Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

WM Holding Company, LLC Equity Incentive Plan

The Company has accounted for the issuance of Class A-3 and Class B Units issued under WM Holding Company, LLC’s Equity Incentive Plan in accordance with ASC 718 - Stock Based Compensation. The Company considers the limitation on the exercisability of the Class A-3 and Class B Units to be a performance condition and records compensation cost when it becomes probable that the performance condition will be met.

In connection with the Business Combination, each of the Class A-3 Units outstanding prior to the Business Combination were cancelled, and the holder thereof received a number of Class A units representing limited liability company interests of WMH LLC (the “Class A Units”) and an equivalent number of shares of Class V Common Stock, par value $0.0001 per share (together with the Class A Units, the “Paired Interests”), and each of the Class B Units outstanding prior to the Business Combination were cancelled and holders thereof received a number of Class P units representing limited liability company interests of WMH LLC (the “Class P Units” and together with the Class A Units, the “Units”), each in accordance with the Merger Agreement.

Concurrently with the closing of the Business Combination, the Unit holders entered into an exchange agreement (the “Exchange Agreement”). The terms of the Exchange Agreement, among other things, provide the Unit holders (or certain permitted transferees thereof) with the right from time to time at and after 180 days following the Business Combination to exchange their vested Paired Interests for shares of Class A Common Stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications, or Class P Units for shares of Class A Common Stock with a value equal to the value of such Class P Units less their participation threshold, or in each case, at the Company’s election, the cash equivalent of such shares of Class A Common Stock.

A summary of the Class P Unit activity for the three months ended March 31, 2023 is as follows:


						Number of Units
Outstanding Class P Units, December 31, 2022						15,125,429
Cancellations						(25,567)
Exchanged for Class A Common Stock						(75,000)
Outstanding, Class P Units, March 31, 2023						15,024,862
Vested, March 31, 2023						14,791,675

As of March 31, 2023, unrecognized stock-based compensation expense for non-vested Class P Units was $0.6 million, which is expected to be recognized over a weighted-average period of 1.5 years. For the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense for the Class P Units of $0.3 million and $0.7 million, respectively.

WM Technology, Inc. Equity Incentive Plan

In connection with the Business Combination, the Company adopted the WM Technology, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan permits the granting of incentive stock options to employees and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants. As of March 31, 2023, 33,146,412 shares of Class A Common Stock are authorized for issuance pursuant to awards under the 2021 Plan. The number of shares of Class A Common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to five percent (5%) of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding year; provided, however that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of Common Stock. As of March 31, 2023, 22,446,927 shares of Class A Common Stock are available for future issuance.

A summary of the restricted stock unit (“RSU”) activity for the three months ended March 31, 2023 is as follows:


	Number of RSUs	Weighted-average Grant Date Fair Value
Non-vested at December 31, 2022	6,269,868	$	7.07
Granted	573,553	$	1.04
Vested	(478,097)	$	8.14
Forfeited	(455,860)	$	8.36
Non-vested at March 31, 2023	5,909,464	$	6.30

As of March 31, 2023, unrecognized stock-based compensation expense for non-vested RSUs was $34.2 million, which is expected to be recognized over a weighted-average period of 2.4 years. For the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense for the RSUs of $4.0 million and $5.0 million, respectively.

On January 5, 2023, the compensation committee of the Company’s board of directors granted the Company’s Executive Chair, Douglas Francis, an award of 481,927 RSU with an approximate value of $800,000, based on the average closing price of the Company’s Class A common stock for the 90-day period prior to the grant date (the “RSU Grant”), in recognition of his leadership of the Company’s executive team since August 2022. The shares subject to the RSU Grant will vest in two equal quarterly increments on May 15, 2023 and August 15, 2023, subject to Mr. Francis’ continuous service (as defined in the 2021 Plan (as defined above) or award agreement) on each such vesting date. On May 8, 2023, Mr. Francis declined the RSU Grant and the RSUs were forfeited.

The Company grants performance-based restricted stock units (“PRSUs”) with performance and service-based vesting conditions. The level of achievement of such goals may cause the actual number of units that ultimately vest to range from 0% to 200% of the original units granted. The Company recognizes expense ratably over the vesting period for the PRSUs when it is probable that the performance criteria specified will be achieved. The fair value is equal to the market price of the Company’s common stock on the date of grant.

No activities occurred during the three months ended March 31, 2023 related to the PRSUs. The number of non-vested PRSUs as of March 31, 2023 was 859,375 and weighted average grant date fair value was $6.40.

Based on the probability of attainment as of March 31, 2023, the unrecognized stock-based compensation expense for non-vested PRSUs was $0.3 million, which is expected to be recognized over a period of 0.8 years. For the three months ended March 31, 2023 and 2022, the Company recorded stock-based compensation expense for the PRSUs of $0.1 million and $1.9 million, respectively.

The Company recorded stock-based compensation cost related to the Class P Units, RSUs and PRSUs in the following expense categories on the accompanying condensed consolidated statements of operations (in thousands):


	Three Months Ended March 31,
	2023		2022
Sales and marketing	$	897	$	1,811
Product development	1,168		1,412
General and administrative	2,318		4,294
Total stock-based compensation expense	4,383		7,517
Amount capitalized to software development	298		410
Total stock-based compensation cost	$	4,681	$	7,927