Public Policy Holding Company, Inc.PPHC
Public Policy Holding Company, Inc. Stock Compensation Disclosure
SHARE-BASED ACCOUNTING CHARGE
OMNIBUS INCENTIVE PLAN
On December 16, 2021, PPHC-Inc. completed its initial public offering ("UK IPO") and its shares began trading on the AIM market of the London Stock Exchange. During 2021, all ultimate owners of PPHC-LLC, referred to as Company Executives, entered into Executive Employment Agreements. These executives sold some of their shares during the UK IPO (referred to as Liquidated Pre-UK IPO Shares) but retained the majority of their shares ("Retained Pre-UK IPO Shares"). The retained shares vest in equal installments over five years, provided the executive remains continuously employed. If an executive's employment terminates, except in cases of death, disability, termination without cause, or for good reason, the unvested shares will be forfeited. In cases of death, disability, termination without cause, or for good reason, all unvested shares will vest immediately. Additionally, the agreements include clawback provisions, allowing the
company to reclaim cash from the sale of Liquidated Pre-UK IPO Shares and vested Retained Pre-UK IPO Shares under certain conditions.
As a result of the vesting conditions for the Retained Pre-UK IPO Shares, the Company is recording share-based accounting charges over the five years 2022-2026. It recorded $29.6 million and $31.8 million for the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, there were 14,181,439 Retained Pre-UK IPO Shares held by current employees and subject to vesting requirements, and 11,216,338 of these shares were fully vested. These shares were issued in 2021 and the weighted-average grant date fair value of these shares was $9.10 as of the grant date. For the Retained Pre-UK IPO shares, the grant-date fair value is based upon the market price of the Company's common stock on the date of the grant. As of December 31, 2025, the unrecognized compensation cost from these restricted shares was approximately $28.3 million, which is expected to be recognized over a weighted-average period of 1.0 years.
The share-based accounting charge relating to the Retained Pre-UK IPO Shares is recorded to costs of services and general and administrative expense in the consolidated statement of operations. The table below represents the total expense relating to Retained Pre-UK IPO Shares recognized in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Cost of services | $ | 26,664 | $ | 26,636 | |||||||
General and administrative expense | 2,962 | 5,168 | |||||||||
Total expense relating to Retained Pre-UK IPO Shares | $ | 29,626 | $ | 31,804 | |||||||
In 2021, we adopted the Public Policy Holding Company, Inc. 2021 Omnibus Incentive Plan (the "Omnibus Incentive Plan"), under which Options (both nonqualified options, and incentive stock options), stock appreciation rights, restricted stock units, restricted stock, unrestricted stock, cash-based awards and dividend equivalent rights may be issued. An award may not be granted if the number of common shares committed to be issued under that award exceeds fifteen percent of the ordinary shares of the Company in issue immediately before that day, when added to the number of common shares which have been issued, or committed to be issued, to satisfy awards under the Omnibus Incentive Plan, or options or awards under any other employee share plan operated by the Company, granted in the five previous years.
As of December 31, 2025, the total amount of shares authorized by the Board of Directors under the Omnibus Plan was 3,776,164. During the years ended December 31, 2025 and 2024, the Company granted 62,588 and 85,000 Options to employees. In addition, during the year ended December 31, 2025, the Company granted 498,532 Restricted Stock Units ("RSUs") and 195,593 Restricted Stock Awards ("RSAs"). During the year ended December 31, 2024, the Company granted 586,000 RSUs and 140,748 RSAs. The stock options have a contractual term of ten years and vest three years after their issuance. The RSUs vest over a three-year period with one-third vesting each year after the grant date. The amortization of the fair value of share-based awards is recorded as an expense in long-term incentive program charges in the statement of operations.
The total long-term incentive program expense, net of forfeitures, is detailed in the following table:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Options | $ | 269 | $ | 550 | |||||||
| RSUs | 3,127 | 1,974 | |||||||||
| RSAs | 2,394 | 1,260 | |||||||||
| SARs | 1,296 | 378 | |||||||||
| Total | $ | 7,086 | $ | 4,162 | |||||||
The table below represents the total expense relating to the long-term incentive program recognized in the consolidated statements of operations and comprehensive loss as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cost of services | $ | 6,039 | $ | 3,328 | |||||||
| General and administrative expense | 1,047 | 834 | |||||||||
| Total | $ | 7,086 | $ | 4,162 | |||||||
As of December 31, 2025, total unrecognized compensation expense and the applicable weighted-average period for that expense to be recognized is as follows:
Unrecognized compensation | Weighted average period | ||||||||||
| Options | $ | 215 | 0.4 years | ||||||||
| RSUs | 5,686 | 0.8 years | |||||||||
| RSAs | 1,926 | 1.4 years | |||||||||
Total | $ | 7,826 | |||||||||
Options
Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each option granted is estimated using a Black-Scholes option-pricing model on the date of grant as follows for the years ended December 31:
| 2025 | 2024 | ||||||||||
| Estimated dividend yield | 4.0% | 4.0% to 10.0% | |||||||||
| Expected stock price volatility | 40.0% | 40.0% | |||||||||
| Risk-free interest rate | 4.2% | 4.3% to 4.4% | |||||||||
| Expected life of option (in years) | 6.5 | 6.5 | |||||||||
| Weighted Average Grant Date Fair Value | $2.50 | $1.25 | |||||||||
The expected volatility rates are estimated based on the actual volatility of comparable public companies over the expected term. The expected term represents the average time that Options that vest are expected to be outstanding. Due to limited historical data, the Company calculates the expected life based on the midpoint between the vesting date and the contractual term, which is in accordance with the simplified method. The risk-free rate is based on the United States Treasury yield curve during the expected life of the option.
The following summarizes the stock option activity for the years ended December 31, 2025 and 2024:
| Number of Shares | Weighted Average Exercise Price- (USD)(1) | Weighted Average Exercise Price-(GBP) | Weighted Average Contractual Term (in years) | ||||||||||||||||||||
| Outstanding as of December 31, 2024 | 676,709 | $ | 10.75 | £ | 8.60 | 7.8 | |||||||||||||||||
| Granted | 62,588 | 15.16 | 11.27 | 10.0 | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Cancelled/Forfeited | (37,295) | 13.18 | 9.80 | — | |||||||||||||||||||
| Outstanding as of December 31, 2025 | 702,002 | 11.33 | 8.42 | 6.9 | |||||||||||||||||||
| Exercisable as of December 31, 2025 | 463,391 | 11.90 | 8.84 | 5.8 | |||||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 702,002 | $ | 11.33 | £ | 8.42 | 6.9 | |||||||||||||||||
| Number of Shares | Weighted Average Exercise Price- (USD)(1) | Weighted Average Exercise Price-(GBP) | Weighted Average Contractual Term (in years) | ||||||||||||||||||||
| Outstanding as of December 31, 2023 | 617,812 | $ | 11.05 | £ | 8.70 | 8.9 | |||||||||||||||||
| Granted | 85,000 | 10.10 | 8.10 | — | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Cancelled/Forfeited | (26,103) | 10.70 | 8.55 | — | |||||||||||||||||||
| Outstanding as of December 31, 2024 | 676,709 | 10.75 | 8.60 | 7.8 | |||||||||||||||||||
| Exercisable as of December 31, 2024 | 10,000 | 11.00 | 8.80 | — | |||||||||||||||||||
| Vested and expected to vest as of December 31, 2024 | 676,709 | $ | 10.75 | £ | 8.60 | 7.8 | |||||||||||||||||
(1)The applicable exercise prices have been adjusted based on the applicable exchange rate of GBP to USD at the end of each period presented.
Option expense for the years ended December 31, 2025 and 2024 was approximately $0.3 million and $0.6 million, respectively.
The weighted average intrinsic value of stock options was $2.75 as of December 31, 2025.
Restricted Stock Units ("RSUs")
Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each RSU granted is estimated using a Black-Scholes option-pricing model on the date of grant as follows as for the years ended December 31:
| 2025 | 2024 | ||||||||||
| Estimated dividend yield | 4.0% | 10.0% | |||||||||
| Expected stock price volatility | 40.0% | 40.0% to 50.0% | |||||||||
| Risk-free interest rate | 3.9% to 4.0% | 4.5% to 5.1% | |||||||||
| Expected life of option (in years) | 1 to 3 years | 1 to 3 years | |||||||||
Activity in the Company's non-vested RSUs was as follows for the years ended December 31, 2025 and 2024, respectively:
| Number of RSUs | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested as of December 31, 2024 | 869,330 | $ | 7.00 | ||||||||
| Granted | 498,532 | 8.65 | |||||||||
| Vested | (329,137) | 8.54 | |||||||||
| Cancelled/Forfeited | (46,993) | 8.93 | |||||||||
| Nonvested as of December 31, 2025 | 991,732 | $ | 7.70 | ||||||||
| Nonvested as of December 31, 2023 | 445,000 | 7.05 | |||||||||
| Granted | 586,000 | 7.05 | |||||||||
| Vested | (161,670) | 7.45 | |||||||||
| Cancelled/Forfeited | — | — | |||||||||
| Nonvested as of December 31, 2024 | 869,330 | $ | 7.00 | ||||||||
RSU expense for the years ended December 31, 2025 and 2024, was approximately $3.1 million and $2.0 million, respectively.
Restricted Stock Awards ("RSAs")
Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each RSA granted is estimated using a Black-Scholes option-pricing model on the date of grant as follows for the years ended December 31:
| 2025 | 2024 | ||||||||||
| Estimated dividend yield | 0.0% | 0.0% | |||||||||
| Expected stock price volatility | 40.0% | 40.0% | |||||||||
| Risk-free interest rate | 4.0% | 5.1% to 5.2% | |||||||||
| Expected life of option (in years) | 1 year | 1 year | |||||||||
Activity in the Company's non-vested RSAs was as follows:
| Number of RSAs | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested as of December 31, 2024 | 479,491 | $ | 6.15 | ||||||||
| Granted | 195,593 | 9.45 | |||||||||
| Vested | (263,176) | 6.93 | |||||||||
| Cancelled/Forfeited | (3,624) | 6.08 | |||||||||
| Nonvested as of December 31, 2025 | 408,284 | $ | 7.91 | ||||||||
| Nonvested as of December 31, 2023 | 437,789 | 5.95 | |||||||||
| Granted | 140,748 | 7.15 | |||||||||
| Vested | (99,046) | 6.70 | |||||||||
| Cancelled/Forfeited | — | — | |||||||||
| Nonvested as of December 31, 2024 | 479,491 | $ | 6.15 | ||||||||
RSA expense for the years ended December 31, 2025 and 2024, was approximately $2.4 million and $1.3 million, respectively.
Stock Appreciation Rights ("SARs")
SARs are not issued shares or committed shares to be issued and therefore do not count against the total number of shares that can be issued under the Omnibus Plan. Upon exercise of a SAR, the Company shall pay the grantee in cash an amount equal to the excess of the fair market value of a share of stock on the effective date of exercise in excess of the exercise price of the SAR. This cash settlement feature requires the SARs to be classified as a liability and remeasured at each reporting period. The SARs vest over a three-year period with one-third vesting each year after the grant date. The fair value of each SAR granted is estimated using a Black-Scholes option-pricing model and the fair value is adjusted at each reporting period. As of December 31, 2025 and 2024, the total liability recorded was $2.0 million and $0.7 million, respectively.
The fair value of the SARs was calculated as follows as of:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Estimated dividend yield | 4.0 | % | 4.0 | % | |||||||
| Expected stock price volatility | 42.0 | % | 45.0 | % | |||||||
| Risk-free interest rate | 3.5% to 3.6% | 4.4% to 4.5% | |||||||||
| Expected life of instrument (in years) | 1.9 to 3.3 years | 2.9 to 3.9 years | |||||||||
| Weighted-average fair value per share | $ | 6.60 | $ | 2.55 | |||||||
Activity in the Company's SARs was as follows for the year ended December 31, 2025 and year ended December 31, 2024:
| Number of Shares | Weighted Average Exercise Price | ||||||||||
| Outstanding as of December 31, 2023 | 352,000 | $ | 8.50 | ||||||||
| Granted | — | — | |||||||||
| Exercised | — | — | |||||||||
| Cancelled/Forfeited | (11,000) | 8.35 | |||||||||
| Outstanding as of December 31, 2024 | 341,000 | $ | 8.05 | ||||||||
| Granted | — | — | |||||||||
| Exercised | — | — | |||||||||
| Cancelled/Forfeited | (30,000) | 8.98 | |||||||||
| Outstanding as of December 31, 2025 | 311,000 | 8.97 | |||||||||
| Exercisable as of December 31, 2025 | 207,337 | 8.97 | |||||||||
| Vested and expected to vest as of December 31, 2025 | 311,000 | $ | 8.97 | ||||||||
SAR expense for the years ended December 31, 2025 and 2024, was approximately $1.3 million and $0.4 million, respectively. The amount of the future expense for all SARs issued will depend upon the value of the Company's common stock and other factors at each future reporting date.
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.