Rocket Companies, Inc.RKT
Rocket Companies, Inc. Stock Compensation Disclosure
Share-based Compensation
Restricted stock units (“RSUs”), performance stock units ("PSUs") and stock options are granted to team members and directors of the Company and its affiliates under the 2020 Omnibus Incentive Plan. Share-based compensation expense is recognized on a straight-line basis over the requisite service period based on the fair value of the award on the date of grant, with forfeitures recognized as they occur.
Stock Options
The Company has granted Stock Options to certain team members that generally vest and become exercisable over a three year period, with 33.33% vesting on the first anniversary of the grant date and the remaining 66.67% vesting ratably on a monthly basis over the 24 month period following the first anniversary of the grant date, subject to the grantee's employment or service with the Company through each applicable vesting date. The Stock Options will be exercisable, subject to vesting, for a period of 10 years after the grant date. The Stock Options activity for the period from December 31, 2021 to December 31, 2024 was as follows:
| Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding as of December 31, 2021 | 24,500,416 | $ | 18.01 | 8.6 years | $ | — | |||||||||||||||||
| Granted | 60,000 | 8.38 | — | — | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Expired | 1,652,408 | 18.01 | — | — | |||||||||||||||||||
| Forfeited | 1,253,258 | 17.99 | — | — | |||||||||||||||||||
Outstanding as of December 31, 2022 | 21,654,750 | $ | 17.98 | 8.5 years | $ | — | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Expired | 4,445,098 | 18.00 | — | — | |||||||||||||||||||
| Forfeited | 333,552 | 17.98 | — | — | |||||||||||||||||||
Outstanding as of December 31, 2023 | 16,876,100 | $ | 17.97 | 6.4 years | $ | 366,000 | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Exercised | 814,371 | 18.00 | — | — | |||||||||||||||||||
| Expired | 1,489,475 | 18.04 | — | — | |||||||||||||||||||
| Forfeited | 20,000 | 8.38 | — | — | |||||||||||||||||||
Outstanding as of December 31, 2024 | 14,552,254 | $ | 17.98 | 5.5 years | $ | 115,200 | |||||||||||||||||
There were no Stock Options granted for the period ending December 31, 2024. The Company had 14,552,254, 16,837,767 and 16,919,368 stock options exercisable as of December 31, 2024, 2023 and 2022, respectively.
The Company estimates the fair value of the Stock Options at the date of grant using the Black-Scholes option pricing model. The inputs to the Black-Scholes option pricing model are as follows:
Year Ended December 31, 2024 | Year Ended December 31, 2023 | Year Ended December 31, 2022 | ||||||||||||||||||
| Expected volatility | N/A | N/A | 34.0% - 36.4% | |||||||||||||||||
| Expected dividend yield | N/A | N/A | 1.5 | % | ||||||||||||||||
| Risk-free interest rates | N/A | N/A | 0.3% - 3.9% | |||||||||||||||||
| Expected term | N/A | N/A | 5.85 years | |||||||||||||||||
The weighted average grant-date fair value of options granted during 2022 was $3.11.
Expected volatility - This is a measure of the amount by which the price of the equity instrument has fluctuated or is expected to fluctuate. The expected volatility was based on the historical volatility of a group of guideline companies. An increase in expected volatility would increase compensation expense.
Expected dividend yield - An increase in the expected dividend yield would decrease compensation expense.
Risk-free interest rate - This is the U.S. Treasury rate as of the measurement date having a term approximating the expected life of the award. An increase in the risk-free interest rate would increase compensation expense.
Expected term - The period of time over which the awards are expected to remain outstanding. The Company estimates the expected term as the mid-point between actual or expected vesting date and the contractual term. An increase in the expected term would increase compensation expense.
Restricted Stock Units
The Company has granted RSUs to certain team members and certain non-employee directors that generally vest annually or semi-annually over a three year period with 33% vesting on each of the first three anniversaries of the grant date, subject, in each case, to the grantee's employment or service with the Company through each applicable vesting date.
In connection with the acquisition of Rocket Money, the Company granted RSUs to certain team members that generally vest quarterly over an accelerated four-year period, subject to the grantee’s employment service with the Company through each applicable vesting date.
During the year-ended December 31, 2023, the Company made a one-time grant of RSUs to vest over a nine-month period, subject to the grantee’s employment with the Company through the applicable vesting date, for a total expense of approximately $34,700 that was fully vested as of December 31, 2023.
The RSU activity for the period from December 31, 2021 to December 31, 2024 was as follows:
| Number of Units | Weighted Average Grant Date Fair Value | Weighted Average Remaining Service Period | |||||||||||||||
Outstanding as of December 31, 2021 | 13,357,317 | $ | 17.90 | 1.2 years | |||||||||||||
| Granted | 24,382,033 | 13.22 | — | ||||||||||||||
| Vested | 15,199,692 | 15.54 | — | ||||||||||||||
| Forfeited | 1,743,308 | 16.37 | — | ||||||||||||||
Outstanding as of December 31, 2022 | 20,796,350 | $ | 14.28 | 2.1 years | |||||||||||||
| Granted | 16,816,637 | 8.41 | — | ||||||||||||||
| Vested | 14,006,419 | 12.54 | — | ||||||||||||||
| Forfeited | 2,583,262 | 12.62 | — | ||||||||||||||
Outstanding as of December 31, 2023 | 21,023,306 | $ | 10.96 | 2.1 years | |||||||||||||
| Granted | 13,678,351 | 13.44 | — | ||||||||||||||
| Vested | 11,144,556 | 11.85 | — | ||||||||||||||
| Forfeited | 1,664,710 | 11.27 | — | ||||||||||||||
Outstanding as of December 31, 2024 | 21,892,391 | $ | 12.02 | 1.8 years | |||||||||||||
Performance Stock Units
The Company authorized 1,055,408 PSUs at target during the year ended December 31, 2024, that will vest based on the satisfaction of certain market, performance and service conditions.
The Company granted 527,704 PSUs that will cliff vest at the end of a three-year period based on the satisfaction of certain service and market conditions. The grant date fair value of these awards is $18.22 which was determined based on a Monte Carlo valuation model. No forfeitures had occurred as of December 31, 2024.
The Company granted 527,704 PSUs that will cliff vest at the end of a three-year period based on the satisfaction of certain service and performance conditions, which will be established by the Company at a future date. The Company has determined that the service inception date precedes the grant date and the fair value of these awards will be remeasured quarterly based on the current period share price until the awards are granted. This portion of the PSUs is not considered contingently issuable and is excluded from the calculation of earnings per share as of December 31, 2024.
Team Member Stock Purchase Plan
The Company has an employee stock purchase plan, also referred to as the Team Member Stock Purchase Plan (“TMSPP”), under which eligible team members may direct the Company to withhold up to 15% of their gross pay to purchase shares of common stock at a price equal to 85% of the closing market price on the exercise date. The TMSPP is a liability classified compensatory plan and the Company recognizes compensation expense over the offering period based on the fair value of the purchase discount. Under the TMSPP, the Company is authorized to issue up to 20,526,316 shares of its common stock to qualifying team members. There were 2,524,819, 3,286,442 and 4,609,697 shares purchased during the year ended December 31, 2024, 2023 and 2022, respectively, under the TMSPP.
Other Awards
We allocated costs associated with awards granted by Rock Holdings, Inc. (“RHI”) in the years prior to the reorganization and IPO. During the year ended December 31, 2022, all remaining RHI restricted stock units and options were cancelled and replaced with cash or a modified award denominated in Rocket Companies, Inc. shares. This resulted in RHI contributing approximately $42,000 in cash to the Company and its subsidiaries in exchange for the share-based compensation award modifications.
Additionally, certain of our subsidiaries have individual compensation plans that include equity awards and stock appreciation rights.
Share-based Compensation Expense
The components of share-based compensation expense included in Salaries, commissions and team member benefits on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) is as follows:
| Year ended December 31, | ||||||||||||||||||||
2024 | 2023 | 2022 | ||||||||||||||||||
| Rocket Companies, Inc. sponsored plans | ||||||||||||||||||||
Restricted stock units (1) | $ | 135,491 | $ | 156,841 | $ | 170,768 | ||||||||||||||
Performance stock units (2) | 4,525 | — | — | |||||||||||||||||
Stock options (3) | 52 | 18,940 | 36,583 | |||||||||||||||||
| Team Member Stock Purchase Plan | 5,018 | 4,271 | 5,714 | |||||||||||||||||
| Subtotal Rocket Companies, Inc. sponsored plans | $ | 145,086 | $ | 180,052 | $ | 213,065 | ||||||||||||||
Rock Holdings, Inc sponsored plans | ||||||||||||||||||||
| Restricted stock units | — | — | 14,451 | |||||||||||||||||
| Stock options | — | — | 1,295 | |||||||||||||||||
| Subtotal Rock Holdings, Inc. sponsored plans | $ | — | $ | — | $ | 15,746 | ||||||||||||||
| Subsidiary plans | 397 | 82 | 123 | |||||||||||||||||
| Total share-based compensation expense | $ | 145,483 | $ | 180,134 | $ | 228,934 | ||||||||||||||
(1) Unrecognized compensation expense as of December 31, 2024 related to these RSUs was $214,346 and is expected to be recognized over a weighted average period of 1.8 years.
(2) Unrecognized compensation expense as of December 31, 2024 related to these PSUs was $11,032 and is expected to be recognized over a weighted average period of 2.2 years.
(3) Unrecognized compensation expense as of December 31, 2024 related to these Stock Options was zero.
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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.