PROG Holdings, Inc.PRG
PROG Holdings, Inc. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
Description of Plans
The Company grants stock options, RSUs, RSAs and PSUs to certain employees and directors of the Company under the 2015 Equity and Incentive Award Plan (the "2015 Plan"). The 2015 Plan was originally approved by the Company's shareholders in May 2015 and was amended and restated with shareholder approval in February 2019. In May 2021, the 2015 Plan was amended, with shareholder approval, to increase the number of shares of common stock authorized for issuance under the 2015 Plan from 8,000,000 shares to 10,980,000 shares. Beginning in 2015, as part of the Company's long-term incentive compensation program ("LTIP Plan") and pursuant to the Company's 2015 Plan, the Company granted a mix of stock options, time-based restricted stock and performance share units to key executives and managers and also granted time-based restricted stock units to non-employee directors of the Company. As of December 31, 2025, the aggregate number of common stock shares that may be issued or transferred under the 2015 Plan is 2,333,071.
Stock-based Compensation Expense
The Company has elected a policy to estimate forfeitures in determining the amount of stock compensation expense. Total stock-based compensation expense for both continuing operations and discontinued operations is presented in the allocation table below.
Allocation Between Continuing and Discontinued Operations
On October 20, 2025, the Company completed the sale of the primary assets of Vive, which is presented as discontinued operations in the consolidated financial statements. In accordance with ASC 718 and ASC 205-20, stock-based compensation expense is allocated to discontinued operations for employees who were directly attributable to the discontinued segment, and to continuing operations for all other employees.
The allocation was based on the proportion of awards held by employees of the discontinued segment, as well as the service periods rendered prior to and after the disposal date. The following table summarizes stock-based compensation expense by classification between continuing operations and discontinued operations:
Year Ended December 31 (In Thousands) | Continuing Operations | Discontinued Operations | Total | ||||||||
| 2025 | $ | 28,477 | $ | 330 | $ | 28,807 | |||||
| 2024 | $ | 27,845 | $ | 1,334 | $ | 29,179 | |||||
| 2023 | $ | 23,730 | $ | 1,190 | $ | 24,920 | |||||
The total income tax benefit recognized in the consolidated statements of earnings for stock-based compensation arrangements was $7.2 million, $7.3 million and $6.2 million in the years ended December 31, 2025, 2024 and 2023, respectively. Deficits of recognized compensation costs in excess of tax deductions were $0.1 million, $0.1 million and $0.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. Deficits and benefits related to tax deductions for compensation cost are included in operating cash flows and as a component of income tax expense (benefit) or earnings from discontinued operations, net of tax, in the consolidated statements of earnings, as applicable.
As of December 31, 2025, there was $25.4 million of total unrecognized compensation expense related to non-vested stock-based compensation of directors and employees of PROG Holdings, which is expected to be recognized over an average period of 1.73 years.
Stock Options
Under the Company's 2015 Plan, options granted to date become exercisable after a period of to three years and unexercised options lapse 10 years after the date of the grant. Unvested options are subject to forfeiture upon termination of service. The Company recognizes compensation expense for options that have a graded vesting schedule on a straight-line basis over the requisite service period. Shares are issued from the Company's treasury shares upon share option exercises.
The Company determines the fair value of stock options on the grant date using a Black-Scholes-Merton option pricing model that incorporates expected volatility, expected option life, risk-free interest rates and expected dividend yields. The expected volatility is based on implied volatilities from traded options on the Company's stock and the historical volatility of the Company's common stock in combination with the volatility of the Company's comparable peer group for the most recent period generally commensurate with the expected estimated life of each respective grant. The expected lives of options are based on the Company's historical option exercise experience. The Company believes that the historical experience method is the best estimate of future exercise patterns. The risk-free interest rates are determined using the implied yield available for zero-coupon United States government issues with a remaining term equal to the expected life of the grant. The expected dividend yields are based on the approved annual dividend rate in effect and the market price of the underlying common stock at the time of grant. For stock options granted in 2023, the annual dividend rate was assumed to be zero, and no assumption for a future dividend rate was included, as the Company did not anticipate paying any dividends at the time of grant.
The Company did not grant any stock options during 2025 and 2024. The Company granted 208,000 stock options during the year ended December 31, 2023. The weighted-average fair value of options granted and the weighted-average assumptions used in the Black-Scholes-Merton option pricing model for such grants were as follows:
| 2023 | |||||
| Dividend Yield | — | % | |||
| Expected Volatility | 51.6 | % | |||
| Risk-free Interest Rate | 4.3 | % | |||
| Expected Term (in years) | 4.5 | ||||
| Weighted-average Fair Value of Stock Options Granted | $ | 11.66 | |||
The following table summarizes information about stock options outstanding at December 31, 2025:
| Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||
| Range of Exercise Prices | Number Outstanding December 31, 2025 | Weighted Average Remaining Contractual Life (in Years) | Weighted Average Exercise Price | Number Exercisable December 31, 2025 | Weighted Average Exercise Price | ||||||||||||||||||||||||
$20.00-30.00 | 483,622 | 5.63 | $ | 26.42 | 422,697 | $ | 26.67 | ||||||||||||||||||||||
30.01-40.00 | 88,344 | 4.17 | 34.78 | 88,344 | 34.78 | ||||||||||||||||||||||||
40.01-50.00 | 255,495 | 3.79 | 46.70 | 255,495 | 46.70 | ||||||||||||||||||||||||
50.01-60.00 | 5,304 | 5.34 | 53.55 | 5,304 | 53.55 | ||||||||||||||||||||||||
20.00-60.00 | 832,765 | 4.91 | 33.70 | 771,840 | 34.41 | ||||||||||||||||||||||||
The table below summarizes option activity for the year ended December 31, 2025:
| Options (In Thousands) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value (in Thousands) | Weighted Average Fair Value | |||||||||||||||||||||||||
| Outstanding at January 1, 2025 | 847 | $ | 33.55 | ||||||||||||||||||||||||||
| Forfeited/Expired | (9) | 24.89 | |||||||||||||||||||||||||||
| Exercised | (5) | 24.70 | |||||||||||||||||||||||||||
| Outstanding at December 31, 2025 | 833 | 33.70 | 4.91 | $ | 1,484 | $ | 12.72 | ||||||||||||||||||||||
| Expected to Vest | 61 | 24.70 | 7.17 | 290 | 11.66 | ||||||||||||||||||||||||
| Exercisable at December 31, 2025 | 772 | 34.41 | 4.73 | 1,192 | 12.80 | ||||||||||||||||||||||||
The aggregate intrinsic value amounts in the table above represent the closing price of the Company's common stock on December 31, 2025 in excess of the exercise price, multiplied by the number of in-the-money stock options as of that same date. Options outstanding that are expected to vest are net of estimated future option forfeitures.
The aggregate intrinsic value of options exercised, which represents the value of the Company's common stock at the time of exercise in excess of the exercise price, was $0.1 million, $0.9 million and $0.1 million during the years ended December 31, 2025, 2024 and 2023, respectively. The total grant-date fair value of options exercised was $0.1 million, $0.4 million and $0.1 million during the years ended December 31, 2025, 2024 and 2023, respectively.
Restricted Stock
Restricted stock units or restricted stock awards (collectively, "restricted stock") may be granted to employees and directors under the 2015 Plan and typically vest over approximately to three-year periods. Restricted stock grants are settled in stock and may be subject to one or more objective employment or other forfeiture conditions as established at the time of grant. The Company recognizes compensation expense for restricted stock with a graded vesting schedule on a straight-line basis over the requisite service period as such restricted stock is not subject to Company performance metrics. Shares are issued from the Company's treasury shares upon vesting. Any shares of restricted stock that are forfeited may again become available for issuance.
The fair value of restricted stock is generally based on the fair market value of the Company's common stock on the date of grant.
The Company granted 581,000, 646,000 and 574,000 shares of restricted stock at weighted-average fair values of $29.02, $30.67 and $25.69 in the years ended December 31, 2025, 2024 and 2023, respectively. The following table summarizes information about restricted stock activity during 2025:
| Restricted Stock (In Thousands) | Weighted Average Fair Value | ||||||||||
| Non-vested at January 1, 2025 | 1,144 | $ | 28.98 | ||||||||
| Granted | 581 | 29.02 | |||||||||
| Forfeited | (107) | 30.07 | |||||||||
| Vested | (455) | 28.20 | |||||||||
| Non-vested at December 31, 2025 | 1,163 | 29.20 | |||||||||
The total vest-date fair value of restricted stock described above that vested during the year was $12.8 million, $19.2 million and $8.4 million in the years ended December 31, 2025, 2024 and 2023, respectively.
Performance Share Units
For performance share units, which are settled in stock, the number of shares earned is determined at the end of the to three-year performance periods based upon achievement of specified performance conditions. The performance criteria vary by agreement and have included the following performance conditions: (i) adjusted pre-tax profit, (ii) return on investment capital, (iii) consolidated revenues, (iv) segment or business unit revenues, (v) certain business development and technology initiatives, (vi) business unit customer count, (vii) business unit enterprise value, (viii) adjusted EBITDA and/or (ix) the Company's total shareholder return ("TSR") relative to the TSR of the S&P 600 Small Cap Index. When the performance criteria are met, the award is earned and vests assuming continued employment through the specified service period(s). Shares are issued from the Company's treasury shares upon vesting. The number of performance-based shares which could potentially be issued ranges from 0% up to a maximum of 100% or 200% of the target award depending on the specified terms and conditions of the target award.
The fair value of performance share units that have only a service and performance condition(s) is based on the fair market value of the Company's common stock on the date of grant. The compensation expense associated with these awards is amortized on an accelerated basis over the vesting period based on the Company's projected assessment of the level of performance that will be achieved and earned. In the event the Company determines it is no longer probable that the minimum performance criteria specified in the plan will be achieved, all previously recognized compensation expense is reversed in the period such a determination is made. The TSR performance condition is a market condition. Therefore, a Monte Carlo simulation model was used to determine the fair value of those awards. The fair value and compensation expense of awards which vest based on the TSR performance is fixed at the measurement date and is not revised based on actual performance during the vesting period.
The table below summarizes the assumptions used in the fair value calculation of the TSR awards granted during the years ended December 31, 2025 and 2024:
| 2025 | 2024 | |||||||
Expected Dividend Yield | — | % | 1.6 | % | ||||
Expected Volatility | 55.4 | % | 53.2 | % | ||||
Risk-Free Rate of Interest | 4.0 | % | 4.4 | % | ||||
Performance Period (Years) | 2.84 | 2.84 | ||||||
The expected volatility was based on the historical volatility of the Company's stock. The risk-free rate of interest was based on the U.S. Treasury yield curve for the period that is commensurate with the expected life at the time of grant. The expected annual dividend yield was zero during 2025 based on the holders of the awards being entitled to dividend equivalents paid during the period.
The following table summarizes information about performance share unit activity during 2025:
| Performance Share Units (In Thousands) | Weighted Average Fair Value | ||||||||||
Non-vested at January 1, 2025 | 736 | $ | 30.54 | ||||||||
| Granted | 417 | 29.16 | |||||||||
Forfeited | (41) | 27.65 | |||||||||
| Vested | (348) | 30.02 | |||||||||
Performance Factor Adjustment | 112 | 30.86 | |||||||||
Non-vested at December 31, 2025 | 876 | 30.18 | |||||||||
The total vest-date fair value of performance share units described above that vested during the period was $8.5 million, $7.7 million and $2.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Employee Stock Purchase Plan
Effective May 9, 2018, the Company's Board of Directors and shareholders approved the Employee Stock Purchase Plan ("ESPP"), which is a tax-qualified plan under Section 423 of the Internal Revenue Code. The purpose of the Company's ESPP is to encourage ownership of the Company's common stock by eligible employees of PROG Holdings, Inc. and certain subsidiaries. Under the ESPP, eligible employees are allowed to purchase common stock of the Company during six-month offering periods at the lower of: (i) 85% of the closing trading price per share of the common stock on the first trading date of an offering period in which a participant is enrolled; or (ii) 85% of the closing trading price per share of the common stock on the last day of an offering period. Employees participating in the ESPP can contribute up to an amount not exceeding 10% of their base salary and wages up to an annual maximum of $25,000 in total fair market value of the common stock (determined at the time the ability to purchase shares of common stock is granted) and may not purchase more than 500 shares in each offering period.
The compensation cost related to the ESPP is measured on the grant date based on eligible employees' expected withholdings and is recognized over each six-month offering period. Total compensation cost recognized in connection with the ESPP was $0.3 million, $0.3 million and $0.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company issued 52,670, 44,811 and 67,720 shares under the ESPP at weighted average purchase prices of $25.00, $27.56 and $18.72 during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, the aggregate number of shares of common stock that may be issued under the ESPP was 290,285.
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.