Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

17. Stock-Based Compensation

The Company’s stock-based compensation plans authorize awards of restricted stock units (“RSUs”), stock options and other equity-related awards. The Company’s 2021 Omnibus Incentive Plan (“2021 Plan”) was adopted by the Company’s Board of Directors on April 12, 2021 and approved by our stockholders on May 11, 2021. The 2021 Plan succeeds the Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”) such that shares subject to the 2018 Plan’s unused reserve (e.g., as a result of termination or forfeiture of awards) are instead rolled over to the 2021 Plan. The Company has two other predecessor plans, the 2016 Long-Term Incentive Plan and the Second Long-Term Incentive Plan (collectively, the “Prior Plans”), whose available balances were terminated in connection with approval of the 2018 Plan. Although outstanding awards under the Prior Plans remain governed by the terms of the Prior Plans, no new awards may be granted or become available for grant under the Prior Plans.

As of December 31, 2021, there were (i) 1,552,284 shares subject to outstanding awards under the 2021 Plan, including 512,399 shares subject to performance-based target awards, 232,500 shares subject to market-price vesting conditions and 165,000 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement; (ii) 751,934 shares subject to outstanding awards under the 2018 Plan, including 75,000 shares subject to performance-based target awards, 20,195 shares subject to awards that were previously subject to performance criteria that were determined to have been met for the applicable performance year which awards continue to remain subject to a time-based vesting schedule and 99,964 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement; and (iii) 1,318,686 shares subject to outstanding awards under the Prior Plans as to which the applicable vesting conditions have been met which remain subject to deferred settlement. As of December 31, 2021, there were 1,490,785 shares available for new awards under the 2021 Plan (which includes shares rolled over from the 2018 Plan) and no shares available for new awards under the Prior Plans. All awards outstanding as of December 31, 2021 consisted of RSUs (including time-based RSUs, performance-based RSUs and stock price based RSUs).

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED

DECEMBER 31, 2021, 2020 AND 2019

The Company also has an employee stock purchase plan (“ESPP”) that authorizes the issuance of up to an aggregate of 500,000 shares of common stock pursuant to purchases thereunder by employees. The ESPP, which was approved by stockholders in July 2017, is administered by the Compensation Committee which has discretion to designate the length of offering periods and other terms subject to the requirements of the ESPP. As of December 31, 2021, a total of 467,751 shares remained available for purchase under the ESPP.

A summary of the Company’s RSU activity is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Unvested Outstanding at January 1, 2021		2,149,118		$	5.20
Granted (1)		1,728,236		$	10.15
Forfeited (2)		(520,227	)	$	(5.66	)
Vested (3)		(1,317,873	)	$	(6.24	)
Unvested Outstanding at December 31, 2021		2,039,254		$	8.60

(1)	The RSUs that were granted during the year ended December 31, 2021 included: (a) 48,466 RSUs under the Board’s compensation program for non-employee directors which vest during the year of grant and remain unsettled until the director leaves the Company; (b) 658,020 RSUs under an incentive program for management and other personnel, as to which one-half was in the form of performance-based RSUs that are conditioned on attainment of performance criteria for fiscal year 2021 and subject to a time-based service period through December 31, 2023 and the other one-half vests in instalments through December 31, 2023; and (c) sign-on awards covering an aggregate of 975,000 RSUs to members of senior management in connection with their entering into new employment agreements or amendments thereof which have vesting schedules through December 31, 2025, including 750,000 RSUs to our Executive Chairman (comprised of a mix of time-based RSUs, performance-based RSUs and stock price based RSUs).
(2)	The RSUs that were forfeited during the year ended December 31, 2021 included 468,517 RSUs subject to market price vesting conditions that had a satisfaction deadline of December 23, 2021. The applicable market price targets were not met by the deadline.
(3)	The RSUs that vested during the year ended December 31, 2021 included: (a) 213,466 RSUs that remain subject to deferred settlement terms such that the awards do not settle until the participant’s services terminate; (b) 285,069 RSUs that vested June 30, 2021, resulting in 160,390 shares being issued in connection with the net settlement thereof and 124,679 withheld for taxes; and (c) 819,338 RSUs that vested on December 31, 2021, resulting in 442,817 shares being issued in settlement thereof and 376,521 withheld for taxes (the processing of the issuance and delivery of such 442,817 shares did not occur until January 2022).

The Company issued a total of 324,122 shares during the year ended December 31, 2021 in connection with the vesting of RSUs, of which 160,390 were issued in net settlement of RSUs that vested on June 30, 2021 and 163,732 were issued in connection with the net settlement of RSUs that vested on December 31, 2020.

A summary of the Company’s Restricted Stock activity is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Unvested Outstanding at January 1, 2021		624,116		$	5.63
Granted		—		$	—
Forfeited (1)		(624,116	)	$	(5.63	)
Vested		—		$	—
Unvested Outstanding at December 31, 2021		—		$	—

(1) Reflects forfeiture of unvested restricted stock awards which had been subject to market price vesting conditions that had a satisfaction deadline of December 23, 2021. The applicable market price targets were not met by the deadline.

Stock-based compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. For performance awards that are contingent upon the Company achieving certain pre-determined financial performance targets, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance criteria will be met. Determining the probability of achieving a performance target requires estimates and judgment. For market-based awards that are contingent upon the Company’s stock achieving certain pre-determined price targets, compensation expense is calculated based upon the determination of the fair value of the awards as derived through multiple running of the Monte Carlo valuation model, with the fair value recognized on a straight-line basis over the requisite service period.

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED

DECEMBER 31, 2021, 2020 AND 2019

The Company recognized stock-based compensation expense as follows:

	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
	(in millions)
Restricted Stock and RSUs	$	11.9	$	4.6	$	8.7
Payroll taxes on vesting of RSUs		1.1		0.2		0.3
	$	13.0	$	4.8	$	9.0

Total unrecognized compensation expense related to unvested stock awards and unvested RSUs at December 31, 2021 amounts to $11.6 million and is expected to be recognized over a weighted average period of 1.8 years.