Garrett Motion Inc.GTX
Garrett Motion Inc. Stock Compensation Disclosure
Note 21. Stock-Based Compensation
2021 Long-Term Incentive Plan
On May 25, 2021, the Garrett Motion Inc. 2021 Long-Term Incentive Plan (the “Long-Term Incentive Plan”) was adopted. The Long-Term Incentive Plan provides for the grant of stock options, stock appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards, and cash-based awards to employees and non-employee directors of Garrett or its affiliates, and independent contractors or consultants of Garrett. The maximum aggregate number of shares of our Common Stock that may be issued under the Long-Term Incentive Plan is 31,280,476 shares. As of December 31, 2025, an aggregate of 11,011,551 shares of our Common Stock were awarded, net of forfeitures and 20,268,925 shares of our Common Stock were available for future issuance under the Long-Term Incentive Plan.
Restricted Stock Units ("RSUs") and Deferred Stock Units ("DSUs")
RSUs are issued to certain key employees and directors at fair market value at the date of grant. RSUs typically vest over 3 to 5 years and when vested, each unit entitles the holder to one share of our Common Stock. In addition, non-employee directors may elect to receive all or part of their annual retainer fees in the form of DSUs which vest upon grant. Each DSU represents the right to receive one share of our Common Stock. DSUs are settled on the earlier of (1) a change in control, or (2) the six months after the director ceases serving on the Board. The following table summarizes information about RSU and DSU activity:
Number of Restricted and Deferred Stock Units | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| Non-vested at December 31, 2023 | 3,035,445 | $ | 7.86 | ||||||||
| Granted | 1,391,412 | 9.45 | |||||||||
| Vested | (1,428,791) | 7.54 | |||||||||
| Forfeited | (152,195) | 8.46 | |||||||||
| Non-vested at December 31, 2024 | 2,845,871 | $ | 8.76 | ||||||||
| Granted | 1,316,459 | 9.95 | |||||||||
| Vested | (1,331,324) | 8.61 | |||||||||
| Forfeited | (232,355) | 8.91 | |||||||||
Non-vested at December 31, 2025 | 2,598,651 | $ | 9.43 | ||||||||
As of December 31, 2025, there was $13 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.70 years.
Performance Stock Units ("PSUs")
As of December 31, 2025, an aggregate of 5,346,162 PSU awards were granted to officers and certain key employees under the Long-Term Incentive Plan, which, upon vesting, entitles the holder to shares of our Common Stock. The actual number of shares an employee receives for each PSU depends on the Company’s performance against various measures.
PSUs are generally earned based on the Company's performance over a three-year period, measured in terms of Adjusted EBITDA and Adjusted EBITDA margin, with some PSUs earned based on achieving certain criteria over new business awards. PSU payouts may range from 0% to 200% of the target award, depending on the level of achievement of these financial and operational metrics.
Additionally, certain PSUs were also granted in 2023, 2024 and 2025 that included a performance measure for relative total shareholder return (“rTSR”) with stock price hurdles measured over a three-year performance period. Each grantee is granted a target level of PSUs and may earn between 0% and 200% of the target level depending on the achievement of the rTSR.
The awards associated with the rTSR performance measures are considered to have a market condition. A Monte-Carlo simulation model was used to determine the grant date fair value by simulating a range of possible future stock prices for the Company over the performance period. This model requires an input of assumptions including the simulation term, the risk-free interest rate, a volatility estimate for the Company’s shares, and a dividend yield estimate. The simulation term was the period of time between performance period start date and the performance end date. The risk-free interest rate assumption was based on observed interest rates from the Treasury Constant Maturity yield curve consistent with the simulation term. The Company’s volatility estimate was based on the historical volatilities of peers over a historical period consistent with the simulation term. The dividend yield in the model is set to zero as recipients of the award are entitled to dividend equivalents on shares that vest. The fair value of the PSUs granted in 2023, 2024 and 2025 were estimated using the following assumptions:
| Monte Carlo Assumptions | PSUs Granted in 2025 | PSUs Granted in 2024 | PSUs Granted in 2023 | |||||||||||
| Volatility | 38.02% | 41.35% | 85.01% | |||||||||||
| Dividend yield | 0.00% | 0.00% | 0.00% | |||||||||||
| Risk-free interest rate | 3.93% | 4.25% | 4.26% | |||||||||||
The following table summarizes information about PSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for each of the periods presented:
Number of Performance Stock Units | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| Non-vested at December 31, 2023 | 2,828,787 | $ | 8.80 | ||||||||
| Granted | 1,171,883 | 10.89 | |||||||||
| Vested | (1,031,104) | 8.67 | |||||||||
| Forfeited | (499,160) | 8.61 | |||||||||
| Non-vested at December 31, 2024 | 2,470,406 | $ | 9.89 | ||||||||
| Granted | 1,243,166 | 10.88 | |||||||||
| Vested | (276,338) | 6.79 | |||||||||
| Forfeited | (199,576) | 9.67 | |||||||||
Non-vested at December 31, 2025 | 3,237,658 | $ | 10.49 | ||||||||
The fair value of the TSR-based PSUs is based on the output of the Monte Carlo simulation model noted above. The fair values of the PSUs not containing a market condition are based on the fair market value of the Company’s common stock at the grant date. The number of underlying shares to be issued will be based on actual performance achievement over the performance period.
The fair value of each PSU grant is amortized monthly into compensation expense on a graded vesting (accelerated) basis over a vesting period of 36 months. The accrual of compensation costs is based on our estimate of the final expected value of the award and is adjusted as required for the performance-based conditions.
As of December 31, 2025, there was $13 million of total unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.74 years.
Dividend Equivalents
All RSUs, DSUs and PSUs granted contain rights that entitle the recipient of an award to a dividend equivalent in the amount and form equal to any dividends that would have been paid on the shares of Common Stock underlying the awards had such shares been outstanding on the record dates. Dividend equivalents are accrued on each award from the grant date until the award vests (or the underlying shares are issued in the case of DSUs). The accrual is based on the dividends declared on the Company's Common Stock during the vesting period. The dividend equivalents are not paid out until the underlying award has vested and settled. The dividend equivalents are subject to the same vesting and settlement conditions as the awards. If the award does not vest, the accrued dividend equivalent is forfeited.
Stock-Based Compensation Expense
The following table summarizes the impact to the Consolidated Statement of Operations from the Company's incentive awards:
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| RSUs and DSUs | $ | 13 | $ | 11 | $ | 9 | |||||||||||
| PSUs | 14 | 12 | 5 | ||||||||||||||
| Stock-based compensation expense | 27 | 23 | 14 | ||||||||||||||
| Future income tax benefits recognized | 3 | 3 | 2 | ||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 14, 2023 | |
| 2021 | Feb 14, 2022 | |
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.