Stock Compensation Plans

12 Months Ended

Dec. 31, 2021

Stock Compensation Plans

Stock Compensation Plans

Note 14  – Stock Compensation Plans

The Company has a share-based compensation plan, the OneSpan Inc. 2019 Omnibus Incentive Plan (“Plan”), which was approved by its Shareholders in June 2019 under which the Board of Directors may grant share-based awards including restricted stock units (RSUs) and performance restricted stock units (PSUs).

The Plan may provide performance incentives to employees and non-employee directors, consultants and other key persons of the Company. The plan is administered by the Compensation Committee as appointed by the Board of Directors and is intended to be a non-qualified plan.

As of December 31, 2021, the remaining number of shares allowed to be issued under the Plan was 3.4 million shares of the company’s common stock, representing 9% of the issued and outstanding shares of the company as of such date.

The following table details long-term compensation plan and stock-based compensation expense for the years ended December 31, 2021, 2020, and 2019.

	For the year ended December 31,
	2021		2020		2019
in thousands
Stock-based compensation	$	4,354	$	4,740	$	3,368
Other long-term incentive plan compensation		848		1,262		1,955
Total compensation	$	5,202	$	6,002	$	5,323

Time-Based Restricted Stock Awards (sharecounts in thousands)

Time-based restricted stock awards granted to certain executive officers under the OneSpan Inc. 2009 Equity Plan vest in equal semi-annual installments over four years. Awards granted to certain other employees vest ratably over a four-year period with the first one-fourth of the grant vesting one year after the date of the grant. Shares are subject to forfeiture if the service period requirement is not met. Compensation expense was $0.3 million, $0.7 million, and $0.5 million for 2021, 2020, and 2019, respectively. Tax benefit related to the compensation expense was less than $0.1 million, $0.2 million, and $0.2 million for 2021, 2020, and 2019, respectively. The following table summarizes the time-based restricted stock activity for the year ended December 31, 2021.

		Weighted-		Weighted-
		average		average
		remaining		grant date
(in thousands)	Shares	term (years)		fair value
Outstanding at January 1, 2021	56	0.89	$	14.60
Shares vested	(40)			14.91
Shares forfeited	(9)			14.91
Outstanding at December 31, 2021	7	0.42	$	16.23

The unamortized future compensation expense for time-based restricted stock awards was less than $0.1 million at December 31, 2021.

Time-Based Restricted Stock Units (sharecounts in thousands)

Beginning in 2019, under the OneSpan Inc. 2019 Omnibus Incentive Plan, the company grants certain eligible employees RSUs that settle in Company stock. RSUs granted to non-employee directors vest on the first anniversary date of the grant. Awards granted to certain executive officers vest in equal semi-annual installments over four years. Awards granted to certain other employees vest over two-year to four-year period. Shares are subject to forfeiture if the service period is not met. Compensation expense was $3.7 million, $2.5 million, and $1.0 million for 2021, 2020, and 2019, respectively, and the related tax benefit was $0.1 million, $0.5 million, and $0.3 million, respectively. The following table summarizes the time-based restricted stock activity for the year ended December 31, 2021:

		Weighted-		Weighted-
		average		average
		remaining		grant date
(in thousands)	Shares	term (years)		fair value
Unearned, January 1, 2021	379	2.55	$	16.87
Shares vested	(196)			18.50
Shares awarded	573			21.21
Shares forfeited	(197)			20.51
Unearned, December 31, 2021	559	3.08	$	19.30

The unamortized future compensation expense for time-based restricted stock awards was $9.0 million at December 31, 2021.

Performance-Based Restricted Stock Units settled in stock (sharecounts in thousands)

Performance-based restricted stock units granted to executive officers and certain other employees were subject to achievement of three year performance criteria established by the Board of Directors Under certain grants, earned shares related to three-year targets cliff vest upon fulfillment of the performance criteria and completion of the three-year period and per recommendation of the Compensation Committee of the OneSpan Inc. Board of Directors (“Compensation Committee”). Shares are subject to forfeiture if the performance criteria and service period are not met.

The restricted stock units subject to achievement of future performance criteria awarded during the year ended December 31, 2021 will be earned if the performance criteria and service period are met at the end of the three-year performance period. None of the restricted stock units subject to the achievement of future performance criteria awarded during the year ended December 31, 2020 were earned, and the related expense was reversed during the year ended December 31, 2020. Certain restricted stock units subject to the achievement of future performance criteria awarded during the year ended December 31, 2019 are not expected to be earned. The compensation cost recorded for 81 unvested shares issued during the year ended December 31, 2019 subject to performance criteria no longer considered probable of achievement was reversed during the year ended December 31, 2020. Approximately 9 additional restricted stock units issued during the year ended December 31, 2019, subject to the achievement of performance criteria, are no longer considered probable of achievement and the related compensation expense will be reversed upon recommendation of the Compensation Committee.

Compensation expense in 2021, 2020, and 2019 was $0.3 million, $1.1 million, and $1.8 million. Tax benefit related to the compensation expense was less than $0.1 million, $0.2 million, and $0.2 million for 2021, 2020, and 2019, respectively.

The following table summarizes activity related to unvested performance restricted stock shares during 2021:

		Weighted-		Weighted-
	Total	average		average
	Unvested	remaining		grant date
(in thousands)	Shares	term (years)		fair value
Unearned, January 1, 2021	459	0.83	$	15.29
Shares vested	(93)			15.16
Shares awarded	144			24.92
Shares forfeited	(389)			17.09
Unearned, December 31, 2021	121	3.29	$	17.30

Unamortized future compensation expense for performance-based restricted stock was $0.6 million at December 31, 2021.

Market-Based Restricted Stock Units settled in stock (sharecounts in thousands)

Market-based restricted stock units granted to executive officers and certain other employees were subject to achievement of three year market-based performance criteria established by the Board of Directors Under certain grants, earned shares related to three-year targets cliff vest upon fulfillment of the market-based performance criteria and completion of the three-year period. Shares are subject to forfeiture if the performance criteria and service period are not met. Compensation expense for the years ended December 31, 2021 and December 31, 2020 was less than $0.1 million and $0.4 million, respectively, and the related tax benefit was $0 million and $0.1 million, respectively.

The following table summarizes activity related to unvested market and service restricted stock units settled in stock:

		Weighted-		Weighted-
		average		average
		remaining		grant date
(in thousands)	Shares	term (years)		fair value
Unearned, January 1, 2021	52	2.00	$	28.44
Shares awarded	291			20.09
Shares forfeited	(60)			32.17
Unearned, December 31, 2021	283	3.43	$	19.06

Unamortized future compensation expense for market-based restricted stock was $4.4 million at December 31, 2021.