Airsculpt Technologies, Inc.AIRS
Airsculpt Technologies, Inc. Stock Compensation Disclosure
NOTE 6 – STOCKHOLDERS' EQUITY AND EQUITY-BASED COMPENSATION
The Company may issue a maximum of 5,564,015 shares under the 2021 Equity Incentive Plan. This amount will automatically increase on January 1 of each year for a period of ten years starting on January 1, 2023, in an amount equal to the lesser of (i) four percent of the total Common Stock outstanding on December 31 of the preceding year and (ii) such smaller number of shares as determined by the Company’s board of directors.
During the twelve months ended December 31, 2024 and 2023, the Company granted 590,279 and 767,261 RSUs, respectively, to certain officers, employees and non-employee directors in accordance with the 2021 Plan. Vesting and payment of these RSUs are generally subject to continuing service of the employee or non-employee director over the ratable vesting periods beginning one year from the date of grant to or three years after the date of grant. The fair values of these RSUs were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date. These RSUs are not considered outstanding until vested.
During the twelve months ended December 31, 2024 and 2023, the Company granted 482,165 and 624,846 PSUs, respectively, subject to the achievement of market-based conditions ("market-based PSUs"). The vesting is based on achievement of a total shareholder return relative to a specified peer group (“rTSR”). Based on the rTSR, the awards can settle in shares in a range from 0% to 200%. In addition to the achievement of the performance conditions, these PSUs are generally subject to the continuing service of the employee over the ratable vesting period from the earned date continuing through the settlement of the shares. For these PSUs, the shares settle in the first quarter of the year following the year in which the vesting criteria is met. The performance criteria is based on the Company’s actual performance condition results as compared to the targets. These PSUs are not considered outstanding until settled.
Determining the fair value of the market-based PSU awards requires judgment. The Company uses a Monte Carlo simulation model to estimate the fair value of the market-based PSU awards. The assumptions used in this pricing model requires the input of subjective assumptions and are as follows:
•Expected volatility—Expected volatility is based on historical volatilities of a publicly traded peer group based on daily price observations over a period equivalent to the expected term of the market-based PSU awards.
•Expected term—The term is estimated in consideration of the time period expected to achieve the performance.
•Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury yield of treasury bonds with a maturity that approximates the expected term of the market-based PSU awards.
•Expected dividend yield—The dividend yield is based on the current expectations of dividend payouts. The Company does not anticipate paying any cash dividends in the foreseeable future.
The following table sets forth the assumptions that were used to calculate the fair value of the market-based PSU awards granted during the twelve months ended December 31, 2024, 2023 and 2022.
| 2024 | 2023 | 2022 | |||||||||
| Expected volatility | 81.9 | % | 89.9 | % | 66.0 | % | |||||
| Expected term | 2.77 | 2.83 | 2.85 | ||||||||
| Risk-free interest rate | 3.83 | % | 1.72 | % | 1.72 | % | |||||
| Expected dividend yield | 0 | % | 0 | % | 0 | % | |||||
The fair values of the PSUs not subject to a market conditions were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.
Restricted and Performance Equity-Based Activity
A summary of the Company’s RSU and PSU activity for the twelve months ended December 31, 2024, 2023 and 2022 follows. For purposes of this summary, the Company assumes the market-based PSUs will be issued at 100% of the units within the range of 0% to 200%.
Unvested Units | Weighted Average Grant Date Fair Value of Units | ||||||||||
| Outstanding at December 31, 2021 | 4,673,766 | 14.27 | |||||||||
| Granted | 359,132 | 15.10 | |||||||||
| Forfeitures/Cancellations | (503,693) | 14.13 | |||||||||
| Vestings | (1,002,571) | 14.76 | |||||||||
| Outstanding at December 31, 2022 | 3,526,634 | 14.23 | |||||||||
| Granted | 1,442,107 | 6.60 | |||||||||
| Forfeitures/Cancellations | (30,605) | 10.83 | |||||||||
| Vestings | (1,025,234) | 13.93 | |||||||||
| Outstanding at December 31, 2023 | 3,912,902 | 14.23 | |||||||||
| Granted | 1,072,444 | 7.66 | |||||||||
| Forfeitures/Cancellations | (2,249,555) | 12.65 | |||||||||
| Vestings | (1,120,408) | 10.62 | |||||||||
| Outstanding at December 31, 2024 | 1,615,383 | $ | 8.05 | ||||||||
Other information pertaining to equity-based compensation
In connection with the IPO, on November 4, 2021 the Company previously granted PSUs with performance-based vesting conditions to certain employees. The performance-based conditions include PSUs that can vest upon achieving specified stock price performance targets (the "Price Targets"), and the remaining PSUs can vest upon achieving a revenue performance target in any trailing twelve-month period up to December 31, 2024 (the "Revenue Target"). During the three months ended March 31, 2024, the Company reassessed the probability of achieving the Revenue Target and determined such achievement is improbable based on current facts and circumstances. As a result, the Company recorded a $10.4 million cumulative reversal of stock compensation expense related to the unvested PSUs attributable to the Revenue Target in the three months ended March 31, 2024.
On August 8, 2024, Todd Magazine stepped down from his role as Chief Executive Officer of the Company, effective as of August 8, 2024, and entered into a Transition Services Agreement with the Company. In consideration of the provision by Mr. Magazine of consulting services to the Company through December 31, 2024, Mr. Magazine remained eligible to vest in 75,000 RSUs on January 1, 2025, which would have otherwise been forfeited, which resulted in an additional
$0.3 million in stock compensation during the twelve months ended December 31, 2024. Further, pursuant to the severance provisions under Section 7.2 of his employment agreement with the Company, Mr. Magazine remains eligible to earn a prorated portion of the PSUs granted to him in 2023 and 2024 through December 31, 2026, and December 31, 2027, respectively, and partial accelerated vesting for 209,490 RSUs, resulting in an additional $0.8 million in stock compensation during the twelve months ended December 31, 2024.
The Company recorded equity-based compensation expense of $3.8 million, $18.2 million, and $29.5 million for the twelve months ended December 31, 2024, 2023, and 2022, respectively, in selling, general and administrative expenses on the consolidated statements of operations. Forfeitures are recognized as incurred. During the twelve months ended December 31, 2024, the Company had actual vestings with fair market value of $6.1 million and $0.0 million related to employees and directors, respectively.
Unrecognized compensation cost related to unvested time-based shares was approximately $2.2 million as of December 31, 2024. Unrecognized compensation cost will be expensed annually based on the number of shares that vest during the year. As of December 31, 2024, the weighted average remaining vesting term on the unvested time-based shares was 1.70 years. Further, the Company has unrecognized compensation cost of $3.1 million related to the PSUs as of December 31, 2024, which will be recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved. As of December 31, 2024, the weighted average remaining vesting term on the unvested PSUs was 1.85 years.
On August 10, 2022, the board of directors of the Company approved a $0.41 per share special cash dividend. The dividend was paid on September 14, 2022, to stockholders of record at the close of business on August 26, 2022. Cash dividends paid totaled $0.3 million for the twelve months ended December 31, 2024. The Company's unvested stock units participate in dividends and as such, the Company had no dividends payable as of December 31, 2024.
The Company recognized distributions to EBS Parent, LLC (the "Parent") of approximately $0.1 million, $1.2 million, and $66.9 million for the twelve months ended December 31, 2024, 2023, and 2022, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.