DHI GROUP, INC.DHX
DHI GROUP, INC. Stock Compensation Disclosure
STOCK BASED COMPENSATION
Under the 2012 Omnibus Equity Award Plan, the Company has granted stock options, restricted stock and Performance-Based Restricted Stock Units (“PSUs”) to certain employees and directors. On January 1, 2017, as a result of ASU No. 2016-09 as discussed in Note 2, the Company began recording expense based upon the number of awards outstanding with no estimate for forfeitures. Previously, the Company estimated forfeitures that it expected would occur and recorded expense based upon the number of awards expected to vest.
The Company recorded stock based compensation expense of $6.6 million and $8.6 million in the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2016, the Company recorded $11.1 million, which included $0.9 million of accelerated compensation due to the sale of Slashdot Media as shown in Note 12. At December 31, 2018, there was $8.8 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted-average period of approximately 1.4166666667 years.
In connection with the employment agreement for the Company's new Chief Executive Officer, the Company granted, as Inducement Grants Under NYSE Rule 303A.08, 1,750,000 restricted stock units during the second quarter of 2018 and 750,000 performance based restricted stock units during the fourth quarter of 2018 to the Company's new Chief Executive Officer.
Restricted Stock—Restricted stock is granted to employees of the Company and its subsidiaries, and to non-employee members of the Company’s Board. These shares are part of the compensation plan for services provided by the employees or Board members. The closing price of the Company’s stock on the date of grant is used to determine the fair value of the grants. The expense related to the restricted stock grants is recorded over the vesting period as described below. There was no cash flow impact resulting from the grants.
The restricted stock vests in various increments either quarterly or on the anniversaries of each grant, subject to the recipient’s continued employment or service through each applicable vesting date. Vesting occurs over one year for Board members and over two to four years for employees.
A summary of the status of restricted stock awards as of December 31, 2018, 2017, and 2016 and the changes during the periods then ended is presented below:
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Shares | Weighted- Average Fair Value at Grant Date | Shares | Weighted- Average Fair Value at Grant Date | Shares | Weighted- Average Fair Value at Grant Date | |||||||||||||||
Non-vested at beginning of the period | 2,393,257 | $ | 5.48 | 2,226,375 | $ | 7.87 | 2,122,225 | $ | 8.54 | |||||||||||
Granted | 4,087,342 | $ | 1.68 | 1,724,500 | $ | 4.05 | 1,302,375 | $ | 7.33 | |||||||||||
Forfeited | (439,750 | ) | $ | 4.20 | (655,000 | ) | $ | 6.54 | (327,750 | ) | $ | 8.17 | ||||||||
Vested | (1,521,917 | ) | $ | 5.03 | (902,618 | ) | $ | 7.89 | (870,475 | ) | $ | 8.58 | ||||||||
Non-vested at end of period | 4,518,932 | $ | 2.32 | 2,393,257 | $ | 5.48 | 2,226,375 | $ | 7.87 | |||||||||||
PSUs—PSUs are granted to employees of the Company and its subsidiaries. These shares are granted under two compensation agreements that are for services provided by the employees. Under the first agreement, with grants during the years ended December 31, 2016 and 2017, the fair value of PSUs are measured using the Monte Carlo pricing model. The expense related to these PSUs are recorded over the vesting period. These shares will vest on the dates the Compensation Committee certifies the Company’s achievement of stock price performance relative to the Russell 2000 Index, provided that the recipient remains employed through such date. Performance will be measured over three separate measurement periods: a one-year measurement period, a two-year measurement period and a three-year measurement period. For performance periods one and two, vesting is not to exceed the total grant divided by three. For performance period three, vesting is no less than zero and no greater than 150% of the initial grant less shares vested in performance periods one and two. As of December 31, 2018, there were 505,000 unvested shares related to this agreement.
Under the second agreement, the fair value of the PSUs are measured at the grant date fair value of the award, which was determined based on an analysis of the probable performance outcomes. The performance period is based on the achievement of bookings targets during the year ended December 31, 2019, as defined in the agreement. The earned shares will vest one-third on each of the first, second, and third anniversaries of the grant date, or if later, the date the Compensation Committee certifies the performance results with respect to the performance period. There was no cash flow impact resulting from the grants.
The fair value of PSUs measured using the Monte Carlo pricing model utilized the following assumptions:
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Weighted average fair value of PSUs granted | $ | 5.38 | $ | 7.24 | ||||
Dividend yield of DHI Group, Inc. stock | — | % | — | % | ||||
Dividend yield of Russell 2000 Index | 1.4 | % | 1.7 | % | ||||
Risk free interest rate | 1.5 | % | 0.9 | % | ||||
Volatility of DHI Group, Inc. stock | 41.0 | % | 33.5 | % | ||||
Volatility of Russell 2000 Index | 16.7 | % | 16.7 | % | ||||
A summary of the status of PSUs as of December 31, 2018, 2017, and 2016 and the changes during the periods then ended is presented below:
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Shares | Weighted- Average Fair Value at Grant Date | Shares | Weighted- Average Fair Value at Grant Date | Shares | Weighted- Average Fair Value at Grant Date | |||||||||||||||
Non-vested at beginning of the period | 760,003 | $ | 6.92 | 580,004 | $ | 8.02 | 415,000 | $ | 9.25 | |||||||||||
Granted | 750,000 | $ | 1.58 | 397,500 | $ | 5.38 | 417,500 | $ | 7.24 | |||||||||||
Forfeited | (255,003 | ) | $ | 8.27 | (217,501 | ) | $ | 7.04 | (98,751 | ) | $ | 8.17 | ||||||||
Vested | — | $ | — | — | $ | — | (153,745 | ) | $ | 9.13 | ||||||||||
Non-vested at end of period | 1,255,000 | $ | 3.45 | 760,003 | $ | 6.92 | 580,004 | $ | 8.02 | |||||||||||
Stock Options—The fair value of each option grant is estimated using the Black-Scholes option-pricing model using the weighted-average assumptions in the table below. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the fair value of the Company’s common stock, the expected life (the period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock, a risk-free interest rate and expected dividends. The expected life of options granted is derived from historical exercise behavior. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury rates in effect at the time of grant. The stock options vest 25% after one year, beginning on the first anniversary date of the grant, and 6.25% each quarter following the first anniversary. There was no cash flow impact resulting from the grants. No stock options were granted during the years ended December 31, 2018, 2017, and 2016.
A summary of the status of options previously granted as of December 31, 2018, 2017, and 2016, and the changes during the periods then ended is presented below:
Year Ended December 31, 2018 | ||||||||||
Options | Weighted-Average Exercise Price | Aggregate Intrinsic Value | ||||||||
Options outstanding at January 1 | 1,101,875 | $ | 9.28 | $ | — | |||||
Exercised | — | $ | — | $ | — | |||||
Forfeited | (774,875 | ) | $ | 9.67 | — | |||||
Options outstanding at December 31 | 327,000 | $ | 8.35 | $ | — | |||||
Exercisable at December 31 | 327,000 | $ | 8.35 | $ | — | |||||
Year Ended December 31, 2017 | ||||||||||
Options | Weighted-Average Exercise Price | Aggregate Intrinsic Value | ||||||||
Options outstanding at January 1 | 1,779,613 | $ | 8.46 | $ | 50,869 | |||||
Exercised | (66,188 | ) | $ | 6.08 | $ | 12,821 | ||||
Forfeited | (611,550 | ) | $ | 7.25 | — | |||||
Options outstanding at December 31 | 1,101,875 | $ | 9.28 | $ | — | |||||
Exercisable at December 31 | 1,076,155 | $ | 9.32 | $ | — | |||||
Options expected to Vest at December 31 | 25,720 | $ | 7.43 | |||||||
Year Ended December 31, 2016 | ||||||||||
Options | Weighted-Average Exercise Price | Aggregate Intrinsic Value | ||||||||
Options outstanding at January 1 | 2,673,512 | $ | 7.46 | $ | 5,485,248 | |||||
Exercised | (641,710 | ) | $ | 4.37 | $ | 2,209,260 | ||||
Forfeited | (252,189 | ) | $ | 8.20 | — | |||||
Options outstanding at December 31 | 1,779,613 | $ | 8.46 | $ | 50,869 | |||||
Exercisable at December 31 | 1,552,642 | $ | 8.52 | $ | 50,869 | |||||
In connection with the Company’s sale of Slashdot Media, the Company accelerated the vesting of 130,375 shares of restricted stock and 24,001 stock options to certain former employees during the year ended December 31, 2016, the expense of which is recorded in Disposition Related and Other Costs in the Consolidated Statements of Operations.
The weighted-average remaining contractual term of options exercisable at December 31, 2018 is 1.4166666667 years. The following table summarizes information about options outstanding as of December 31, 2018:
Options Outstanding | Options Exercisable | |||||||
Exercise Price | Number Outstanding | Weighted- Average Remaining Contractual Life | Number Exercisable | |||||
(in years) | ||||||||
$ 7.00 - $ 7.99 | 155,000 | 2.1 | 155,000 | |||||
$ 8.00 - $ 8.99 | 92,000 | 0.8 | 92,000 | |||||
$ 9.00 - $ 9.99 | 80,000 | 1.1 | 80,000 | |||||
327,000 | 327,000 | |||||||
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.