Nine Energy Service, Inc.NINE
Nine Energy Service, Inc. Stock Compensation Disclosure
Stock-based Compensation
Stock Options
Information about stock option activity during the years ended December 31, 2024 and 2023 was as follows:
| 2024 Activity | Number of Shares in Underlying Options | Weighted Average Exercise Price | Remaining Weighted Average Contractual Life in Years | Intrinsic Value | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Beginning balance | 535,491 | $ | 34.51 | 2.2 | $ | — | ||||||||||||||||||||
| Granted | — | — | — | — | ||||||||||||||||||||||
| Exercised | — | — | — | — | ||||||||||||||||||||||
| Forfeited | — | — | — | — | ||||||||||||||||||||||
| Expired | (51,557) | 45.67 | — | — | ||||||||||||||||||||||
| Total outstanding | 483,934 | $ | 33.32 | 1.4 | $ | — | ||||||||||||||||||||
| Options exercisable | 483,934 | $ | 33.32 | 1.4 | $ | — | ||||||||||||||||||||
| 2023 Activity | Number of Shares in Underlying Options | Weighted Average Exercise Price | Remaining Weighted Average Contractual Life in Years | Intrinsic Value | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Beginning balance | 587,506 | $ | 33.80 | 3.0 | $ | — | ||||||||||||||||||||
| Granted | — | — | — | — | ||||||||||||||||||||||
| Exercised | — | — | — | — | ||||||||||||||||||||||
| Forfeited | — | — | — | — | ||||||||||||||||||||||
| Expired | (52,015) | 26.50 | — | — | ||||||||||||||||||||||
| Total outstanding | 535,491 | $ | 34.51 | 2.2 | $ | — | ||||||||||||||||||||
| Options exercisable | 535,491 | $ | 34.51 | 2.2 | $ | — | ||||||||||||||||||||
The intrinsic value at December 31, 2024 and 2023 is the amount by which the fair value of the underlying share exceeds the exercise price of an option as of December 31, 2024 and 2023, respectively.
The Company granted no options in 2024 and 2023.
There was no compensation expense recorded for the years ended December 31, 2024 and 2023. As of December 31, 2024, there is no remaining compensation expense related to options for the Company to expense. Future stock option grants will result in additional compensation expense.
Restricted Stock and Restricted Stock Units
Information about restricted stock and restricted stock unit activity during the years ended December 31, 2024 and 2023 was as follows:
| 2024 Activity | Number of Shares and Units | Weighted Average Grant Date Fair Value | ||||||||||||
| Nonvested at January 1, 2024 | 1,474,544 | $ | 2.92 | |||||||||||
| Granted | 1,658,780 | 2.08 | ||||||||||||
| Vested | (874,133) | 2.67 | ||||||||||||
| Forfeited | (15,162) | 2.66 | ||||||||||||
| Nonvested at December 31, 2024 | 2,244,029 | $ | 2.40 | |||||||||||
| 2023 Activity | Number of Shares and Units | Weighted Average Grant Date Fair Value | ||||||||||||
| Nonvested at January 1, 2023 | 1,934,556 | $ | 2.12 | |||||||||||
| Granted | 662,845 | 3.51 | ||||||||||||
| Vested | (1,063,090) | 1.85 | ||||||||||||
| Forfeited | (59,767) | 2.63 | ||||||||||||
| Nonvested at December 31, 2023 | 1,474,544 | $ | 2.92 | |||||||||||
The total amount of compensation expense related to the restricted stock and restricted stock units recorded was approximately $2.9 million and $2.2 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, the Company expects to record compensation expense related to restricted stock and restricted stock units of approximately $3.5 million over the remaining term of approximately 1.8 years. Future restricted stock and restricted stock unit grants would result in additional compensation expense.
Performance Cash Awards
In May 2022 and May 2023, the Company granted performance cash awards (the “PCAs”) that vest based upon the Company’s achievement of certain criteria related to its relative total shareholder return (“TSR”) in comparison to TSR of members of its peer group (the “Peer Group”), as defined by the PCA grant. These awards, which the Company granted at a target achievement amount, are subject to three individual year-long performance periods (the “Performance Periods”), and payment related to each Performance Period can range from 0% to 200% of the target amount for that Performance Period.
The PCAs were valued on the date of grant based on the estimated fair value, which was based on numerous assumptions including the likelihood of the Company’s stock price performance achieving targeted thresholds, using a Monte Carlo simulation model. The assumptions used to value the awards included the historical volatility of the Company as well as the volatility of its Peer Group and the risk-free rate, which was derived using the U.S. Treasury security rates.
Under the relevant liability accounting, the Level 3 fair value of the unvested PCAs is remeasured at the end of each reporting period and was $0.9 million and $2.0 million at December 31, 2024 and 2023, respectively.
The following information is related to the Company’s May 2023 grant of PCAs at December 31, 2024 and 2023.
| December 31, 2024 | December 31, 2023 | ||||||||||
| Volatility for remeasurement | 86.35 | % | 118.62 | % | |||||||
| Risk-free rate | 4.15 | % | 4.11 | % | |||||||
The following information is related to the Company’s May 2022 grant of PCAs at December 31, 2024 and December 31, 2023.
| December 31, 2024 | December 31, 2023 | ||||||||||
| Volatility for remeasurement | 109.01 | % | 98.16 | % | |||||||
| Risk-free rate | 4.28 | % | 4.55 | % | |||||||
Income related to performance cash was $0.3 million for the year ended December 31, 2024. Expense related to performance cash was $1.3 million for the year ended December 31, 2023. As of December 31, 2024, there was $0.3 million of remaining compensation expense related to performance cash for the Company to expense. Future PCA grants will result in additional compensation expense.
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.