XML 69 R21.htm IDEA: XBRL DOCUMENT v3.22.4
Incentive Compensation Plans
12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Incentive Compensation Plans Incentive Compensation Plans
In connection with the IPO, the Company adopted the 2019 Omnibus Incentive Compensation Plan (the “2019 Plan”) in August 2019. The Company’s board of directors or the compensation committee of the board of directors, acting as plan administrator, administers the 2019 Plan and the awards granted under it. The Company reserved a total of 38,486,295 shares of Class A common stock for issuance pursuant to the 2019 Plan. The Company currently has two types of share-based compensation awards outstanding under the 2019 Plan: Class A common stock options (“Options”) and Class A restricted stock units (“RSUs”), including those issued pursuant to IBAs.

Class A Common Stock Options

Options activity was as follows during the year ended December 31, 2022:

Number of
Options
Weighted
Average
Exercise Price
Weighted
Average Remaining
Contractual Term (Number of Years)
Aggregate
Intrinsic Value
Outstanding at December 31, 2021
1,664,122 $22.70 7.7$— 
Granted— — — — 
Exercised— — — — 
Expired— — — — 
Forfeited(276,631)23.00 — — 
Outstanding at December 31, 2022
1,387,491 $22.91 6.6$— 
Exercisable at December 31, 2022
1,387,491 $22.91 6.6$— 
The Company estimates fair value of the Options using the Black-Scholes option pricing model. There were no grants during the year ended December 31, 2022.

Restricted Stock Units

Incentive Bonus Awards

The Company has IBA agreements with several key employees to provide a bonus payment in the event of a liquidation event as defined in each agreement. The bonus amounts are calculated based on the value of the Company at the time of the liquidation event, less an amount determined upon the employee entering into the agreement. The right to the payment generally vests annually over a five-year period, with certain liquidation events resulting in an acceleration of the vesting period. As the vesting of these awards was contingent on a liquidation event, no amounts were required to be recorded prior to a liquidation event. The IBA agreements were modified in August 2019 to accelerate certain vesting conditions upon a liquidation event and to modify the settlement terms, whereby the Company settled the vested portion of each IBA in 50% shares of Class A common stock and/or vested RSUs and 50% cash, of which approximately 80% of the cash (40% of the total vested portion of the award) that the IBA holders would have otherwise received was withheld by the Company to fulfill tax withholding obligations and the remainder was paid out to IBA holders upon the occurrence of a liquidation event. As a result of the modification and the occurrence of a liquidation event through the IPO, the Company recorded equity-based compensation expense of $316,959, equivalent to the amount of IBAs vested at the time of the IPO, in the form of cash, 5,654,078 shares of Class A common stock and 2,199,453 vested RSUs which were released over a period of six to twenty-four months following the date of the IPO. The unvested portion of the IBAs is represented in the form of unvested RSUs that will vest, subject to the holders’ continued employment, over a period generally ranging from 2 years to 4 years.

Non-IBA Restricted Stock Units

The Company granted RSUs to certain team members that generally vest annually over two to four years or after four years from the date of grant, subject to the recipient’s continued employment or service to the Company through each vesting date.

A summary of activity related to these RSUs is as follows:

RSUsWeighted Average Grant Date Fair Value
RSUs outstanding, December 31, 2021
4,837,161 $15.53 
Granted29,333,175 2.15 
Vested(1,697,096)12.54 
Forfeited(5,341,409)4.32 
RSUs outstanding, December 31, 2022
27,131,831 $2.63 
    

During the year ended December 31, 2021, there were 4,333,642 shares of RSUs granted with a weighted-average fair value of $11.00 per share. During the year ended December 31, 2020, there were 1,900,605 shares of RSUs granted with a weighted-average fair value of $9.07 per share. As of December 31, 2022, unrecognized RSUs compensation expense was $53,709. This expense is expected to be recognized over a weighted-average period of 2.7 years.

Employee Stock Purchase Plan

The SmileDirectClub, Inc. team member Stock Purchase Plan (“SPP”) was initiated in November 2019. Under the SPP, the Company is authorized to issue up to 5,772,944 shares of its Class A common stock to qualifying employees. Eligible team members may direct the Company, during each six months option period, to withhold up to 30% of their base salary and commissions, the proceeds from which are used to purchase shares of Class A common stock at a price equal to the lesser of 85% of the closing market price on the exercise date or the grant date. For accounting purposes, the SPP is considered a
compensatory plan such that the Company recognizes equity-based compensation expense based on the fair value of the options held by the employees to purchase the Company’s shares.
Summary of Equity-Based Compensation Expense

The Company recognized compensation expense of $26,608, $44,628 and $44,903 for the years ended December 31, 2022, 2021 and 2020, respectively. Amounts are included in general and administrative expense on the consolidated statements of operations.