Southwest Gas Holdings, Inc.SWX
Southwest Gas Holdings, Inc. Stock Compensation Disclosure
Note 12 - Share-Based Compensation
At December 31, 2025, the following share-based compensation plans existed at the Company: an omnibus incentive plan and a restricted stock/unit plan. The fair value of share grants is primarily based on the closing price of the Company’s stock on the date of grant. All share grants in 2025, including time-lapse restricted stock units and performance stock units, occurred under the omnibus incentive plan. The table below shows total share-based plan compensation expense which was recognized in the Company’s Consolidated Statements of Income:
| Year Ended December 31, | ||||||||||||||||||||
| (Thousands of dollars) | 2025 | 2024 | 2023 | |||||||||||||||||
| Share-based compensation expense - continuing operations | $ | 14,631 | $ | 11,372 | $ | 6,228 | ||||||||||||||
| Share-based compensation expense - discontinued operations | 8,705 | 3,527 | 1,851 | |||||||||||||||||
| Total share-based compensation expense | $ | 23,336 | $ | 14,899 | $ | 8,079 | ||||||||||||||
| Tax benefit related to share-based compensation - continuing operations | $ | 2,244 | $ | 2,051 | $ | 1,495 | ||||||||||||||
| Tax benefit related to share-based compensation - discontinued operations | 1,539 | 797 | 444 | |||||||||||||||||
| Total tax benefit | $ | 3,783 | $ | 2,848 | $ | 1,939 | ||||||||||||||
The omnibus incentive plan is used to promote the long-term growth and profitability of the Company, including its subsidiaries, by providing directors, employees, and certain other individuals, with incentives to increase stockholder value and otherwise contribute to the success of the Company. In addition, the plan enables the Company to attract, retain, and reward the best available persons for positions of responsibility. The omnibus incentive plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock units, and other equity-based, as well as cash, awards. Employees, directors, and consultants who provide services to the Company or any subsidiary may be eligible under this plan. For grants under the omnibus incentive plan, directors continue to immediately vest in the shares upon grant but are provided the option to defer receipt of equity compensation until they leave the Board.
Performance-based incentive opportunities under the ongoing programs of the omnibus plan were granted to all officers of Southwest Gas in the form of performance stock units and are based, depending on the officer, on consolidated or Southwest Gas earnings per share, utility net income, and utility return on equity, with an adjustment, where relevant, based on total shareholder return compared to peer companies and, for all participants, measured over a three-year forward performance period. Performance stock units are restricted based on vesting, and in this case, further subject to future performance determinations against relevant benchmarks. From time to time, special awards may be granted, as permissible under the omnibus plan, that are recognized based on the relevant conditions of the grant and accounting determinations for recognition and, in 2024, three officers received special performance stock unit awards with accelerated vesting provisions for certain termination events. In 2025, one officer received a special performance stock unit award with accelerated vesting provisions for certain termination events. Southwest Gas recorded $6.2 million, $5.2 million, and $1.1 million of estimated compensation expense associated with the collective performance stock unit awards during 2025, 2024, and 2023, respectively. Performance stock unit awards provide for accelerated vesting in certain limited termination events, with vesting in the ultimate award, if any, generally prorated based on the number of months of employment during the three-year forward vesting period.
Conversely, with regard to management, grants under the omnibus plan are of time-lapse restricted stock units with graded vesting (and issuance in the form of common stock) occurring (following grant) at the rate of 40% at the end of year one and 30% at the end of years two and three. Accelerated vesting occurs based on retirement eligibility.
Restricted stock/units under the restricted stock/unit plan were previously granted to attract, motivate, retain, and reward key employees of the Company with an incentive to attain high levels of individual performance and improved financial performance. The legacy plan was also established to attract, motivate, and retain experienced and knowledgeable directors. All remaining shares under the legacy restricted stock/unit plan (in regard to employees) were issued during 2021; remaining unissued legacy program shares relate solely to directors, and such shares were immediately vested at the time of grant, with distribution to occur when service on the Board ends.
No new grants are made under the legacy plan as all future stock-based incentive compensation, including with regard to restricted stock, is granted under programs of the omnibus incentive plan, which for directors, with advance election, issuance may occur upon leaving Board service.
The following table summarizes the activity of the omnibus incentive plan and restricted stock/units programs as of December 31, 2025:
| (Thousands of shares) | Performance Stock Units | Weighted-average grant date fair value | Restricted Stock Units/Director Deferred Stock Units | Weighted-average grant date fair value | ||||||||||||||||||||||
Nonvested/unissued at December 31, 2024 | 326 | $ | 64.95 | 232 | $ | 55.39 | ||||||||||||||||||||
| Granted | 100 | 76.87 | 84 | 75.42 | ||||||||||||||||||||||
| Dividends | 1 | — | 7 | — | ||||||||||||||||||||||
| Forfeited or expired | (32) | 68.85 | — | — | ||||||||||||||||||||||
Vested and issued (1) | (146) | 68.34 | (115) | 56.90 | ||||||||||||||||||||||
Nonvested/unissued at December 31, 2025 | 249 | $ | 66.96 | 208 | $ | 60.68 | ||||||||||||||||||||
(1) Includes shares for retiree payouts and those converted for taxes.
The weighted average grant date fair value of performance stock units and time-lapse restricted stock units granted in 2024 was $68.54 and $62.55, respectively, and in 2023 was $62.78 for performance stock units and $62.83 for time-lapse restricted stock units.
As of December 31, 2025, total compensation cost related to all unvested shares not yet recognized is $7.3 million, which is expected to be recognized over a weighted average period of 1.6 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 28, 2017 | |
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.