Stock-based Compensation |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based Compensation | Stock-based Compensation 2024 CEO Equity Awards
On February 29, 2024, the Company held a special meeting of its stockholders to approve the issuance of a performance-vesting restricted stock unit award (the “CEO PSUs”) representing the right to receive 1.7 million shares of the Company’s Common Stock, 50.0% of which may vest based on the achievement of certain cumulative Company revenue milestones for the twelve months ended December 31, 2024 and for the twenty-four months ended December 31, 2025, and 50% of which may vest based on certain thresholds relating to the volume weighted average trading price of the Company’s Common Stock any time during the twelve months ended December 31, 2024 and the twenty-four months ended December 31, 2025, subject to continuous services requirements through the applicable service vesting date. Additionally, the approval also included the issuance of a restricted stock unit award (the “CEO RSUs” and, together with the “CEO PSUs”, the “CEO Equity Awards”) representing the right to receive 3.4 million shares of the Company’s Common Stock, the initial 50.0% of which vested immediately and the latter 50.0% of which will vest in equal increments on January 1, 2025 and January 1, 2026.
In connection with the issuance of the CEO Equity Awards, previously granted restricted stock units were automatically cancelled and forfeited. The cancellation of prior awards and issuance of the CEO Equity Awards was determined to be a modification. At the modification date, the vesting conditions for all awards besides a tranche of CEO PSUs that vest upon achievement of revenue milestones were expected to be satisfied. The incremental stock-based compensation expense recognized as a result of the modification of the awards during the three months ended March 31, 2024 was $3.7 million.
Restricted Stock Units
The Company granted stock to compensate existing employees and attract top talent, primarily through various forms of equity, including restricted stock unit awards (“RSU”). Each RSU represents a contingent right to receive one share of Common Stock. During the three months ended March 31, 2024 and 2023, 3.6 million and 0.1 million RSUs, inclusive of the CEO RSUs, were granted subject to time-based vesting, respectively.
The total fair value of restricted stock units granted during the three months ended March 31, 2024 and 2023 were $8.4 million and $1.3 million, respectively.
Performance-Based Restricted Stock Units
Performance stock unit awards (“PSU”) represent the right to receive a share of Common Stock if service, performance, and market conditions, or a combination thereof, are met over a defined period. PSUs that contain a market condition, such as stock price milestones, are subject to a Monte Carlo simulation model to determine the grant date fair value by simulating a range of possible future stock prices for the Company over the performance period. The grant date fair value of the market condition PSUs is recognized as compensation expense over the greater of the Monte Carlo
simulation model’s derived service period and the arrangement’s explicit service period, assuming both conditions must be met.
PSUs subject to performance conditions, such as operational milestones, are measured on the grant date, the total fair value of which is calculated as the product of the number of PSUs and the grant date stock price. Compensation expense for PSUs with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period. The PSUs vest based on the Company's achievement of certain specified operational milestones by various dates through December 2025. The Company granted zero PSUs to employees during the three months ended March 31, 2024 and 2023, except as noted below as it relates to the CEO. As of March 31, 2024, the Company's analysis determined that these operational milestone events are probable of achievement and as such, compensation expense excluding the impact of forfeitures of $0.2 million has been recognized for the previously awarded PSUs to employees during the three months ended March 31, 2024. The compensation expense recognized during the three months ended March 31, 2023 was $0.7 million.
There were 1.7 million PSUs granted to the CEO during the three months ended March 31, 2024 with a grant date fair value of $3.2 million. There were no PSUs granted to the CEO during the three months ended March 31, 2023. The compensation expense recognized for PSUs to the CEO was $2.2 million and $3.5 million for the three months ended March 31, 2024 and 2023, respectively.
The following table summarizes the Company’s stock-based compensation expense by line item for the three months ended March 31, 2024 and 2023 (in thousands):
The Company’s total unrecognized compensation cost as of March 31, 2024, was $21.5 million
2020 Employee Stock Purchase Plan
The 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was adopted by the board of directors on September 18, 2020, approved by the stockholders on December 18, 2020, and became effective on December 21, 2020, with the merger between HCAC and Legacy Canoo. On December 21, 2020, the board of directors delegated its authority to administer the 2020 ESPP to the Compensation Committee. The Compensation Committee determined that it is in the best interests of the Company and its stockholders to implement successive three-month purchase periods. The 2020 ESPP provides participating employees with the opportunity to purchase up to a maximum number of shares of Common Stock of 0.2 million, plus the number of shares of Common Stock that are automatically added on January 1st of each year for a period of ten years, in an amount equal to the lesser of (i) 1.0% of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year, and (ii) 0.4 million shares of Common Stock. During the three months ended March 31, 2024 and 2023, total employee withholding contributions for the 2020 ESPP was $0.1 million and $0.4 million, respectively. A nominal amount and approximately $0.2 million of stock-based compensation expense was recognized for the 2020 ESPP during the three months ended March 31, 2024 and 2023, respectively
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