Grocery Outlet Holding Corp.GO
Grocery Outlet Holding Corp. Stock Compensation Disclosure
Share-based Awards
Share-based Incentive Plans
The Globe Holding Corp. 2014 Stock Incentive Plan (the "2014 Plan") became effective on October 21, 2014. Under the 2014 Plan, we granted stock options and RSUs to purchase shares of our common stock. Effective as of June 19, 2019, we terminated the 2014 Plan and as a result no further equity awards may be issued under the 2014 Plan. Any outstanding awards granted under the 2014 Plan will remain subject to the terms of the 2014 Plan and the applicable equity award agreements.
On June 4, 2019, our Board and stockholders approved the Grocery Outlet Holding Corp. 2019 Incentive Plan (the "2019 Plan"). A total of 4,597,862 shares of common stock were reserved for issuance under the 2019 Plan at that time. In
addition, on the first day of each fiscal year beginning in fiscal 2020 and ending in fiscal 2029, the 2019 Plan provides for an annual automatic increase of the shares reserved for issuance in an amount equal to the positive difference between (i) 4% of the "outstanding common stock" (as defined in the 2019 Plan) on the last day of the immediately preceding fiscal year and (ii) the plan share reserve on the last day of the immediately preceding fiscal year, or a lesser number as determined by our Board. As of December 28, 2024, there were a total of 8,443,140 shares of common stock reserved for issuance under the 2019 Plan, which included 1,190,591 shares added effective December 31, 2023 per the above noted annual automatic increase. As of December 28, 2024, there were 3,183,688 remaining shares available for issuance of new equity awards under the 2019 Plan.
Long-term incentive programs ("LTIPs") under the 2019 Plan include time-based RSUs, PSUs and stock options. In fiscal 2024, we granted RSUs and PSUs to our employees. RSUs granted under the LTIPs generally vest over to three years. PSUs granted under the LTIPs will vest upon the achievement of certain performance targets as determined by the Compensation Committee following the last day of a three-year performance period. The number of PSUs ultimately earned will equal the number of PSUs granted multiplied by the applicable percentage of performance target levels achieved, and can range from 0% to 200% of the number of PSUs granted. PSUs granted during fiscal 2024 will vest upon the achievement of certain revenue-based and adjusted EPS-based performance targets, and PSUs granted during fiscal 2023 and fiscal 2022 will vest upon the achievement of certain revenue-based and certain adjusted EBITDA-based performance targets.
Fair Value Determination
The fair value of stock option, RSU and PSU awards is determined as of the grant date. For time-based stock options, a Black-Scholes valuation model was utilized to estimate the fair value of the awards. For performance-based stock options, a Monte Carlo simulation approach implemented in a risk-neutral framework was utilized to estimate the fair value of the awards. For RSUs and PSUs, the closing price of our common stock as reported on the grant date is utilized to estimate the fair value of the awards.
The respective valuation methods resulted in weighted-average grant date fair values for RSUs and PSUs granted during fiscal 2024, fiscal 2023 and fiscal 2022 as follows:
| Fiscal Year Ended | |||||||||||||||||
| December 28, 2024 | December 30, 2023 | December 31, 2022 | |||||||||||||||
| RSUs | $ | 21.59 | $ | 27.50 | $ | 29.70 | |||||||||||
| PSUs | $ | 25.65 | $ | 27.34 | $ | 29.16 | |||||||||||
We did not award any time-based or performance-based stock options during fiscal 2024, fiscal 2023 and fiscal 2022.
Share-based Award Activity
The following table summarizes stock option activity under all equity incentive plans during fiscal 2024, fiscal 2023 and fiscal 2022:
| Time-Based Stock Options | Performance-Based Stock Options | ||||||||||||||||||||||
| Number of Options | Weighted-Average Exercise Price | Number of Options | Weighted-Average Exercise Price | ||||||||||||||||||||
| Options outstanding as of January 1, 2022 | 3,135,141 | $ | 12.77 | 1,696,194 | $ | 4.58 | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Exercised | (276,022) | 9.63 | (894,559) | 4.50 | |||||||||||||||||||
| Forfeitures | (296,345) | 21.25 | — | — | |||||||||||||||||||
| Options outstanding as of December 31, 2022 | 2,562,774 | $ | 12.13 | 801,635 | $ | 4.68 | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Exercised | (462,972) | 8.17 | (574,030) | 3.91 | |||||||||||||||||||
| Forfeitures | (8,279) | 21.93 | — | — | |||||||||||||||||||
| Options outstanding as of December 30, 2023 | 2,091,523 | $ | 12.97 | 227,605 | $ | 6.62 | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Exercised | (1,157,529) | 7.22 | (128,221) | 3.81 | |||||||||||||||||||
| Forfeitures | (54,637) | 22.00 | — | — | |||||||||||||||||||
Options outstanding as of December 28, 2024 | 879,357 | $ | 19.98 | 99,384 | $ | 10.25 | |||||||||||||||||
Options vested and exercisable as of December 28, 2024 | 879,357 | $ | 19.98 | 99,384 | $ | 10.25 | |||||||||||||||||
The total intrinsic value of time-based stock options exercised was $16.3 million, $11.7 million and $7.1 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. The total intrinsic value of performance-based stock options exercised was $2.2 million, $15.9 million and $29.9 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. Intrinsic value represents the difference between the current fair value of the underlying stock and the exercise price of the stock option.
The following table summarizes RSU activity under all equity incentive plans during fiscal 2024, fiscal 2023 and fiscal 2022:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Unvested balance as of January 1, 2022 | 836,496 | $ | 30.14 | ||||||||
| Granted | 449,438 | 29.70 | |||||||||
| Vested | (499,696) | 27.38 | |||||||||
| Forfeitures | (95,884) | 30.61 | |||||||||
| Unvested balance as of December 31, 2022 | 690,354 | $ | 31.79 | ||||||||
| Granted | 552,372 | 27.50 | |||||||||
| Vested | (345,887) | 32.50 | |||||||||
| Forfeitures | (39,019) | 29.87 | |||||||||
| Unvested balance as of December 30, 2023 | 857,820 | $ | 28.82 | ||||||||
| Granted | 1,015,470 | 21.59 | |||||||||
| Vested | (440,389) | 29.49 | |||||||||
| Forfeitures | (253,830) | 26.14 | |||||||||
Unvested balance as of December 28, 2024 | 1,179,071 | $ | 22.93 | ||||||||
The following table summarizes PSU activity under the 2019 Plan during fiscal 2024, fiscal 2023 and fiscal 2022:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Unvested balance as of January 1, 2022 | 576,725 | $ | 36.36 | ||||||||
Granted (1) | 404,382 | 29.16 | |||||||||
Adjustment for expected performance achievement (2) | 423,347 | 31.86 | |||||||||
| Forfeitures | (72,651) | 33.79 | |||||||||
| Unvested balance as of December 31, 2022 | 1,331,803 | $ | 32.89 | ||||||||
Granted (1) | 451,077 | 27.34 | |||||||||
Adjustment for expected performance achievement (2) | 432,774 | 28.84 | |||||||||
| Vested | (441,346) | 36.84 | |||||||||
| Forfeitures | (20,319) | 29.83 | |||||||||
Unvested balance as of December 30, 2023 | 1,753,989 | $ | 29.50 | ||||||||
Granted (1) | 572,987 | 25.65 | |||||||||
Adjustment for expected performance achievement (2) | (758,632) | 27.54 | |||||||||
| Vested | (301,392) | 35.45 | |||||||||
| Forfeitures | (475,068) | 27.00 | |||||||||
Unvested balance as of December 28, 2024 (3) | 791,884 | $ | 27.83 | ||||||||
_______________________
(1)Represents initial grant of PSUs based on performance target level achievement of 100%.
(2)Represents the adjustment to previously granted PSUs based on performance expectations as of the end of each respective reporting period.
(3)An additional 1,283,626 PSUs could potentially be included if the maximum performance level of 200% is reached for all PSUs outstanding as of December 28, 2024.
Share-based Compensation Expense
We recognize compensation expense for stock options, RSUs, and PSUs by amortizing the grant date fair value on a straight-line basis over the expected vesting period to the extent we determine the vesting of the grant is probable.
Share-based compensation expense and the related tax benefit consisted of the following (amounts in thousands):
| Fiscal Year Ended | |||||||||||||||||
| December 28, 2024 | December 30, 2023 | December 31, 2022 | |||||||||||||||
| Time-based stock options | $ | 11 | $ | 770 | $ | 471 | |||||||||||
| RSUs | 12,805 | 11,327 | 14,855 | ||||||||||||||
| PSUs | (2,300) | 18,979 | 17,125 | ||||||||||||||
Dividends (1) | — | 15 | 105 | ||||||||||||||
Share-based compensation expense (2) | $ | 10,516 | $ | 31,091 | $ | 32,556 | |||||||||||
_______________________
(1)Represents cash dividends paid upon vesting of share-based awards as a result of dividends declared in connection with a recapitalization that occurred in fiscal 2018.
(2)Total recognized income tax benefit related to share-based compensation expense was $2.9 million, $8.3 million and $8.7 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively.
Share-based compensation expense qualifying for capitalization was insignificant for each of the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022. Accordingly, no share-based compensation expense was capitalized during these years.
Stock Options
We had no unamortized compensation cost related to time-based stock options and performance-based stock options, as all awards were fully vested as of December 28, 2024.
Time-Based RSUs
Unamortized compensation expense for RSUs was $17.7 million as of December 28, 2024, which is expected to be amortized over a weighted average period of approximately 1.7 years.
Performance-Based RSUs
Unamortized compensation cost related to the expected level of achievement of unvested PSUs was $4.3 million as of December 28, 2024, which is expected to be amortized over a weighted average period of approximately 1.4 years.
Dividends
For time-based stock options and RSU share-based awards that were outstanding on the dividend date of October 22, 2018 and that vested in fiscal 2023, fiscal 2022, and fiscal 2021, we made dividend payments as these awards vested.
We paid $0.1 million of dividends during the fiscal year ended December 31, 2022, which was included in share-based compensation expense. We paid less than $0.1 million of dividends during the fiscal year ended December 30, 2023. There was no unamortized compensation cost related to future dividend payments on unvested time-based stock options and RSU share-based awards as of December 28, 2024.
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.