stock-based compensation expense of these June 1, 2022 approved RSUs is $6.1 million, which is expected to be recognized over the period from grant date through April 2024.
For the three and nine months ended September 30, 2022, compensation expense associated with these awards totaled $0.3 million and $0.4 million, respectively.
Employee Stock Purchase Plan
The first offering period for the Company’s Employee Stock Purchase Plan (“ESPP”) began on May 20, 2022 and will continue for six months until the purchase date on November 19, 2022. Thereafter, offerings will begin on November 20 and May 20 and will end on the following May 19 and November 19, respectively. Such shares will be purchased at an amount equal to 85% of the fair market value of a share on (i) the purchase date or (ii) the offering date, whichever amount is lower; provided, that the purchase price will in no event be less than the par value of a share.
The Company recognized $0.1 million and $0.2 million of stock-based compensation expense related to the ESPP during the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, total unrecognized compensation expense related to the ESPP was $0.1 million, which will be recognized on a straight-line basis over a weighted-average remaining period of 0.14 years.
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