Inspired Entertainment, Inc. Stock Compensation Disclosure
The Company’s stock-based compensation plans authorize awards of restricted stock units (“RSUs”), stock options and other equity-related awards. The Company’s 2023 Omnibus Incentive Plan (“2023 Plan”) was adopted by the Company’s Board of Directors on April 10, 2023 and approved by our stockholders on May 9, 2023. The 2023 Plan succeeds the 2021 Omnibus Incentive Plan and the 2018 Omnibus Incentive Plan (collectively, the “Prior Plans”) such that shares subject to the unused reserves of the Prior Plans (e.g., as a result of termination or forfeiture of awards) are instead rolled over to the 2023 Plan. The Company has two other predecessor plans, the 2016 Long-Term Incentive Plan and the Second Long-Term Incentive Plan (collectively, the “Terminated Plans”), whose available balances were terminated in connection with approval of the 2018 Omnibus Incentive Plan. Although outstanding awards under the Terminated Plans remain governed by the terms of such plans, no new awards may be granted or become available for grant thereunder.
As of December 31, 2024, there were ; (ii) shares subject to outstanding awards under the Prior Plans, including shares subject to performance-based target awards, shares subject to market-price vesting conditions, shares subject to awards that were previously subject to performance criteria that were determined to have been met which continue to remain subject to a time-based vesting schedule and shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement (a portion of which settled in January 2025); and (iii) shares subject to outstanding awards under the Terminated Plans as to which the applicable vesting conditions have been met which remain subject to deferred settlement. As of December 31, 2024, there were shares available for new awards under the 2023 Plan (which includes shares rolled over from the Prior Plans) and no shares available for new awards under the Prior Plans. All awards outstanding as of December 31, 2024 consisted of RSUs (including time-based RSUs, performance-based RSUs and stock price based RSUs).
INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024 AND 2023, AND FOR THE YEARS ENDED
DECEMBER 31, 2024, 2023 AND 2022
The Company also has an employee stock purchase plan (“ESPP”) that authorizes the issuance of up to an aggregate of shares of common stock pursuant to purchases thereunder by employees. The ESPP, which was approved by stockholders in July 2017, is administered by the Compensation Committee which has discretion to designate the length of offering periods and other terms subject to the requirements of the ESPP. Offerings may also be under the ESPP’s subplan for UK-based employees (the “Subplan”) which was adopted in June 2022 and is designed to meet the requirements of a sharesave scheme under UK law. The terms applicable to offerings approved under the ESPP and Subplan for 2023 and 2024 are described below.
ESPP — Eligible employees may contribute up to % of base compensation through payroll deductions over a period of twelve months, a maximum of shares may be purchased per participant, the purchase price is equal to % of the lower of the closing price of the common stock at the beginning of the offering period and the end of the offering period and shares are purchased on the last day of the offering period.
Subplan (UK) — Eligible employees may contribute a maximum amount of £350 per month through payroll deductions over a period of three years, the purchase price is equal to % of the closing price of the common stock on the day prior to commencement of the enrollment window for the offering, and participants have a period of six months following the end of the offering to elect to purchase shares or receive a refund.
As of December 31, 2024, a total of shares remained available for purchase under the ESPP (including in connection with outstanding purchase rights under the Company’s ongoing offering periods). shares were purchased under the ESPP in 2022, a total of shares were purchased in 2023 (at a purchase price of $ per share) and a total of shares were purchased in 2024 (at a purchase price of $ per share). Such shares (from the 2023 and 2024 purchases) were issued in 2024. Based on enrollments in the ESPP (including the Subplan), an aggregate of approximately shares were subject to outstanding purchase rights thereunder as of December 31, 2024.
Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||
| Unvested Outstanding at January 1, 2024 (1) | 1,241,675 | $ | 12.79 | ||||||
| Granted (2) | 654,384 | $ | 9.07 | ||||||
| Forfeited | (272,094 | ) | $ | (12.90 | ) | ||||
| Vested (3) | (837,414 | ) | $ | (11.77 | ) | ||||
| Unvested Outstanding at December 31, 2024 | 786,551 | $ | 10.75 | ||||||
| (1) | The amount shown as “unvested outstanding at January 1, 2024” does not include certain tranches of Adjusted EBITDA RSUs that have performance criteria for annual periods later than 2023 (an aggregate of RSUs, including subject to 2024 criteria), which were part of sign-on tranches approved for our Executive Chairman and our Chief Executive Officer during the years 2021 and 2023, as the applicable performance targets were not set by January 1, 2024 (and, accordingly, the accounting grant dates had not yet occurred for the tranches). Such tranches had previously been included in the amounts shown in 2023 as unvested outstanding since the initial approval date for the tranches. The targets for the 2024 period were set in February 2024 and the remaining targets (for each of 2025, 2026 and 2027) are anticipated to be set in February of the performance year. |
| (2) | The amount shown as “granted” includes performance-based target RSUs as to which the number eligible to vest ranged from to of the target amount of RSUs (a maximum of RSUs based on attainment of Adjusted EBITDA targets for 2024 and criteria previously set by the Compensation Committee). |
| (3) | The RSUs that vested during the year ended December 31, 2024 included: (a) approximately RSUs that are subject to deferred settlement terms; and (b) approximately RSUs that vested on the last day of the year and were settled on a net share basis in January 2025. |
The Company issued a total of shares during the year ended December 31, 2024, in connection with the Company’s equity-based plans, which included an aggregate of shares issued in connection with the net settlement of RSUs that vested during the prior year (primarily on December 29, 2023).
The weighted average grant date fair value of awards granted for years ended December 31, 2024, December 31, 2023 and December 31, 2022 amounted to $, $and $, respectively. The vesting date value of RSUs vesting for years ended December 31, 2024, December 31, 2023 and December 31, 2022 amounted to $million, $million and $million, respectively.
When tax deductions from stock options and awards are less than the cumulative book compensation expense, the tax effect of the resulting differences is a shortfall. For the year ended December 31, 2024 an income tax expense of $0.5 million was recorded for shortfalls generated from stock options and awards exercised in 2024. There was no income tax benefit recognized related to awards that vested during the years ended December 31, 2023, and 2022, as there was a full valuation allowance in place against the RSU scheme’s deferred tax asset.
Stock-based compensation is recognized as an expense over the requisite service period, which is generally the vesting period. For performance awards that are contingent upon the Company achieving certain pre-determined financial performance targets, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance criteria will be met. Determining the probability of achieving a performance target requires estimates and judgment. For market-based awards that are contingent upon the Company’s stock achieving certain pre-determined price targets, compensation expense is calculated based upon the determination of the fair value of the awards as derived through multiple running of the Monte Carlo valuation model, with the fair value recognized on a straight-line basis over the requisite service period. The requisite service period for awards to employees is generally satisfied over a vesting period of three years (and one year for non-employee directors). The Company accounts for forfeitures as they occur. For stock purchase rights under the Company’s ESPP (including its subplan), the Company estimates fair value using the Black-Scholes option pricing model on the dates of grant, with the compensation expense recognized over the requisite service period.
INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024 AND 2023, AND FOR THE YEARS ENDED
DECEMBER 31, 2024, 2023 AND 2022
Year Ended December 31, 2024 | Year Ended December 31, 2023 | Year Ended December 31, 2022 | ||||||||||
| (in millions) | ||||||||||||
| RSUs | $ | 6.7 | $ | 10.4 | $ | 10.1 | ||||||
| ESPP | 0.1 | 0.2 | ||||||||||
| Payroll taxes on vesting of RSUs | 0.8 | 0.6 | 0.7 | |||||||||
| $ | 7.6 | $ | 11.2 | $ | 10.8 | |||||||
Total unrecognized compensation expense related to unvested stock awards and unvested RSUs at December 31, 2024 amounts to $ million and is expected to be recognized over a weighted average period of years.
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.