Bowhead Specialty Holdings Inc.BOW
Bowhead Specialty Holdings Inc. Stock Compensation Disclosure
Stock-Based Compensation
2024 Plan
On May 22, 2024, the Board approved and adopted the 2024 Plan, which provides for the grant of stock options (including ISOs and nonqualified stock options), stock appreciation rights, restricted stock, RSUs, other stock-based awards, stock bonuses, cash awards and substitute awards.
A total of 3,152,941 shares of common stock were initially authorized and reserved for issuance under the 2024 Plan. The reserve increases on January 1 of each year, starting in 2025, by an amount equal to the lesser of: (a) 2.0% of the fully-diluted shares on the preceding December 31, and (b) a smaller amount as determined by the Board. As of January 1, 2025, 3,824,051 shares of common stock were authorized and reserved for issuance under the 2024 Plan.
The Board approved the grant of RSUs to the Company’s employees and certain Board directors, and PSUs to its CEO. As of December 31, 2025, 1,224,665 shares of common stock were granted and unvested under the 2024 Plan.
Restricted Stock Units
On May 22, 2024, the Board approved the grant of 762,115 RSUs with a grant-date fair value of $17.00 per share. Additional RSUs were granted after May 22, 2024 based on the grant-date fair value of Bowhead’s common stock. The RSUs issued to employees and a one-time issuance to one of the Company’s directors have a four-year vesting period. These RSUs vest 20% per year for the first three years following issuance and 40% at the end of the fourth year, and are contingent upon the employee’s continuous employment or the director’s continuous service as a director with the Company throughout the vesting period. In addition, the RSUs issued to directors of the Company under the Company’s non-employee director compensation policy are contingent upon the director’s continuous service as a director through the vesting date, which is the earliest of: (a) the one-year anniversary of the grant date, (b) the date of the regular annual meeting of the Company’s stockholders held following the grant date, or (c) the date of the consummation of a change in control.
The following table provides a summary of RSU activities during the year ended December 31, 2025:
Number of RSUs | Weighted Average Grant-Date Fair Value | ||||||||||
| Granted and unvested at December 31, 2024 | 763,415 | $ | 17.19 | ||||||||
Granted | 479,649 | 31.31 | |||||||||
Vested | (170,072) | 17.17 | |||||||||
Forfeited | (45,264) | 20.75 | |||||||||
| Granted and unvested at December 31, 2025 | 1,027,728 | $ | 23.62 | ||||||||
The Company recognizes the compensation cost for the RSUs on a straight-line basis over the awards’ vesting period.
The Company recognized compensation costs associated with the RSUs of $6.5 million, for the year ended December 31, 2025, compared to $2.3 million for the year ended December 31, 2024. Since the RSUs were authorized for issuance in 2024, there were no compensation costs associated with the RSUs for the year ended December 31, 2023.
As of December 31, 2025, total unrecognized compensation cost for the RSUs were $18.5 million, and the weighted average period over which the cost is expected to be recognized is approximately 2.7 years.
Performance Stock Units
On May 22, 2024, the Board approved the grant of 129,411 PSUs to the Company’s CEO. The grant-date fair value of the PSUs, which was valued based on a Monte Carlo simulation model, was $10.04 per share. The PSUs include both a service and a market condition, and may be settled in cash upon the occurrence of an event that is outside of the Company’s control. The vesting of the PSUs are contingent upon the CEO’s continuous employment and service to the Company through the third anniversary of the date of grant, or May 22, 2027. The number of PSUs earned, which range from 0 - 125% of the PSUs granted, are based on the achievement of certain compounded annual growth rate milestones of BSHI’s common stock compared its IPO price of $17.00 per share for any 20 business day period between the second and third anniversaries of the grant date.
On February 21, 2025, the Board approved the grant of 67,526 PSUs to the Company’s CEO. The grant-date fair value of the PSUs, which was valued based on a Monte Carlo simulation model, was $16.09 per share. Similar to the May 22, 2024 grant, the PSUs include both a service and a market condition, and may be settled in cash upon the occurrence of an event that is outside of the Company’s control. The vesting of the PSUs are contingent upon the CEO’s continuous employment and service to the Company through the third anniversary of the date of grant, or February 21, 2028. The number of PSUs earned, which range from 0 - 125% of the PSUs granted, are based on the achievement of certain compounded annual growth rate milestones of BSHI’s common stock compared to its grant price of $32.58 per share for any 20 business day period between the second and third anniversaries of the grant date.
Since the PSUs are required to be settled in cash upon the occurrence of an event that is outside of the Company’s control, the PSUs are accounted for as mezzanine equity on the Company’s Consolidated Balance Sheets until the vesting date.
The following table provides a summary of PSU activity during the year ended December 31, 2025:
Number of PSUs | Weighted Average Grant-Date Fair Value | ||||||||||
| Granted and unvested at December 31, 2024 | 129,411 | $ | 10.04 | ||||||||
Granted | 67,526 | 16.09 | |||||||||
Vested | — | — | |||||||||
Forfeited | — | — | |||||||||
| Granted and unvested at December 31, 2025 | 196,937 | $ | 12.11 | ||||||||
The following table summarizes the significant inputs used in the Monte Carlo simulation model to determine the grant-date fair value of the PSUs awarded:
| May 22, 2024 | February 21, 2025 | |||||||||||||
| Expected term (in years) | 3.0 | 3.0 | ||||||||||||
Expected volatility | 27.0% | 27.0% | ||||||||||||
Expected dividend yield | —% | —% | ||||||||||||
| Risk-free interest rate | 4.6% | 4.2% | ||||||||||||
The Company recognizes the compensation cost for PSUs on a straight-line basis over the award’s vesting period.
The Company recognized compensation costs associated with the PSUs of $0.7 million in the year ended December 31, 2025, compared to $0.3 million for the year ended December 31, 2024. Since the PSUs were
authorized for issuance in 2024, there were no compensation costs associated with the PSUs for the year ended December 31, 2023.
As of December 31, 2025, total unrecognized compensation cost for the PSUs was $1.4 million and the weighted average period over which the cost is expected to be recognized is approximately 1.7 years.
Warrants
On May 22, 2024, the Board approved the issuance of warrants to AmFam to purchase 1,614,250 shares of the Company’s common stock (the warrants associated with such shares the “Initial Warrants”) and, upon the exercise of the underwriters overallotment option, on May 28, 2024, the Company issued to AmFam warrants to purchase 56,471 additional shares of the Company’s common stock (the warrants associated with such additional shares, individually, the “Overallotment Warrants” and together with the Initial Warrants, the “Warrants”).
The Warrants, which are subject to a five-year service condition, are accounted for as stock-based compensation under ASC 718. The grant-date fair value of the Initial Warrants and Overallotment Warrants were $9.13 per share and $17.50 per share, respectively. The Warrants vest 20% per year over the five-year service period and have a stated and weighted average exercise price of $17.00 per share. The vested portion of the Warrants may be exercised at any time, in whole or in part, until the -year anniversary of the issuance dates.
As of December 31, 2025, 334,144 Warrants have vested, but none have been exercised.
The following table summarizes the significant inputs used in the Black-Scholes-Merton pricing models to determine the grant-date fair value of the Warrants issued:
| Initial Warrants | Overallotment Warrants | ||||||||||
| Expected term (in years) | 10.0 | 10.0 | |||||||||
| Expected volatility | 34.0% | 34.0% | |||||||||
| Expected dividend yield | —% | —% | |||||||||
| Risk-free interest rate | 4.4% | 4.5% | |||||||||
The Company recognizes compensation cost for the Warrants on a quarterly basis over the awards’ vesting period.
The Company recognized compensation costs associated with the Warrants of $3.1 million in the year ended December 31, 2025, compared to $1.9 million for the year ended December 31, 2024. Since the Warrants were authorized for issuance in 2024, there were no compensation costs associated with the Warrants for the year ended December 31, 2023. As of December 31, 2025, total unrecognized compensation cost for the Warrants were $10.7 million.
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.