SEMPRASRE
SEMPRA Stock Compensation Disclosure
SHARE-BASED COMPENSATION
SEMPRA EQUITY COMPENSATION PLANS
Sempra has share-based compensation plans intended to align employee and shareholder objectives related to the long-term growth of Sempra. The plans permit a wide variety of share-based awards, including:
▪nonqualified stock options
▪incentive stock options
▪restricted stock awards
▪restricted stock units
▪stock appreciation rights
▪performance awards
▪stock payments
▪dividend equivalents
Eligible employees, including those from SDG&E and SoCalGas, participate in Sempra’s share-based compensation plans as a component of their compensation package.
In the three years ended December 31, 2025, Sempra had the following types of equity awards outstanding:
▪Nonqualified Stock Options: Options to purchase common stock have an exercise price equal to the market price of the common stock at the date of grant, are service-based, become exercisable over a three-year period and expire 10 years from the date of grant. Unvested option awards are subject to forfeiture following a termination of employment, except where the retirement criteria under such awards have been met and subject to certain other exceptions described below.
▪Performance-Based Restricted Stock Units: These RSU awards generally vest in Sempra common stock at the end of -year performance periods based on Sempra’s total return to shareholders relative to that of specified market indices or based on the compound annual growth rate of Sempra’s EPS. The comparative market indices for the awards that vest based on total return to shareholders are the S&P 500 Utilities Index (excluding water companies) and the S&P 500 Index. For the awards that vest based on EPS growth, (i) awards issued in 2025 and 2024 are based on the percentile ranking of the compound annual growth rate of Sempra’s adjusted EPS relative to the EPS compound annual growth rate of companies in the S&P 500 Utilities Index (excluding water companies), and (ii) awards issued in 2023 are based on long-term analyst consensus EPS growth estimates for companies in the S&P 500 Utilities Index (excluding water companies). If Sempra’s total return to shareholders or EPS growth is below the target levels but above threshold performance levels, shares are subject to partial vesting on a pro rata basis. If Sempra’s total return to shareholders or EPS growth exceeds target levels, up to an additional 100% of the granted RSUs may be issued. These RSU awards are subject to forfeiture prior to vesting following a termination of employment, except where the retirement criteria under such awards have been met and subject to certain other exceptions described below.
▪Service-Based Restricted Stock Units: RSUs may also be service-based; these vest ratably over -, -, - and four-year service periods. These awards are subject to earlier forfeiture upon termination of employment, subject to certain exceptions described below.
For awards that would otherwise be forfeited upon termination of employment, the Compensation and Talent Development Committee of Sempra’s board of directors may waive the forfeiture requirement and, with respect to options and service-based RSUs, may accelerate vesting. Awards are also subject to accelerated vesting under certain circumstances upon a change in control under the applicable LTIP, in accordance with severance pay agreements or to the extent otherwise required by the terms of the applicable award. Dividend equivalents on shares subject to RSUs are reinvested to purchase additional common shares that become subject to the same vesting conditions as the RSUs to which the dividends relate.
SHARE-BASED AWARDS AND COMPENSATION EXPENSE
At December 31, 2025, 15,400,000 common shares were authorized, and 6,544,164 common shares were available for future grants of share-based awards, in each case under Sempra’s 2019 LTIP. Our practice is to satisfy share-based awards by issuing new shares rather than by open-market purchases.
We measure and recognize compensation expense for all share-based payment awards made to our employees and directors based on estimated fair values on the date of grant. We recognize compensation costs net of an estimated forfeiture rate (based on historical experience) and recognize the compensation costs for nonqualified stock options and RSUs on a straight-line basis over the requisite service period of the award, which is generally three years. However, for awards granted to retirement-eligible participants, the expense is recognized over the initial year in which the award was granted as the award requires service through the end of the year in which it was granted. For awards granted to participants who become eligible for retirement during the requisite service period, the expense is recognized over the period between the date of grant and the later of the end of the year in which the award was granted or the date the participant first becomes eligible for retirement. Substantially all awards outstanding are classified as equity instruments; therefore, we recognize additional paid in capital as we recognize the compensation expense associated with the awards. We recognize in earnings the tax benefits (or deficiencies) resulting from tax deductions that are in excess of (or less than) tax benefits related to compensation cost recognized for share-based payments.
Sempra subsidiaries record an expense for the plans to the extent that subsidiary employees participate in the plans and/or the subsidiaries are allocated a portion of the Sempra plans’ corporate staff costs. Total share-based compensation expense for all of Sempra’s share-based awards was comprised as follows:
| SHARE-BASED COMPENSATION EXPENSE | |||||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Sempra: | |||||||||||||||||
Share-based compensation expense, before income taxes(1) | $ | 56 | $ | 77 | $ | 71 | |||||||||||
Income tax benefit(1) | (6) | (9) | (9) | ||||||||||||||
| $ | 50 | $ | 68 | $ | 62 | ||||||||||||
| Capitalized share-based compensation cost | $ | 8 | $ | 13 | $ | 12 | |||||||||||
| Excess income tax (benefit) deficiency | (15) | (9) | (6) | ||||||||||||||
| SDG&E: | |||||||||||||||||
| Share-based compensation expense, before income taxes | $ | 8 | $ | 12 | $ | 13 | |||||||||||
| Income tax benefit | (1) | (2) | (2) | ||||||||||||||
| $ | 7 | $ | 10 | $ | 11 | ||||||||||||
| Capitalized share-based compensation cost | $ | 5 | $ | 7 | $ | 7 | |||||||||||
| Excess income tax (benefit) deficiency | (3) | (1) | (1) | ||||||||||||||
| SoCalGas: | |||||||||||||||||
| Share-based compensation expense, before income taxes | $ | 10 | $ | 20 | $ | 18 | |||||||||||
| Income tax benefit | (2) | (4) | (3) | ||||||||||||||
| $ | 8 | $ | 16 | $ | 15 | ||||||||||||
| Capitalized share-based compensation cost | $ | 3 | $ | 6 | $ | 5 | |||||||||||
| Excess income tax (benefit) deficiency | (3) | (2) | (1) | ||||||||||||||
(1) Includes activity of awards issued from the IEnova 2013 LTIP in the years ended December 31, 2024 and 2023, which settled in cash upon vesting based on the price of IEnova’s common stock.
SEMPRA NONQUALIFIED STOCK OPTIONS
We use a Black-Scholes option-pricing model to estimate the fair value of each nonqualified stock option grant. The use of a valuation model requires us to make certain assumptions about selected model inputs. Expected volatility is calculated based on a blend of the historical and implied volatility of Sempra’s common stock price. The average expected term for options is based on the vesting schedule, contractual term of the option, expected employee exercise and post-termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term estimated at the date of the grant. In 2025, 2024 and 2023, Sempra’s board of directors granted 303,614, 414,812 and 326,574 nonqualified stock options, respectively, that become exercisable over a -year period. The weighted-average per-share fair value for options granted was $20.58, $16.43 and $17.50 in 2025, 2024 and 2023, respectively. To calculate this fair value, we used the Black-Scholes model with the following weighted-average assumptions:
| KEY ASSUMPTIONS FOR STOCK OPTIONS GRANTED | |||||||||||||||||
| Years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Sempra: | |||||||||||||||||
| Stock price volatility | 26.85 | % | 26.49 | % | 27.35 | % | |||||||||||
| Expected term | 5.36 years | 5.36 years | 5.36 years | ||||||||||||||
| Risk-free rate of return | 4.35 | % | 3.90 | % | 3.89 | % | |||||||||||
| Annual dividend yield | 2.85 | % | 3.14 | % | 2.98 | % | |||||||||||
The following table shows a summary of nonqualified stock options at December 31, 2025 and activity for the year then ended:
| NONQUALIFIED STOCK OPTIONS | |||||||||||||||||||||||
| Common shares under options | Weighted- average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value (in millions) | ||||||||||||||||||||
| Sempra: | |||||||||||||||||||||||
Outstanding at January 1, 2025 | 2,030,666 | $ | 68.22 | ||||||||||||||||||||
| Granted | 303,614 | $ | 87.13 | ||||||||||||||||||||
Outstanding at December 31, 2025 | 2,334,280 | $ | 70.68 | 6.20 | $ | 41 | |||||||||||||||||
Vested or expected to vest at December 31, 2025 | 2,334,280 | $ | 70.68 | 6.20 | $ | 41 | |||||||||||||||||
Exercisable at December 31, 2025 | 1,645,270 | $ | 66.37 | 5.33 | $ | 36 | |||||||||||||||||
The aggregate intrinsic value at December 31, 2025 is the total of the difference between Sempra’s closing common stock price and the exercise price for all in-the-money options. The aggregate intrinsic value for nonqualified stock options exercised was:
▪zero in 2025
▪$4.4 million in 2024
▪zero in 2023
We expect a negligible amount of total compensation cost related to nonvested stock options not yet recognized as of December 31, 2025 to be recognized over a weighted-average period of 0.4 years. The weighted-average exercise price for nonqualified stock options granted in 2024 and 2023 was $75.82 and $76.86, respectively.
SEMPRA RESTRICTED STOCK UNITS
We use Sempra’s common stock price at the grant date to estimate the fair value of our service-based RSUs and our RSUs that vest based on the compound annual growth rate of Sempra’s EPS.
We use a Monte-Carlo simulation model to estimate the fair value of our RSUs that vest based on Sempra’s total return to shareholders. Our determination of fair value is affected by the historical volatility of the common stock price for Sempra and its peer group companies. The valuation also is affected by the risk-free rates of return and a number of other variables. Below are key assumptions for RSUs granted in the last three years:
| KEY ASSUMPTIONS FOR RSUs GRANTED | |||||||||||||||||
| Years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Sempra: | |||||||||||||||||
| Stock price volatility | 21.84 | % | 21.27 | % | 35.31 | % | |||||||||||
| Risk-free rate of return | 4.23 | % | 4.06 | % | 4.13 | % | |||||||||||
The following table shows a summary of RSUs at December 31, 2025 and activity for the year then ended:
| RESTRICTED STOCK UNITS | |||||||||||||||||||||||
| Performance-based restricted stock units | Service-based restricted stock units | ||||||||||||||||||||||
| Units | Weighted- average grant-date fair value | Units | Weighted- average grant-date fair value | ||||||||||||||||||||
| Sempra: | |||||||||||||||||||||||
Nonvested at January 1, 2025 | 1,905,724 | $ | 77.22 | 543,088 | $ | 74.55 | |||||||||||||||||
| Granted | 628,413 | $ | 86.46 | 261,084 | $ | 85.88 | |||||||||||||||||
| Vested | (603,506) | $ | 73.43 | (299,620) | $ | 73.44 | |||||||||||||||||
| Forfeited | (71,070) | $ | 83.46 | (27,515) | $ | 84.16 | |||||||||||||||||
Nonvested at December 31, 2025(1) | 1,859,561 | $ | 81.33 | 477,037 | $ | 80.89 | |||||||||||||||||
Expected to vest at December 31, 2025 | 1,823,031 | $ | 81.32 | 461,750 | $ | 80.83 | |||||||||||||||||
(1) Each RSU represents the right to receive one share of our common stock if applicable performance conditions are satisfied. For all performance-based RSUs, up to an additional 100% of the shares represented by the RSUs may be issued if Sempra exceeds target performance conditions.
In 2025, 2024 and 2023, the total fair value of RSU shares vested during the year was $66 million, $57 million and $52 million, respectively.
We expect $36 million of total compensation cost related to nonvested RSUs not yet recognized as of December 31, 2025 to be recognized over a weighted-average period of 1.90 years. The weighted-average per-share fair values for performance-based RSUs granted were $75.70 and $82.64 in 2024 and 2023, respectively. The weighted-average per-share fair values for service-based RSUs granted were $75.86 and $76.76 in 2024 and 2023, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 26, 2016 | |
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.