Equity-Based Compensation

12 Months Ended

Dec. 31, 2021

Equity-Based Compensation

Equity-Based Compensation

13. Equity-Based Compensation

The RE/MAX Holdings, Inc. 2013 Omnibus Incentive Plan (the “Incentive Plan”) includes restricted stock units which may have time-based or performance-based vesting criteria. The Company recognizes equity-based compensation expense in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income (Loss). The Company recognizes corporate income tax benefits relating to the vesting of restricted stock units in “Provision for income taxes” in the accompanying Consolidated Statements of Income (Loss).

Employee stock-based compensation expense under the Company’s Incentive Plan, net of the amount capitalized in internally developed software, is as follows (in thousands):

	Year Ended
	December 31,
	2021		2020		2019
Expense from time-based awards (a)(b)	$	21,042	$	12,224	$	7,554
Expense from performance-based awards (a)(c)		6,073		2,150		(179)
Expense from bonus to be settled in shares (d)		7,183		1,925		3,788
Equity-based compensation capitalized		—		(32)		(229)
Equity-based compensation expense		34,298		16,267		10,934
Tax deficit / (benefit) from equity-based compensation		(5,052)		(2,308)		(1,548)
Deficit / (excess) tax benefit from equity-based compensation		(121)		378		55
Net compensation cost	$	29,125	$	14,337	$	9,441

(a) Includes significant amounts of awards granted to employees and former owners of acquired companies at the time of acquisition.

(b) During the year ended December 31, 2021, the Company recognized $5.5 million of expense as a result of the acceleration of grants that were issued to two employees of an acquired company who departed during the first quarter of 2021.

(c) Expense recognized for performance-based awards is re-assessed each quarter based on expectations of achievement against the performance conditions. The acquisition of INTEGRA significantly increased the expected performance against the revenue performance condition resulting in an increase in expense for those awards.

(d) A portion of the annual corporate bonus earned is to be settled in shares. These amounts are recognized as “Accrued liabilities” in the accompanying- Consolidated Balance Sheets and are not included in “Additional paid-in capital” until the shares are issued.

Time-based Restricted Stock

Time-based restricted stock units and restricted stock awards are valued using the Company’s closing stock price prior to the date of grant. Grants awarded to the Company’s Board of Directors generally vest over a one-year period. Grants awarded to the Company’s employees, other than grants issued to former owners in connection with acquisitions, generally vest equally in annual installments over a two or three-year period. Grants awarded to former owners in connection with acquisitions vest in varying lengths from two to four years. Refer to Note 6, Acquisitions, for additional discussion regarding the details of these transactions. Compensation expense is recognized on a straight-line basis over the vesting period.

The following table summarizes equity-based compensation activity related to time-based restricted stock units and restricted stock awards:

	Shares	Weighted average grant date fair value per share
Balance, January 1, 2021	1,018,008	$	36.74
Granted (a)	269,315	$	39.14
Shares vested (including tax withholding) (b)	(498,446)	$	37.78
Forfeited	(32,716)	$	36.77
Balance, December 31, 2021	756,161	$	36.91

(a) The weighted average grant date fair value per share for the years ended December 31, 2020 and 2019 were $33.05 and $38.43, respectively.

(b) Pursuant to the terms of the Incentive Plan, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.

At December 31, 2021, there was $13.5 million of total unrecognized expense for time-based restricted stock awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.4 years.

Performance-based Restricted Stock

Performance-based restricted stock units (“PSUs”) granted to employees are stock-based awards that generally vest at the end of a three-year period in which the number of shares ultimately received depends on the Company’s achievement

of either a specified revenue target or the Company’s total shareholder return (“rTSR”) relative to a peer company index over a distinct performance period. The number of shares that could be issued range from 0% to 200% of the participant’s target award and if the minimum threshold conditions are not met, no shares will vest. PSUs are valued using the Company’s closing stock price prior to the date of grant. For these awards, compensation expense is recognized over the vesting period and is adjusted based on the estimated revenue achievement for each target. PSUs that vest upon achievement of a rTSR target are valued on the date of grant using a Monte Carlo simulation and compensation expense is recognized over the vesting period.

PSUs granted to booj employees and former owners in connection with the booj acquisition were stock-based awards in which the number of shares received were dependent on the achievement of certain technology milestones set forth in the related purchase agreement. The awards were valued using the Company’s closing stock price on the date of grant. The Company’s expense was adjusted based on the final achievement of the milestones. Most of these PSUs vested in 2019. The remaining PSUs vested in early 2020 based on the achieved milestone.

The following table summarizes equity-based compensation activity related to PSUs:

	Shares	Weighted average grant date fair value per share
Balance, January 1, 2021	281,735	$	32.34
Granted (a)	58,247	$	40.02
Shares vested (including tax withholding) (b)(c)	(48,421)	$	39.24
Forfeited (c)	(49,740)	$	41.02
Balance, December 31, 2021	241,821	$	31.02

(a) The weighted average grant date fair value per share for the years ended December 31, 2020 and 2019 were $28.34 and $38.87, respectively.

(b) Pursuant to the terms of the Incentive Plan, shares withheld by the Company for the payment of the employee's tax withholding related to shares vesting are added back to the pool of shares available for future awards.

(c) Includes PSUs that were granted on December 31, 2019, that vested on December 31, 2021. The number of shares that vest are dependent on the minimum thresholds conditions.

At December 31, 2021, there was $5.4 million of total unrecognized PSU expense. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.5 years for PSUs.

After giving effect to all outstanding awards (assuming maximum achievement of performance goals for performance-based awards), there were 1,179,538 additional shares available for the Company to grant under the Incentive Plan as of December 31, 2021.