Thryv Holdings, Inc.THRY
Thryv Holdings, Inc. Stock Compensation Disclosure
Stock-Based Compensation
Stock-Based Compensation
The Stock Incentive Plans provides for several forms of incentive awards to be granted to designated eligible employees, non-management directors, and independent contractors providing services to the Company. On September 3, 2020, the Company's Board of Directors adopted and the Company's stockholders approved, the Company's 2020 Plan. The 2020 Plan replaces the 2016 Plan, as we have determined not to make additional awards under the 2016 Plan following the effectiveness of the 2020 Plan. However, the terms of the 2016 Plan continue to govern outstanding equity awards granted under the 2016 Plan.
The maximum number of shares of the Company’s common stock authorized for issuance under the 2016 Plan is 6,166,667. A total of 1,000,000 shares of the Company's common stock are reserved for issuance under the 2020 Plan, plus a number of shares reserved for issuance but unissued, forfeited or lapse unexercised under the 2016 Plan.
Stock Options
On October 15, 2020 and December 11, 2020, the Company granted 388,292 and 482,000 stock options, respectively, to certain employees and non-management directors at an exercise price of $13.82 and $10.35, respectively, that vest over a three-year to four-year period ending on October 15, 2024 and have a 10-year term from the date of grant.
On November 18, 2019 and December 3, 2019, the Company granted 2,549,556 and 5,556 stock options, respectively, to certain employees and non-management directors at an exercise price of $16.20 that vest over a three-year period ending on January 1, 2023 and have a 10-year term from the date of grant. No options were issued during the year ended December 31, 2018.
On November 23, 2020, the Company’s Board of Directors and the compensation committee approved 1) a one-time stock option repricing for certain previously granted and still outstanding options held by the Company’s employees; and 2) for certain officers, contingent upon each such officer’s written consent with respect to certain of his or her own previously granted and still outstanding options, (a) a one-time stock option repricing and (b) a delayed vesting schedule for such options ("Repricing"). Except for the reduction in the exercise price of the outstanding options and the officer vesting change described above, all outstanding stock options under the 2016 Plan will continue to remain outstanding in accordance with all of the current terms and conditions set forth in the 2016 Plan and the applicable award agreements. As a result of the Repricing, 2,377,886 vested and unvested stock options outstanding, with an original exercise price of $16.20, were repriced to $13.82 under this program. The Repricing resulted in one-time incremental stock-based compensation expense of $1.5 million, which will be recognized over the remaining term of the repriced options.
A stock option holder may pay the option exercise price in cash, by delivering to the Company unrestricted shares having a value at the time of exercise equal to the exercise price, by a cashless broker-assisted exercise, by a loan from the Company, or by a combination of these methods.
Any unvested portion of the stock option award will be forfeited upon the employee’s termination of employment with the Company for any reason before the date the option vests, except that the Compensation Committee of the Company, at its sole option and election, may provide for the accelerated vesting of the stock option award. If the Company terminates the employee without cause or the employee resigns for good reason, then the employee is eligible to exercise the stock options that vested on or before the effective date of such termination or resignation. If the Company terminates the employee for cause, then the employee's stock options, whether or not vested, shall terminate immediately upon termination of employment. The Compensation and Benefits Committee of the Company shall have the authority to determine the treatment of awards in the event of a change in control of the Company or the affiliate which employs the award holder.
The Company estimates the fair value of its common stock as outlined in Note 1, Description of the Business and Summary of Significant Accounting Policies, Common Stock Fair Value. The fair value of each stock option was estimated using the Black-Scholes option pricing model. The model used for this valuation/revaluation incorporates assumptions regarding inputs as follows:
•Due to the lack of trading volume of the Company's common stock, expected volatility is based on the debt-leveraged historical volatility of the Company's peer companies;
•The risk-free interest rate is determined using the U.S. Treasury zero-coupon issue with a remaining term equal to the expected life option;
•Expected life is calculated using the simplified method based on the average life of the vesting term and the contractual life of each award; and
•Due to the lack of historical turnover information relating to the option holder group, the Company has estimated a forfeiture rate of zero.
The following table sets forth the weighted-average stock option fair values and assumptions:
| Years Ended December 31, | |||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
| Weighted-average fair value | $ | 6.97 | $ | 10.24 | $ | 15.43 | |||||||||||
| Dividend yield | — | — | — | ||||||||||||||
| Volatility | 52.06 | % | 39.37 | % | 47.39 | % | |||||||||||
| Risk-free interest rate | 0.30 | % | 1.68 | % | 2.47 | % | |||||||||||
| Expected life (in years) | 4.82 | 4.47 | 4.03 | ||||||||||||||
The following tables reflect changes in the Company's outstanding stock-based compensation awards for the years ended December 31, 2020 and 2019:
| 2020 | |||||||||||||||||||||||
| Number of Stock Option Awards | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding stock option awards at January 1 | 5,875,829 | $ | 9.29 | 8.15 | $ | 42,433,615 | |||||||||||||||||
| Granted | 872,003 | 11.90 | 9.87 | 1,393,499 | |||||||||||||||||||
| Exercises (net cash settled) | (130,017) | 3.68 | 5.74 | 896,335 | |||||||||||||||||||
| Exercises (issuance of shares) | (2,143,317) | 3.69 | 5.77 | 15,510,765 | |||||||||||||||||||
| Forfeitures/expirations | (196,338) | 13.22 | 8.64 | (146,415) | |||||||||||||||||||
| Outstanding stock option awards as of December 31, 2020 | 4,278,160 | $ | 11.20 | 8.36 | $ | 9,855,005 | |||||||||||||||||
| Options exercisable as of December 31 | 992,061 | $ | 4.28 | 5.81 | $ | 9,151,100 | |||||||||||||||||
As of December 31, 2020, the unrecognized stock-based compensation expense related to the unvested portion of the Company's stock options was approximately $15.5 million and is expected to be recognized over a weighted-average period of approximately 2.5 years.
| 2019 | |||||||||||||||||||||||
| Number of Stock Option Awards | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding stock option awards at January 1 | 6,069,907 | $ | 3.87 | 6.79 | $ | 90,463,239 | |||||||||||||||||
| Granted | 2,555,109 | 16.20 | 9.88 | — | |||||||||||||||||||
| Exercises (net cash settled, see Tender Offer below) | (2,326,019) | 3.69 | 6.75 | 33,901,447 | |||||||||||||||||||
| Exercises (issuance of shares) | (111,660) | 3.92 | 6.78 | 1,420,239 | |||||||||||||||||||
| Forfeitures/expirations | (311,508) | 4.18 | 6.81 | 3,745,889 | |||||||||||||||||||
| Outstanding stock option awards at December 31, 2019 | 5,875,829 | $ | 9.29 | 8.15 | $ | 42,433,615 | |||||||||||||||||
| Options exercisable as of December 31 | 2,341,193 | $ | 3.80 | 6.78 | $ | 29,029,972 | |||||||||||||||||
As of December 31, 2019, the fair value associated with the Company's stock options totaled $60.2 million. The vested portion of this fair value at December 31, 2019 was $43.0 million and is included in Other liabilities on the Company's consolidated balance sheet. See Note 4, Fair Value Measurements. As of December 31, 2019, the unrecognized stock-based compensation expense related to the unvested portion of the Company's stock options was approximately $17.2 million and is expected to be recognized over a weighted-average period of approximately 3.0 years.
Proceeds from Exercises of Stock Options
Cash proceeds received from exercises of stock options during the years ended December 31, 2020 and 2019 were $11.2 million and $0.4 million, respectively. There were no exercises of stock options during the year ended December 31, 2018. The associated tax benefit from options exercised were $1.7 million and $0.4 million for the years ended December 31, 2020 and 2019.
Stock-Based Compensation Expense
The following table sets forth stock-based compensation (benefit) expense, including the effects of gains and losses from change in fair value recognized by the Company in the following line items in the Company's consolidated statements of operations during the periods presented (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
| Cost of services | $ | (72) | $ | 381 | $ | 4,156 | |||||||||||
| Sales and marketing | 266 | 1,649 | 4,276 | ||||||||||||||
| General and administrative | (3,089) | 12,089 | 31,172 | ||||||||||||||
| Stock-based compensation (benefit) expense | $ | (2,895) | $ | 14,119 | $ | 39,604 | |||||||||||
There is no income tax benefit recognized in the consolidated statement of operations related to stock-based compensation awards for the year ended December 31, 2020. The income tax benefit recognized in the consolidated statements of operations related to stock-based compensation awards was $3.6 million and $10.0 million for the years ended December 31, 2019 and 2018, respectively, prior to consideration of the valuation allowance. The majority of the tax benefit for the years ended December 31, 2019 and 2018 was not recognized as a result of the valuation allowance recorded in those respective periods.
Private Placement
On August 25, 2020 the Company completed a private placement of 68,857 shares of the Company’s common stock with a per share price of $10.17. The total cash received was $0.4 million net of expenses. These shares were issued from Treasury stock. This resulted in a loss on the reissuance of Treasury stock of $0.8 million recorded as a reduction to Additional paid-in-capital.
Share Repurchases
On January 28, 2020, the Company repurchased approximately 1.0 million shares of its outstanding common stock from a single stockholder. The total purchase price of this transaction was approximately $12.6 million. On March 10, 2020, the Company repurchased approximately 0.8 million shares of its outstanding common stock. The total purchase price of this transaction was $9.2 million. During June 2020, the Company repurchased approximately 0.8 million of shares of its outstanding common stock for a total price of $8.8 million. The shares acquired in each of these transactions were recorded as Treasury stock upon repurchase.
Tender Offer
On May 1, 2019, the Company completed a tender offer (the “Tender Offer”). The transaction ultimately included the purchase of approximately 24.0 million shares of the outstanding common stock for a purchase price of approximately $438.0 million. Of these shares, the Company purchased approximately 11.1 million shares, 5.6 million shares, and 4.2 million shares from Mudrick Capital Management, LP, Paulson & Co Inc, and GoldenTree Asset Management, LP, all of which are related parties, for purchase prices of approximately $202.6 million, $102.2 million, and $75.8 million, respectively. All repurchased shares are recorded in Treasury stock as of December 31, 2020 and December 31, 2019. Additionally, through this Tender Offer, the Company settled approximately 2.3 million of its outstanding stock options, resulting in a net cash distribution to the related option holders of approximately $33.9 million.
Stock Warrants
As of December 31, 2020 and December 31, 2019, the Company had $10.5 million fully vested outstanding warrants. The holders of such warrants are entitled to purchase, in the aggregate, up to approximately 5.8 million shares of common stock. Each warrant can be exercised at a strike price of $24.39. The warrants were issued in 2016 upon Dex Media Holdings, Inc. emergence from its pre-packaged bankruptcy. No warrants were exercised during the year ended 2020 and 2019. These warrants expire on August 15, 2023.
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.