Note 14 – Equity Compensation

Profit interest units – Under the pre-IPO plan, the Parent granted profit interest units to certain key employees of the Company and its subsidiaries. Subsequent to the IPO, the profit interest units converted to Class B shares. Stock-based compensation related to profit interest units increases noncontrolling interests.

The fair value of the time-based grants was recognized as compensation expense over the vesting period (generally four years) and was calculated using a Black-Scholes option-pricing model. At December 31, 2024, there were no profit interest units outstanding as the last of these profit interest units vested in August 2024.

Liability classified restricted stock units – In November 2021, the Company granted RSU awards with performance conditions of meeting certain EBITDA targets through the year ending December 31, 2024. The awards were granted with fixed dollar valuation and the number of shares granted depends on the trading price at the closing date of the period in which the EBITDA target is met. As such, these awards are classified as a liability. Management performs a regular assessment to determine the likelihood of meeting the targets and adjusts the expense recognized if necessary. During the first quarter of 2023, the performance condition of an award with a total fixed dollar value of $2,250 was met and 101 units were earned and issued as shares. During the fourth quarter of 2023, the Company determined that it was no longer probable that the EBITDA targets will be achieved for the remaining RSU awards granted in November 2021. Accordingly, the Company reversed all previously recognized stock-based compensation expense related to these awards.

Equity classified restricted stock units – In June 2021, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”) under which the Company may grant options, restricted stock units and other equity-based awards. The number of shares available for issuance under the 2021 Plan shall not exceed in the aggregate the sum of (i) 5,746 shares of Class A common stock, (ii) the number of shares of Class A common stock issuable pursuant to awards previously granted under the First Amended and Restated Profits Interest Plan of H&W Franchise Holdings LLC (“Pre-IPO Plan”) (taking into account any conversion of such outstanding Awards) and (iii) an additional number of shares of Class A common stock that shall become available on the first day of each fiscal year of the Company in an amount equal to the lesser of a) 511, b) 2% of the outstanding shares of Class A common stock on the last day of the immediately prior fiscal year or c) such number of shares of Class A common stock as determined by the board of directors in its discretion. As of December 31, 2024, there were 2,684 shares available for future grants under the 2021 Plan. As an accounting policy election, the Company recognizes forfeitures as they occur.

RSUs are valued at the Company’s closing stock price on the date of grant, and generally vest over a one- to four-year period. Compensation expense for restricted stock units is recognized on a straight-line basis. For the years ended December 31, 2024, 2023 and 2022, the weighted average grant-date fair value per share of RSUs granted was $13.18, $21.60 and $19.82, respectively. The total fair value of RSUs vested during the years ended December 31, 2024, 2023 and 2022 was $15,314, $17,858 and $6,635, respectively.

The Company grants performance-based RSUs, which are included in the RSUs described above, to executive officers and other key employees that vest upon the achievement of specified market or internal performance goals. The performance-based RSUs are recognized as expense on a straight-line basis over the vesting period which is typically three to four years. Management performs a regular assessment to determine the likelihood of meeting the related metrics and adjusts the expense recognized if necessary. As of December 31, 2023, there were 110 performance-based RSUs outstanding. During the year ended December 31, 2024, 65 performance-based RSUs were earned and issued as shares and 58 performance-based RSUs were forfeited. During the year ended December 31, 2024, the Company granted 411 performance-based RSUs, of which 249 contained performance conditions and 162 contained market conditions, with weighted average grant-date fair values of $11.95 and $12.54, respectively. To estimate the fair value of performance-based awards containing a market condition, the Company uses the Monte Carlo valuation model. For other performance based awards, the fair value is generally based on the closing price of the Company’s Class A Common Stock as reported on the New York Stock Exchange on the date of grant. As of December 31, 2024, the achievement of remaining performance metrics is considered probable.

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

Income tax benefit (expense) relates to vested RSUs. Due to the Company's full valuation allowance on its net deferred tax assets, there is no income tax benefit on the unvested RSUs. At December 31, 2024, the Company had $22,112 of total unamortized compensation expense related to non-vested RSUs. That cost is expected to be recognized over a weighted-average period of 2.10 years.

Included in the total compensation for RSUs described above, the Company recorded $625 of stock-based compensation for the year ended December 31, 2024, related to stock-based incentive bonuses that the Company plans to settle by issuing fully-vested restricted stock units to employees. The $625 recorded for the year ended December 31, 2024 is for certain key employees annual bonus and is expected to be settled during 2025.

During the second quarter of 2024, the Company reversed $689 of previously recognized stock-based compensation expense related to its companywide 2024 annual bonus plan as it was deemed no longer probable the Company would achieve certain performance metrics.