|6 Months Ended|
Jun. 30, 2023
|Share-Based Payment Arrangement [Abstract]|
Note 13 – Equity Compensation
Profit interest units –
Under the pre-IPO plan, the Parent granted time-based and performance-based 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 performance-based grants were awarded with vesting conditions based on performance targets connected to the value received from change of control of the Parent and were subject to certain forfeiture provisions prior to vesting. In June 2021, the Parent amended previously issued profit interest units with performance-based vesting conditions that were based on performance targets connected to the value received from change of control of the Parent. The vesting condition, as amended, was based on the average trading price of XPO Inc. common stock exceeding the IPO threshold price, as defined in the amendment. The amendment of these units was treated as a modification with the compensation cost of the amended units of $18,127 recognized over the new estimated service period through November 2022. In March 2022, the units vested when the average trading price condition was met. The Company recognized $12,003 of expense during the six months ended June 30, 2022.
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. The Company recognized expense of $3 and $17 during the three and six months ended June 30, 2023, respectively, and $69 and $147 during the three and six months ended June 30, 2022, respectively, which was included within selling, general and administrative expenses. At June 30, 2023, the Company had $5 of unrecognized compensation expense. The unrecognized compensation expense is expected to be recognized over a weighted average period of approximately 1.11 years for the time-based grants.
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. As of June 30, 2023, management believes that the EBITDA targets for the remaining RSU awards will be achieved and is accordingly recognizing expense ratably over the vesting period. The Company recognized expense of $444 and $888 during the three and six months ended June 30, 2023, respectively, and $621 and $1,242 during the three and six months ended June 30, 2022, respectively. At June 30, 2023, the Company had $2,709 of unrecognized expense relating to these grants.
Equity classified restricted stock units –
The following table summarizes activity for RSUs for the six months ended June 30, 2023:
RSUs are valued at the Company’s closing stock price on the date of grant, and generally vest over a - to four-year period. Compensation expense for RSUs is recognized on a straight-line basis.
During 2022, included in the RSUs described above, the Company granted 171 performance-based RSUs at a weighted average grant-date closing price of $18.25 per share. The performance-based RSUs are recognized as expense on a straight-line basis over the vesting period of 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. During 2022, the performance metrics related to 18 performance-based RSUs fell below the minimum threshold and as a result, the Company cancelled these previously granted performance-based RSUs. During the first quarter of 2023, 36 units were earned and issued as shares. As of June 30, 2023, the achievement of remaining performance metrics is considered probable.
Total compensation expense recognized for RSUs was $5,608 and $11,206 during the three and six months ended June 30, 2023, respectively, and $3,862 and $6,284 during the three and six months ended June 30, 2022, respectively. Due to the Company's full valuation allowance on its net deferred tax assets, there is no income tax benefit on the unvested RSUs. The Company recognized an income tax benefit on vested RSUs of $120 and $838 during the three and six months ended June 30, 2023, respectively, and $27 during the three and six months ended June 30, 2022.
At June 30, 2023, the Company had $26,351 of total unamortized compensation expense related to non-vested RSUs. That cost is expected to be recognized over a weighted-average period of 2.48 years.
The entire disclosure for share-based payment arrangement.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef