Equity-Based Compensation

6 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the three and six months ended March 31, 2020 and 2019 is as follows:


	Three months ended March 31,						Six months ended March 31,
	2020		2019		2020		2019
Stock options	$	2,510	$	1,363	$	4,634	$	2,314

Amounts are included in general and administrative expense on the condensed consolidated statements of operations. Income tax benefits of $193 and $341 were recognized related to equity-based compensation during the three and six months ended March 31, 2020, respectively. No income tax benefits were recognized related to equity-based compensation during the three and six months ended March 31, 2019.

Stock Options

In May 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) under which the Company may grant up to 3,500,000 stock options and other equity-based awards to employees, directors and officers. The number of shares of Class A common stock available for issuance under the 2018 Plan includes an annual increase on the first day of each year, beginning with the 2019 calendar year, equal to 4.0% of the outstanding shares of all classes of the Company's common stock as of the last day of the immediately preceding calendar year, unless the Company’s board of directors determines prior to the last trading day of December of the immediately preceding calendar year that the increase shall be less than 4.0%. As of March 31, 2020, there are 360,190 equity awards available for grant under the 2018 Plan.

The fair value of the stock option awards during the six months ended March 31, 2020 and from June 20, 2018 through September 30, 2019 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:


	March 31, 2020		September 30, 2019
Expected volatility⁽¹⁾	25.2	%	26.7	%
Expected dividend yield⁽²⁾	—	%	—	%
Expected term⁽³⁾	6 years		6 years
Risk-free interest rate⁽⁴⁾	1.5	%	2.5	%

_________________

1.Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.

2.The Company has assumed a dividend yield of zero as management has no plans to declare dividends in the foreseeable future.

3.Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method as details of employee exercise behavior are limited due to limited historical data.

4.The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.

A summary of stock option activity for the six months ended March 31, 2020 is as follows:


	Stock Options	Weighted Average Exercise Price
Outstanding at beginning of period	4,240,695	$	18.33
Granted	1,094,000	30.99
Exercised	(166,709)	16.11
Forfeited	(39,331)	22.12
Outstanding at end of period	5,128,655	$	21.08

The weighted-average grant date fair value of stock options granted during the six months ended March 31, 2020 was $8.58. As of March 31, 2020, there were 5,128,655 stock options outstanding, of which 911,560 were exercisable. As of March 31, 2020, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $21,484, which is expected to be recognized over a weighted-average period of 2.2 years. The Company's policy is to account for forfeitures of stock-based compensation awards as they occur. The total fair value of stock options that vested was $1,477 and $3,228 during the three and six months ended March 31, 2020, respectively.