Arq, Inc.ARQ
Arq, Inc. Stock Compensation Disclosure
Stock-Based Compensation
On June 10, 2024, the Company's stockholders approved the 2024 Omnibus Incentive Plan (the "2024 Plan"), which permits grants of awards to employees, directors and consultants. Awards may be in the form of options (both nonqualified stock options and incentive stock options), stock appreciation rights, restricted stock, restricted stock units, performance share units, and other stock-based awards and cash-based awards as described under the 2024 Plan. As of December 31, 2024, the Company has 1,906,407 shares of its common stock authorized for issuance under the 2024 Plan.
On May 16, 2022, the Company's stockholders approved the 2022 Omnibus Incentive Plan (the "2022 Plan"), which permits grants of awards to employees, directors and consultants. Awards may be in the form of options (both nonqualified stock options and incentive stock options), stock appreciation rights, restricted stock, restricted stock units, performance share units, and other stock-based awards and cash-based awards as described under the 2022 Plan. As of December 31, 2024, the Company has zero shares of its common stock authorized for issuance under the 2022 Plan.
On June 20, 2017, the Company's stockholders approved the 2017 Omnibus Incentive Plan (the "2017 Plan"), which permits grants of awards to employees, directors and non-employees. Awards may be in the form of shares, rights to purchase restricted
stock, bonuses of restricted stock, or other rights or benefits as described under the 2017 Plan. As of December 31, 2024, the Company has zero shares of its common stock authorized for issuance under the 2017 Plan.
Expense
RSAs - Restricted Stock Awards ("RSA's") are typically granted with vesting terms of three years. The fair value of RSAs is determined based on the closing price of the Company’s common stock on the authorization date of the grant multiplied by the number of shares subject to the stock award. Compensation expense for RSAs is generally recognized over the vesting term on a straight-line basis.
PSUs - Performance share units ("PSU's") generally vest over three years and are based on the grantee’s continuous service with the Company, performance measures or a combination of both. Each PSU represents a contingent right to receive shares of the Company’s common stock if the Company meets certain performance measures over the requisite period.
Compensation expense is recognized for PSU awards on a straight-line basis over the vesting period based on the estimated fair value at the date of grant using a Monte Carlo simulation model. The Company's Monte Carlo simulation models include the following assumptions:
•Risk-free interest rate - The risk-free interest rate for PSUs granted during the period was determined by using a zero-coupon, U.S. Treasury rate for the periods that coincided with the expected terms listed above.
•Dividends - As the PSUs granted receive dividend equivalent units, no discount was applied for any dividends declared.
•Expected volatility - To calculate expected volatility, the historical volatility of the Company's common stock was used.
•Performance period - The Company’s performance period is based on the vesting term of the Company’s PSU awards.
Stock Options
Stock options vest over three years and have a contractual limit of ten years from the date of grant to exercise. The fair value of stock options granted is determined on the date of grant using the Black-Scholes option pricing model, and the related expense is recognized on a straight-line basis over the entire vesting period. The determination of the grant date fair value of stock options issued is affected by a number of variables, including the fair value of the Company’s common stock, the expected common stock price volatility over the expected term of the stock option, the expected term of the stock option, risk-free interest rates, and the expected dividend yield of the Company’s common stock. The Company's Black Scholes option pricing models include the following assumptions:
•Risk-free interest rate - The risk-free interest rate for stock options granted during the period was determined by using a zero-coupon U.S. Treasury rate for the periods that coincided with the expected term of the options.
•Dividend yield - An expected dividend yield of zero was included in the calculations, as the Company does not currently pay nor does it anticipate paying dividends on its common stock as of the grant date of the stock options.
•Expected volatility - To calculate expected volatility, the historical volatility of the Company's common stock was used.
•Expected term - The Company’s expected term of stock options was calculated using a simplified method whereby the midpoint between the vesting date and the end of the contractual term is utilized to compute the expected term, as the Company does not have sufficient historical data for options with similar vesting and contractual terms.
No stock options were granted during the year ended December 31, 2024. The following table indicates the weighted average assumptions that were used related to the awards granted during the year ended December 31, 2023:
| Year ended December 31, 2023 | ||||||||
| Stock options granted: | 1,000,000 | |||||||
| Risk-free interest rate | 4 | % | ||||||
| Dividend yield | — | % | ||||||
| Volatility | 62 | % | ||||||
| Expected term (in years) | 6 | |||||||
The Company recorded the following compensation expense related to the Stock Plans:
| Years Ended December 31, | ||||||||||||||
| (in thousands) | 2024 | 2023 | ||||||||||||
| RSA expense | $ | 1,834 | $ | 1,887 | ||||||||||
| PSU expense | 638 | 650 | ||||||||||||
| Stock option expense | 243 | 111 | ||||||||||||
| Total stock-based compensation expense | $ | 2,715 | $ | 2,648 | ||||||||||
Stock-based compensation expense related to manufacturing employees and administrative employees is included in the "Cost of revenue" and "Selling, general and administrative" line items, respectively, in the Consolidated Statements of Operations. Stock-based compensation expense related to non-employee directors and consultants is included in the "Selling, general and administrative" line item in the Consolidated Statements of Operations. The Company recognizes forfeitures as they occur.
The amount of unrecognized compensation cost as of December 31, 2024, and the expected weighted-average period over which the cost will be recognized is as follows:
| As of December 31, 2024 | ||||||||||||||
| (in thousands, except years) | Unrecognized Compensation Cost | Expected Weighted-Average Period of Recognition (in years) | ||||||||||||
| RSA expense | $ | 2,763 | 1.62 | |||||||||||
| PSU expense | 1,156 | 1.03 | ||||||||||||
| Stock option expense | 374 | 1.54 | ||||||||||||
| Total unrecognized stock-based compensation expense | $ | 4,293 | 1.45 | |||||||||||
Activity
Restricted Stock
A summary of activity of RSAs for the year ended December 31, 2024 is presented in the following table:
| Restricted Stock | Weighted-Average Grant Date Fair Value | |||||||||||||
| (in thousands, except for share and per share amounts) | Awards | RSA's | ||||||||||||
| Non-vested at January 1, 2024 | 790,005 | $ | 3.10 | |||||||||||
| Granted | 577,159 | $ | 5.79 | |||||||||||
| Vested | (577,583) | $ | 3.45 | |||||||||||
| Forfeited | (57,026) | $ | 2.79 | |||||||||||
| Non-vested at December 31, 2024 | 732,555 | $ | 4.99 | |||||||||||
The weighted-average grant date fair value of RSAs granted or modified for the years ended December 31, 2024 and 2023 was $5.79 and $1.91, respectively. The total grant-date fair value of RSAs vested for the years ended December 31, 2024 and 2023 was $2.0 million and $2.0 million, respectively. The aggregate intrinsic value of non-vested RSAs outstanding as of December 31, 2024 was $5.5 million.
PSUs
PSUs outstanding remain unvested until either the requisite performance condition of the grant is met, or the third anniversary of their issuance date, at which time the actual number of vested shares will be determined based on the actual price performances of the Company’s common stock relative to a peer group performance index.
A summary of PSU activity for the year ended December 31, 2024 is presented in the table below:
| Units | Weighted-Average Grant Date Fair Value | Aggregate Intrinsic Value (in thousands) | Weighted-Average Remaining Contractual Term (in years) | |||||||||||||||||||||||
| PSUs outstanding at January 1, 2024 | 968,918 | $ | 2.06 | |||||||||||||||||||||||
| Granted | 115,877 | 10.94 | ||||||||||||||||||||||||
| Vested / Settled | (192,825) | 3.35 | ||||||||||||||||||||||||
| Forfeited / Canceled | (14,925) | 2.48 | ||||||||||||||||||||||||
| PSUs outstanding at December 31, 2024 | 877,045 | $ | 2.94 | $ | 6,639 | 1.01 | ||||||||||||||||||||
Stock Options
A summary of stock option activity for the year ended December 31, 2024 is presented below:
| Number of Options Outstanding and Exercisable | Weighted-Average Exercise Price | Aggregate Intrinsic Value (in thousands) | Weighted-Average Remaining Contractual Term (in years) | |||||||||||||||||||||||
| Options outstanding at January 1, 2024 | 1,000,000 | $ | 3.00 | |||||||||||||||||||||||
| Options granted | — | — | ||||||||||||||||||||||||
| Options exercised | — | — | ||||||||||||||||||||||||
| Options expired / forfeited | — | — | ||||||||||||||||||||||||
| Options outstanding at December 31, 2024 | 1,000,000 | $ | 3.00 | $ | 4,570 | 8.54 | ||||||||||||||||||||
| Options vested and exercisable at December 31, 2024 | 333,333 | $ | 3.00 | $ | 1,523 | 8.54 | ||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 5, 2025 | Showing above |
| 2021 | Mar 8, 2022 | |
| 2020 | Mar 10, 2021 | |
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.