Phillips Edison & Company, Inc.PECO
Phillips Edison & Company, Inc. Stock Compensation Disclosure
| 13. COMPENSATION | ||
Employee Long Term Incentive Plan—We issue stock awards that vest based upon the completion of a service period (“service-based awards”) under our 2020 Omnibus Incentive Plan (“2020 Incentive Plan”), which became effective in June 2020. Awards to employees are typically granted and vest during the first quarter of each year. Service-based awards typically follow a four-year graded vesting schedule and will vest in the form of common stock or OP units.
We recognize expense for awards with graded vesting under the accelerated recognition method, whereby each vesting is treated as a separate award with expense for each vesting recognized ratably over the requisite service period. We account for forfeitures as they occur. Expense amounts are recorded in General and Administrative or Property Operating on our consolidated statements of operations. Awards are valued according to the Nasdaq closing stock price at the date of the grant. Holders of unvested service-based awards are entitled to dividend and distribution rights, but are not entitled to voting rights.
Additionally, we issue performance-based awards that are earned based on the achievement of specified performance metrics measured at the end of the three-year performance period. The maximum number of performance-based awards earned cannot exceed two times the target number. Half of the earned performance-based awards vest when earned at the end of the three-year performance period and the second half of the earned performance-based awards vest one year later, subject to continued employment.
Beginning in 2022, our Compensation Committee approved a change to our performance-based long-term incentive program such that the performance-based component of awards under the program will be based on a single metric, total shareholder return (“TSR”) relative to the FTSE Nareit Equity Shopping Center Index. Prior to 2022, our performance-based equity grants were based on two separate, equally-weighted performance metrics: (i) three-year average Same-Center NOI growth measured against a peer group of public retail REITs; and (ii) three-year Core Funds From Operations (“FFO”) per share growth measured against the same peer group. Same-Center NOI and Core FFO are both non-GAAP measures.
The fair value of the 2025, 2024, and 2023 performance-based awards on the date of grant was $6.4 million, $5.4 million, and $6.0 million, respectively, using a Monte Carlo simulation to estimate the fair value through a risk-neutral premise. The following is a summary of the significant assumptions used to value the performance-based awards granted during the years ended December 31, 2025, 2024, and 2023:
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected volatility | 23.0 | % | 26.0 | % | 38.0 | % | |||||||||||
| Dividend yield | 3.40 | % | 3.40 | % | 3.20 | % | |||||||||||
| Risk-free interest rate | 4.04 | % | 4.35 | % | 4.63 | % | |||||||||||
In addition to the single TSR performance metric, a Company absolute TSR modifier will be applied if our three-year absolute TSR percentage at the end of the performance period is negative (the “Absolute TSR Modifier”). Specifically, to the extent that any portion of the award above the target level is earned based on achievement of the relative TSR performance metric at the end of the performance period, but our absolute TSR percentage at the end of the performance period is negative, the portion of the award that is earned at the end of the performance period will be capped at the target amount. The remaining amount of the award that would have been earned based on achievement of the performance metric (the “Contingent Portion”) will become earned and vested if and when our absolute TSR performance is positive measured from the last day of the performance period through the last day of any calendar quarter within five years following the completion of the performance period (when compared to the share value at the beginning of the performance period). In the event that such share value target is not achieved as described above, the Contingent Portion will be forfeited.
Underwritten IPO Grants—In connection with our underwritten IPO in 2021, we issued a total of 0.5 million RSUs, inclusive of 0.3 million OP units, and restricted stock awards in the form of time-based stock compensation awards with expenses included within Other Expense, Net on our consolidated statements of operations. Included in the restricted stock awards were 24,000 RSUs granted to our independent directors. The shares had a grant price of $28.00 per share and, with the exception of one individual whose award was subject to accelerated vesting provisions, 50% of the shares vested after 18 months and the remaining 50% vested after 36 months.
Independent Director Stock Plan—The Board approves restricted stock awards pursuant to our 2020 Incentive Plan. The awards are granted to our independent directors as service-based awards. As of December 31, 2025 and 2024, there were approximately 23,000 and 24,000 outstanding unvested awards granted to independent directors, respectively, in connection with the 2020 Incentive Plan.
Share-Based Compensation Award Activity—As of December 31, 2025, the fair value for certain of our equity awards was based on our Nasdaq closing stock price at the date of the grant and the fair value for our 2025, 2024, and 2023 performance-based awards was calculated using the Monte Carlo method, as described above. All share-based compensation awards, regardless of the form of payout upon vesting, are presented in the following table, which summarizes our stock-based award activity (number of units in thousands):
Restricted Stock Awards(1) | Performance Stock Awards(1) | Weighted-Average Grant-Date Fair Value | |||||||||||||||
Nonvested at January 1, 2023 | 770 | 1,136 | $ | 29.60 | |||||||||||||
| Granted | 162 | 308 | 27.27 | ||||||||||||||
| Vested | (393) | (129) | 29.99 | ||||||||||||||
| Forfeited | (10) | — | 30.75 | ||||||||||||||
Nonvested at December 31, 2023 | 529 | 1,315 | 28.89 | ||||||||||||||
| Granted | 196 | 248 | 27.49 | ||||||||||||||
| Vested | (327) | (104) | 28.69 | ||||||||||||||
| Forfeited | (18) | (711) | 32.83 | ||||||||||||||
Nonvested at December 31, 2024 | 380 | 748 | 25.87 | ||||||||||||||
| Granted | 195 | 263 | 29.54 | ||||||||||||||
| Vested | (145) | (199) | 26.16 | ||||||||||||||
| Forfeited | (12) | (46) | 25.11 | ||||||||||||||
Nonvested at December 31, 2025 | 418 | 766 | $ | 27.25 | |||||||||||||
(1)The maximum number of award units that could be issued under all outstanding grants was 1.2 million as of December 31, 2025. The number of award units expected to vest was 0.8 million as of December 31, 2025.
The expense for all stock-based awards during the years ended December 31, 2025, 2024, and 2023 was $11.2 million, $10.3 million, and $9.4 million, respectively. We had $13.6 million of unrecognized compensation costs related to these awards that we expect to recognize over a weighted average period of approximately two years. The fair value at the vesting date for stock-based awards that vested during the year ended December 31, 2025 was $8.4 million.
401(k) Plan—We sponsor a 401(k) plan that provides benefits for qualified employees. Our match of the employee contributions is discretionary and has a five-year vesting schedule. The cash contributions to the plan for the years ended December 31, 2025, 2024, and 2023 were approximately $1.3 million, $1.1 million, and $1.1 million, respectively. All employees who have attained the age of 21 are eligible to participate starting the first day of the month following their date of hire. Employees are vested immediately with respect to employee contributions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 10, 2026 | Showing above |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 13, 2019 | |
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.