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Share-Based Compensation
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation
Share-Based Compensation
Management Incentive Units
Management Incentive Units (“MIUs”) are non-voting units issued to certain senior management. Issuances can vest immediately or be subject to vesting terms according to time-based benchmarks or performance-based benchmarks that vary between issuance. MIUs are forfeited if certain vesting provisions are not met. Certain MIUs participate in distributions from the date of issuance while other MIUs were issued at a profits interest and therefore only participate in distributions in the event of liquidation. For the MIUs that management has deemed not probable of vesting, no share-based compensation expense is recorded.
The following table summarizes the activity for awards granted by the Company under the MIU Plan:
 
 
Shares
 
Weighted-Average Grant-Date Fair Value Per Share
 
Weighted-Average Contractual Term (in years)
Outstanding at January 1, 2018
 
376,520

 
$
2.20

 
0.98

Granted
 
343,660

 
4.18

 
 
Outstanding at December 31, 2018
 
720,180

 
3.15

 
1.90

Granted
 
475,900

 
7.34

 
 
Forfeited
 
(40,000
)
 
2.97

 
 
Exchanged for options
 
(10,000
)
 
2.97

 
 
Exchanged for Class B common stock
 
(1,146,080
)
 
4.90

 
 
Outstanding at December 31, 2019
 

 

 


The Company recorded compensation expense related to MIUs of $1.9 million and $309,000 for the years ended December 31, 2019 and 2018, respectively, which is included in commissions, employee compensation and benefits in the consolidated statements of comprehensive income (loss). The compensation expense recorded for the year ended December 31, 2019 includes $1.1 million associated with certain awards for which the vesting was accelerated in connection with the successful Initial Public Offering,
In conjunction with the Reorganization Transactions, MIUs were converted to 5,627,155 restricted shares of Class B common stock and LLC Units, which contain identical vesting conditions to the original MIU issuances.
There were 2,504,341 Class B shares related to the MIU Plan that were fully vested upon the issuance and another 1,165,586 shares that vested by December 31, 2019. The following table summarizes the number of non-vested shares of Class B common stock related to the MIU Plan that are expected to vest in each of the following years:
For the Years Ending December 31,
 
Class B Shares
2020
 
609,500

2021
 
466,279

2022
 
451,222

2023
 
430,227


Valuation Assumptions
The fair value of each time-based and performance-based MIUs is estimated on the grant date using the Black-Scholes Model using the assumptions noted in the following table. Expected volatility is based on the historical volatility of a peer group of public and private companies. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The assumptions noted in the table below represent the weighted average of each assumption for each grant during the year.
 
 
For the Years Ended December 31,
 
 
2019
 
2018
Expected volatility
 
26.1
%
 
26.0
%
Expected dividend yield
 
0.2
%
 
%
Expected life (in years)
 
7.0

 
7.0

Risk-free interest rate
 
3.1
%
 
3.2
%

For certain MIUs granted in May and September 2019, the individuals are not entitled to dividends and therefore, an estimated dividend yield rate of 1.2% and 1.4%, respectively, was applied as management’s best estimate of future dividends based on projections and industry data.
Omnibus Incentive Plan
On October 24, 2019, the Company adopted the BRP Group, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) to motivate and reward employees (“Colleagues”) and other individuals to perform at the highest level and contribute significantly to the Company’s success, thereby furthering the best interests of BRP Group’s shareholders. The Omnibus Plan permits the grant of stock options (both nonqualified and incentive stock options), stock appreciation rights (the “SARs”), restricted stock awards, restricted stock unit awards, or RSUs, performance awards, other cash-based awards and other stock-based awards to the Company’s officers, employees, non-employee directors and consultants and advisors. Such awards may be for partial-year, annual or multi-year periods.
The Omnibus Plan provides for the Company to make awards of 696,000 shares of Class A common stock at December 31, 2019. The number of shares of Class A common stock reserved for issuance will increase automatically on the first day of each fiscal year by the lesser of (i) 2% of outstanding shares of Class A common stock and Class B common stock on the last day of the immediately preceding fiscal year and (ii) such number of shares as determined by BRP Group’s board of directors. In accordance therewith, the number of authorized shares of Class A common stock reserved for issuance under the plan increased by 1,252,414 shares at January 1, 2020.
The Omnibus Plan is administered by the Compensation Committee, the majority of the members of which are independent members of the Board of Directors. Under the Omnibus Plan, the aggregate value of all compensation paid to a non-employee director under the plan in any calendar year may not exceed $250,000. Each contractual term of an option granted is fixed by the Compensation Committee, and except for limited circumstances, the term cannot exceed ten years from the grant date. Restricted stock awards, RSUs and performance-share awards have a vesting period as defined by the applicable award agreement.
At December 31, 2019, there were 192,316 shares underlying the Omnibus Plan that were authorized, but not yet granted. The Company issues new shares of Class A common stock upon the exercise of stock options, the vesting of RSUs and performance shares and the grant of restricted stock awards.
In connection with the Initial Public Offering, BRP Group granted an aggregate of 273,880 shares of restricted stock under the Omnibus Plan to its Colleagues, subject to four-year cliff vesting. These grants are one-time grants solely related to the Initial Public Offering. In addition and as discussed further in Note 3, the Company issued 204,807 and 22,243 shares of restricted stock in connection with settling its obligations under the Advisor Incentive Plan and the Participation Plan, respectively. The Advisor Incentive Plan awards and the Participation Plan awards are subject to the vesting requirements of the original awards. The Company issued new shares of Class A common stock upon the grant of these restricted stock awards. Although these restricted stock awards are not fully vested, the Class A common shares are considered outstanding for purposes of these financial statements.
On December 5, 2019, the Company granted an aggregate of 2,754 shares of restricted stock under the Omnibus Plan to its non-employee directors, which vested immediately upon issuance.
The following table summarizes the activity for non-vested awards granted by the Company under the Omnibus Plan:
 
 
Shares
 
Weighted-Average Grant-Date Fair Value Per Share
 
Weighted-Average Contractual Term (in years)
 
Aggregate Intrinsic value (in thousands)
Outstanding at January 1, 2019
 

 
 
 
 
 
 
Granted
 
503,684

 
$
14.00

 
2.52
 
 
Vested and settled
 
(173,440
)
 
13.99

 
 
 
$

Outstanding at December 31, 2019
 
330,244

 
14.00

 
3.66
 
677

Non-vested shares expected to vest as of December 31, 2019
 
258,333

 
14.00

 
3.63
 
530


The total fair value of shares that vested and settled during the year ended December 31, 2019 was $2.4 million.
The Company recognizes share-based compensation expense for the Omnibus Plan net of actual forfeitures. The Company recorded share-based compensation expense of $204,000 in connection with the Omnibus Plan for the year ended December 31, 2019, which is included in commissions, employee compensation and benefits expense on the consolidated statements of comprehensive income (loss). The Company had $4.0 million of total unrecognized compensation cost related to unvested shares of restricted stock at December 31, 2019, which is expected to be recognized over a weighted-average period of 3.8 years.
Issuance of Unvested Class B Shares
On December 27, 2019, the Company issued 69,503 unvested shares of Class B common stock and LLC units to an executive officer outside of the Omnibus Plan. These shares vest 20% on September 30 of each of the following five years. These Class B common shares and LLC Units have a grant-date fair value of $15.55 per share and a contractual vesting term of 4.7 years.