Stock-based Compensation

9 Months Ended

Sep. 28, 2023

Share-Based Payment Arrangement [Abstract]

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures compensation cost for all stock-based awards at fair value on the date of grant and recognizes compensation expense, net of forfeitures, using the straight-line method over the requisite service period of awards expected to vest, which for each of the awards is the service vesting period.

The table below presents components of stock-based compensation expense within the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income:


	Thirty-nine Weeks Ended
in thousands	September 28, 2023		September 29, 2022
General and administrative	$	18,927	$	16,911
Selling and store operating	1,409		318
Total stock-based compensation expense	$	20,336	$	17,229

Stock Options

The table below summarizes stock option activity for the thirty-nine weeks ended September 28, 2023.


	Options	Weighted Average Exercise Price
Outstanding at December 30, 2022	2,101,559	$	27.10
Exercised	(336,061)	$	23.53
Forfeited or expired	(3,983)	$	48.97
Outstanding at September 28, 2023	1,761,515	$	27.73
Vested and exercisable at September 28, 2023	1,669,036	$	25.39

Restricted Stock Units

The Company periodically grants restricted stock units (“RSUs”) that represent an unfunded, unsecured right to receive a share of the Company’s Class A common stock upon vesting. During the thirty-nine weeks ended September 28, 2023, the Company granted RSUs to certain employees, officers, and non-employee directors comprised of service-based RSUs, performance-based RSUs, and total shareholder return (“TSR”) awards. Service-based RSUs vest based on the grantee’s continued service through the vesting date. The performance-based RSUs cliff vest based on (i) the Company's achievement of predetermined financial metrics at the end of a three-year performance period and (ii) the grantee’s continued service through the vesting date. Depending on the performance-based RSU grant and the extent to which the relevant performance goals are achieved, the number of common shares earned upon vesting may range from either 0% to 150% or 0% to 200% of the award granted. The TSR awards cliff vest based on (i) the Company's relative TSR compared to a specified peer group and (ii) the grantee's continued service through the vesting date. The number of common shares earned upon vesting of the TSR awards may range from 0% to 150% of the TSR awards granted with no vesting above the target awards amount if the Company’s three-year absolute TSR is negative. The Company assesses the probability of achieving all performance goals on a quarterly basis. The service periods for RSUs granted during the period varies by grantee and ranges between approximately two to four years from the grant date.

The following table summarizes restricted stock unit activity during the thirty-nine weeks ended September 28, 2023:


	Restricted Stock Units
	Service-based	Performance-based	Total shareholder return	Total Restricted Stock Units
Unvested at December 30, 2022	408,829	36,117	—	444,946
Granted	374,685	188,543	58,854	622,082
Vested	(132,432)	—	—	(132,432)
Forfeited	(24,262)	(36,117)	—	(60,379)
Unvested at September 28, 2023	626,820	188,543	58,854	874,217

The aggregate fair value for all restricted stock units granted during the thirty-nine weeks ended September 28, 2023 was $56.3 million. The grant-date fair value of service-based RSUs and performance-based RSUs is based on the closing market price of the Company’s Class A common stock on the date of grant. The grant-date fair value of TSR awards is estimated using a Monte Carlo valuation method, which included the following assumptions for TSR awards granted during the period:


	Thirty-nine Weeks Ended September 28, 2023
Expected term (in years)	2.8
Risk-free interest rate	4.5	%
Expected volatility	49.5	%
Dividend yield	—	%

Restricted Stock Awards

The following table summarizes restricted stock award activity during the thirty-nine weeks ended September 28, 2023:


	Restricted Stock Awards
	Service-based	Performance-based (1)	Total shareholder return (1)	Total Restricted Stock Awards
Unvested at December 30, 2022	103,326	134,318	87,517	325,161
Vested	(68,334)	(86,656)	(56,461)	(211,451)

Unvested at September 28, 2023	34,992	47,662	31,056	113,710

(1) The performance-based and total shareholder return restricted stock awards that vested during the period were issued at 100% of target based on achievement of the predetermined performance and total shareholder return criteria as specified in the underlying grant agreements.