HireRight Holdings Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Equity Incentive Plans

The Company issues stock-based compensation awards under the 2021 Omnibus Incentive Plan (“Omnibus Incentive Plan”), and prior to the IPO the Company issued stock-based compensation under the HireRight GIS Group Holdings LLC Equity Incentive Plan (“Equity Plan”). At September 30, 2023, the total number of shares authorized for issuance under the Omnibus Incentive Plan was 14.2 million shares and 7.9 million shares remain available for issuance.

Stock-Based Compensation Expense

Stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)
Selling, general and administrative	$	4,691	$	1,089	$	12,844	$	8,083
Cost of services (exclusive of depreciation and amortization)	127		193		1,045		504
Total stock-based compensation expense	$	4,818	$	1,282	$	13,889	$	8,587

Stock Options under the Equity Plan

For stock options issued under the Equity Plan that were outstanding and unvested as of September 30, 2023, the Company expects to recognize future compensation expense of $4.9 million over a weighted average remaining vesting period of 2.2 years.

Awards under the Omnibus Incentive Plan

The Company granted 46,081 options during the nine months ended September 30, 2023 under the Omnibus Incentive Plan, with a weighted average grant date fair value of $3.96 calculated using the Black-Scholes option pricing model. For options under the Omnibus Incentive Plan outstanding and unvested as of September 30, 2023, the Company expects to recognize future compensation expense of $4.9 million over a weighted average remaining vesting period of 2.2 years.

The Company granted 3,389,064 restricted stock units (“RSU”), including the performance RSUs discussed below, with a weighted average grant date fair value of $9.11 per share during the nine months ended September 30, 2023 under the Omnibus Incentive Plan. For RSUs outstanding and unvested as of September 30, 2023, the Company expects to recognize future compensation expense of $31.2 million over a weighted average remaining vesting period of 2.4 years.

On March 20, 2023, the Company approved a grant of a total of 2,561,275 performance RSUs. A total of 1,116,323 of these performance RSUs had a grant-date fair value of $5.67 per unit based on a Monte Carlo valuation model and may vest based upon the achievement of a market condition related to achievement of stock price targets of the Company's common stock, and are subject to continued service. The expected stock-based compensation expense for the market condition performance RSUs is $6.3 million and is expected to be recognized over the period

from grant date through March 2026. The remaining portion, 1,444,952 units, of these performance RSUs granted on March 20, 2023, had a grant date fair value of $10.90 per unit and may vest upon the achievement of AEBITDA performance targets and are subject to continued service. The total expected stock-based compensation expense for the AEBITDA performance RSUs is $15.8 million and is expected to be recognized over the period from grant date through March 2026.