AVANOS MEDICAL, INC.AVNS
AVANOS MEDICAL, INC. Stock Compensation Disclosure
Stock-Based Compensation
The Avanos Medical, Inc. Equity Participation Plan, the Avanos Medical, Inc. 2021 Long Term Incentive Plan, as amended and the Avanos Medical, Inc. Outside Directors’ Compensation Plan (together, the “Equity Plans”) provide for awards of stock options, stock appreciation rights, restricted stock (and in certain limited cases, unrestricted stock), restricted stock units, performance units and cash awards to eligible employees (including officers who are employees), directors, advisors and consultants of Avanos or its subsidiaries. A maximum of 7.4 million shares of Avanos common stock may be issued under the Equity Plans, and there were 2.5 million shares remaining available for issuance as of December 31, 2025.
The Avanos Medical, Inc. Employee Stock Purchase Plan (“ESPP”) allows for employee contributions to purchase shares of the Company’s common stock at a 15% discount off the lower of the closing prices at the beginning or end of each offering period. The ESPP is available to all employees meeting the eligibility requirements defined in the ESPP. Offering periods will generally be six month periods ending on June 30 and December 31 of each year. Employees may contribute up to 25% of their compensation, subject to a maximum of $25,000 into the ESPP each year. A maximum of 1.0 million common shares may be issued under the ESPP, and there were 0.6 million shares remaining available as of December 31, 2025.
Stock-based compensation expense is included in “Cost of products sold,” “Research and development,” and “Selling and general expenses.” Stock-based compensation expense for the years ended December 31, 2025, 2024 and 2023 is shown in the table below (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock options | $ | 0.5 | $ | — | $ | 0.3 | |||||||||||
| Time-based restricted share units | 10.1 | 9.8 | 10.5 | ||||||||||||||
| Performance-based restricted share units | 1.9 | 3.8 | 4.8 | ||||||||||||||
| Employee stock purchase plan | 0.1 | 0.2 | 0.2 | ||||||||||||||
| Total stock-based compensation | $ | 12.6 | $ | 13.8 | $ | 15.8 | |||||||||||
Stock Options
Stock options are granted at an exercise price equal to the fair market value of our common stock on the date of grant. Stock options are generally subject to vesting whereby options vest 30% at the end of each of the first two 12-month periods following the grant and 40% at the end of the third 12-month period and have a term of 10 years.
The fair value of stock option awards was determined using a Black-Scholes option-pricing model utilizing a range of assumptions related to volatility, risk-free interest rate, expected term and dividend yield. Expected volatility was based on historical weekly closing stock price volatility for a peer group of companies. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The expected term was based on historical observed settlement behavior. The dividend yield was based on the expectation that no dividends are expected to be paid on our common stock.
The weighted-average fair value of options granted during the year ended December 31, 2025 was $7.13 based on the following assumptions. There were no options awarded in the years ended December 31, 2024 and 2023.
| Year Ended December 31, | |||||
| 2025 | |||||
| Volatility | 44% | ||||
| Risk-free rate | 4.1% | ||||
| Expected term (Years) | 5.5 | ||||
| Dividend Yield | 0% | ||||
A summary of stock option activity is presented below:
| Shares (in thousands) | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||||
| Outstanding at December 31, 2024 | 975 | $ | 39.44 | ||||||||||||||||||||
| Granted | 288 | 15.24 | |||||||||||||||||||||
| Exercises | — | — | |||||||||||||||||||||
| Forfeitures/Expired | (316) | 31.83 | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 947 | $ | 34.60 | 3.46 | $ | — | |||||||||||||||||
| Vested and exercisable at December 31, 2025 | 840 | $ | 37.08 | 2.80 | $ | — | |||||||||||||||||
The following table summarizes information about options outstanding as of December 31, 2025:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||
| Range of Exercise Prices | Shares (in thousands) | Weighted-Average Remaining Contractual Term (Years) | Shares (in thousands) | Weighted-Average Exercise Price | ||||||||||||||||||||||||||||
| $15.00 | to | $25.00 | 198 | 7.0 | 91 | $ | 15.24 | |||||||||||||||||||||||||
| $25.00 | to | $35.00 | 240 | 3.4 | 240 | $ | 28.94 | |||||||||||||||||||||||||
| $35.00 | to | $45.00 | 353 | 2.1 | 353 | 41.55 | ||||||||||||||||||||||||||
| $45.00+ | 156 | 2.1 | 156 | 52.10 | ||||||||||||||||||||||||||||
| 947 | 3.5 | 840 | $ | 37.08 | ||||||||||||||||||||||||||||
No options were exercised during the years ended December 31, 2025, December 31, 2024 and 2023. For stock options outstanding at December 31, 2025, we expect to recognize an additional $0.6 million of expense over the remaining average service period of less than one year.
Restricted Share Units
Restricted shares, time-vested restricted share units (“RSUs”) and performance-based RSUs granted to employees and directors are valued at the closing market price of our common stock on the grant date with vesting conditions determined upon approval of the award. Time-vested RSUs are generally subject to a minimum service period of three years.
A summary of time-vested RSU activity is presented below:
| Shares (in thousands) | Weighted Average Fair Value | ||||||||||
| Outstanding at December 31, 2024 | 1,127 | $ | 24.94 | ||||||||
| Granted | 780 | 14.46 | |||||||||
| Vested | (572) | 24.54 | |||||||||
| Forfeited | (332) | 19.36 | |||||||||
| Outstanding at December 31, 2025 | 1,003 | $ | 18.86 | ||||||||
For time-vested RSUs outstanding at December 31, 2025, we expect to recognize an additional $8.0 million of expense over the remaining average service period of two years.
Performance-based RSUs are subject to achievement of certain service and performance targets over a restricted period of three years. A summary of performance-based RSU activity is presented below:
| Shares (in thousands) | Weighted Average Fair Value | ||||||||||
| Outstanding at December 31, 2024 | 798 | $ | 24.03 | ||||||||
| Granted | 694 | 15.12 | |||||||||
| Vested | (89) | 33.36 | |||||||||
| Forfeited | (522) | 20.11 | |||||||||
| Outstanding at December 31, 2025 | 881 | $ | 18.39 | ||||||||
For performance-based RSUs outstanding at December 31, 2025, we expect to recognize an additional $6.2 million of expense over the remaining average service period of two years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 21, 2023 | |
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.