ORMAT TECHNOLOGIES, INC.ORA
ORMAT TECHNOLOGIES, INC. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
The Company makes an estimate of expected forfeitures and recognizes compensation costs only for those stock-based awards expected to vest. As of December 31, 2025, the total future compensation cost related to unvested stock-based awards that are expected to vest is $14.0 million, which will be recognized over a weighted average period of 1.15 years.
During the years ended December 31, 2025, 2024 and 2023, the Company recorded compensation related to stock-based awards as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||
| Cost of revenues | $ | 8,757 | $ | 9,169 | $ | 6,899 | |||||||||||
| Selling and marketing expenses | 854 | 921 | 866 | ||||||||||||||
| Research and development expenses | 222 | 144 | 94 | ||||||||||||||
| General and administrative expenses | 9,557 | 9,963 | 7,620 | ||||||||||||||
| Total stock-based compensation expense | 19,390 | 20,197 | 15,479 | ||||||||||||||
| Tax effect on stock-based compensation expense | 1,964 | 1,998 | 1,598 | ||||||||||||||
| Net effect of stock-based compensation expense | $ | 17,426 | $ | 18,199 | $ | 13,881 | |||||||||||
During the fourth quarter of 2025, 2024 and 2023, the Company evaluated the trends of the employees stock-based award forfeiture rate and determined that the actual rates are 11.3%, 10.9% and 11.6%, respectively. This represents an increase (decrease) of 3.7%, (6.0)%, and 0.9%, respectively, from prior estimates. As a result of the change in the estimated forfeiture rate, there was an immaterial impact on stock-based compensation expense for each of the respective periods.
Valuation Assumptions
The Company estimates the fair value of the stock-based awards using the Black-Merton-Scholes methodology implemented using binomial Tree option pricing model. The dividend yield forecast is expected to be at least 20% of the Company’s yearly net profit, which is equivalent to a 0.7% yearly weighted average dividend rate in the year ended December 31, 2025. The risk-free interest rate was based on the yield from U.S. constant treasury maturities bonds with an equivalent term. The forfeiture rate is based on trends in actual stock-based awards forfeitures.
The Company calculated the fair value of each stock-based award on the date of grant based on the following assumptions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| For stock based awards issued by the Company: | |||||||||||||||||
| Risk-free interest rates | 4.0 | % | 4.5 | % | 4.2 | % | |||||||||||
| Expected lives (in weighted average years) | 2.1 | 2.2 | 2.5 | ||||||||||||||
| Dividend yield | 0.7 | % | 0.7 | % | 0.6 | % | |||||||||||
| Expected volatility (weighted average) | 28.8 | % | 31.9 | % | 38.2 | % | |||||||||||
The Company estimated the forfeiture rate (on a weighted average basis) as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average forfeiture rate | 8.8 | % | 8.2 | % | 8 | % | |||||||||||
Stock-based Awards
The 2018 Incentive Compensation Plan
The 2018 Incentive Plan provides for the grant of the following types of awards: incentive stock options, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), Performance Stock Units (“PSUs), stock units, performance awards, phantom stock, incentive bonuses and other possible related dividend equivalents to employees of the Company, directors and independent contractors. SARs, RSUs and PSUs granted to employees under the 2018 Incentive Plan typically vest and become exercisable as follows: 50% on the second anniversary of the grant date, and 25% on each of the third and fourth anniversaries of the grant date, or 33.3% on each of the first, second and third anniversaries of the grant date. SARs, RSUs and PSUs granted to directors under the 2018 Incentive Plan typically vest and become exercisable (100%) on the first anniversary of the grant date. The term of stock-based awards typically ranges from to ten years from the grant date. The shares of common stock issued in respect of awards under the 2018 Incentive Plan are issued from the Company’s authorized share capital upon exercise of options or SARs. In June 2022, the 2018 Incentive Compensation Plan was amended and restated to increase the number of shares authorized for issuance (which was initially 5,000,000) by 1,700,000 shares, to change the fungible ratio, and to implement a one year mandatory minimum vesting period, and in May 2024 amended and restated again to increase the number of shares authorized for issuance by 1,400,000 shares.
As of December 31, 2025, 2,145,870 shares of the Company’s common stock are available for future grants under the 2018 Incentive Plan.
In March 2025, the Company granted certain members of its management and employees an aggregate of 210,961 restricted stock units ("RSUs") and 45,190 performance stock units ("PSUs") under the Company’s 2018 Incentive Compensation Plan. The RSUs and PSUs have vesting periods of between 1 to 3 years from the grant date.
The fair value of each RSU and PSU on the grant date was $68.9 and $70.9, respectively. The Company calculated the fair value of each RSU and PSU on the grant date using the Black-Merton-Scholes using binomial Tree option pricing model, and the Monte Carlo simulation, based on the following assumptions:
| Risk-free interest rates | 3.95% | — | 4.08% | |||||||||||
| Expected life (in years) | 1 | — | 3 | |||||||||||
| Dividend yield | 0.69% | |||||||||||||
| Expected volatility (weighted average) | 27.0% | — | 31.0% | |||||||||||
In March 2024, the Company granted certain members of its management and employees an aggregate of 209,563 RSUs and 61,197 PSUs under the Company’s 2018 Incentive Compensation Plan. The RSUs and PSUs have vesting periods of between 1 to 3 years from the grant date.
The fair value of each RSU and PSU on the grant date was $64.9 and $64.0, respectively. The Company calculated the fair value of each RSU and PSU on the grant date using the Black-Merton-Scholes using binomial Tree option pricing model, based on the following assumptions:
| Risk-free interest rates | 4.27% | — | 4.94% | |||||||||||
| Expected life (in years) | 1 | — | 3 | |||||||||||
| Dividend yield | 0.73% | |||||||||||||
| Expected volatility (weighted average) | 28.0% | — | 34.0% | |||||||||||
In March 2023, the Company granted certain members of its management and employees an aggregate of 174,422 RSUs and 35,081 PSUs under the Company’s 2018 Incentive Compensation Plan. The RSUs and PSUs have vesting periods of between 1 to 4 years from the grant date. The fair value of each RSU and PSU on the grant date was $79.9 and $79.6, respectively. The Company calculated the fair value of each RSU and PSU on the grant date using the Black-Merton-Scholes using binomial Tree option pricing model based on the following assumptions:
| Risk-free interest rates | 3.86% | — | 4.68% | ||||||||||||||
| Expected life (in years) | 1 | — | 4 | ||||||||||||||
| Dividend yield | 0.59% | ||||||||||||||||
| Expected volatility (weighted average) | 36.0% | — | 42.2% | ||||||||||||||
In May 2023, the Company granted its directors an aggregate of 10,852 RSUs under the Company’s 2018 Incentive Compensation Plan. The RSUs have vesting periods 1 year from the grant date. The fair value of each RSU on the grant date was $82.9. The Company calculated the fair value of each RSU and PSU on the grant date using the Black-Merton-Scholes using binomial Tree option pricing model based on the following assumptions:
| Risk-free interest rates | 4.70% | ||||||||||
| Expected life (in years) | 1 | ||||||||||
| Dividend yield | 0.56% | ||||||||||
| Expected volatility (weighted average) | 34.80% | ||||||||||
Information on the awards outstanding and the related weighted average exercise price as of and for the years ended December 31, 2025, 2024 and 2023 are presented in the table below:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Awards (In thousands) | Weighted Average Exercise Price | Awards (In thousands) | Weighted Average Exercise Price | Awards (In thousands) | Weighted Average Exercise Price | |||||||||||||||||||||||||||||||||
| Outstanding at beginning of year | 1,380 | $ | 69.91 | 1,483 | $ | 52.57 | 1,810 | $ | 60.08 | |||||||||||||||||||||||||||||
| Granted: | ||||||||||||||||||||||||||||||||||||||
RSUs (1) | 248 | — | 242 | — | 189 | — | ||||||||||||||||||||||||||||||||
PSUs (2) | 45 | — | 61 | — | 35 | — | ||||||||||||||||||||||||||||||||
| Exercised | (835) | 69.63 | (377) | 62.91 | (492) | 56.00 | ||||||||||||||||||||||||||||||||
| Forfeited | (25) | 71.15 | (29) | 64.16 | (59) | 54.09 | ||||||||||||||||||||||||||||||||
| Expired | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Outstanding at end of year | 813 | 70.70 | 1,380 | 69.91 | 1,483 | 52.57 | ||||||||||||||||||||||||||||||||
Options and SARs exercisable at end of year (3) | 101 | 70.26 | 614 | 69.41 | 606 | 66.81 | ||||||||||||||||||||||||||||||||
| Weighted-average fair value of awards granted during the year | $ | 70.99 | $ | 64.95 | $ | 79.98 | ||||||||||||||||||||||||||||||||
(1) An RSU represents the right to receive one share of common stock once certain vesting conditions are met. The value of an RSU approximates the value of the underlying stock.
(2) The PSUs shall be paid out based on achievement of three-year relative total stockholder return compared to other companies in the S&P 500 index or based on achievement of three-year megawatt COD capacity targets.
(3) Upon exercise, SARs entitle the recipient to receive shares of common stock equal to the increase in value of the award between the grant date and the exercise date.
The following table summarizes information about stock-based awards outstanding at December 31, 2025 (shares in thousands):
| Awards Outstanding | Awards Exercisable | ||||||||||||||||||||||||||||||||||||||||
| Exercise Price | Number of Stock-based Awards Outstanding | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | Number of Stock-based Awards Exercisable | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||||||||||||||||||||||||||||
| $ | — | 611 | 1.0 | $ | 67,522 | $ | — | ||||||||||||||||||||||||||||||||||
| 67.54 | 3 | 0.9 | 113 | 3 | 0.9 | 113 | |||||||||||||||||||||||||||||||||||
| 69.14 | 45 | 0.4 | 1,869 | 45 | 0.4 | 1,869 | |||||||||||||||||||||||||||||||||||
| 71.15 | 154 | 2.2 | 6,048 | 53 | 2.2 | 2,084 | |||||||||||||||||||||||||||||||||||
| 90.28 | 1 | 1.0 | 12 | 1 | 1.0 | 12 | |||||||||||||||||||||||||||||||||||
| 813 | 1.2 | $ | 75,564 | 101 | 1.3 | $ | 4,078 | ||||||||||||||||||||||||||||||||||
The following table summarizes information about stock-based awards outstanding at December 31, 2024 (shares in thousands):
| Awards Outstanding | Awards Exercisable | ||||||||||||||||||||||||||||||||||||||||
| Exercise Price | Number of Stock-based Awards Outstanding | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | Number of Stock-based Awards Exercisable | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | |||||||||||||||||||||||||||||||||||
| $ | — | 537 | 1.0 | $ | 36,349 | — | 0.0 | $ | — | ||||||||||||||||||||||||||||||||
| 63.40 | 45 | 1.5 | 196 | 45 | 1.5 | 196 | |||||||||||||||||||||||||||||||||||
| 67.54 | 7 | 1.8 | 1 | 7 | 1.9 | 1 | |||||||||||||||||||||||||||||||||||
| 68.34 | 47 | 1.4 | — | 47 | 1.4 | — | |||||||||||||||||||||||||||||||||||
| 69.14 | 335 | 1.4 | — | 335 | 1.4 | — | |||||||||||||||||||||||||||||||||||
| 71.15 | 385 | 3.2 | — | 160 | 3.2 | — | |||||||||||||||||||||||||||||||||||
| 71.71 | 4 | 0.6 | — | 4 | 0.6 | — | |||||||||||||||||||||||||||||||||||
| 76.43 | 5 | 0.9 | — | 5 | 0.9 | — | |||||||||||||||||||||||||||||||||||
| 76.54 | 9 | 2.9 | — | 6 | 2.9 | — | |||||||||||||||||||||||||||||||||||
| 78.53 | 6 | 2.3 | — | 5 | 2.4 | — | |||||||||||||||||||||||||||||||||||
| 90.28 | 1 | 2.0 | — | 1 | 2.0 | — | |||||||||||||||||||||||||||||||||||
| 1,380 | 1.8 | $ | 36,546 | 614 | 1.9 | $ | 197 | ||||||||||||||||||||||||||||||||||
The aggregate intrinsic value in the above tables represents the total pretax intrinsic value, based on the Company’s stock price of $110.47 and $67.72 as of December 31, 2025 and 2024, respectively, which would have potentially been
received by the stock-based award holders had all stock-based award holders exercised their stock-based award as of those dates. The total number of in-the-money stock-based awards exercisable as of December 31, 2025 and 2024 was 101,426 and 51,940, respectively.
The total pretax intrinsic value of options exercised during the year ended December 31, 2025 and 2024 was $27.1 million and $3.4 million, respectively, based on the average stock price of $85.9 and $72.0 during the years ended December 31, 2025 and 2024, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
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.