Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

2017 Profits Interest Units Plan

On September 30, 2017, the former Parent’s Limited Liability Agreement (“LLC Agreement”) created class B units, called Profit Interest Units (“PIU”), to provide additional incentives to attract and retain qualified, competent employees for the Company. All grants of PIUs vested upon the closing of the Business Combination on June 3, 2021 and resulted in an expense of $1.0 million recorded in the selling, general, and administrative caption.

2021 Stock Option and Incentive Plan

At the Company’s special meeting of stockholders held on June 2, 2021, the stockholders approved the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (“2021 ESPP”) to encourage and enable the current and future officers, employees, directors, and consultants of the Company and its affiliates to obtain ownership in the Company. The aggregate number of shares authorized for issuance under the 2021 Plan will not exceed 52.0 million shares of stock. The aggregate number of shares authorized for issuance under the 2021 ESPP will not exceed 4.7 million, plus on January 1, 2022, and each January 1 thereafter through January 1, 2031 the number of shares of Class A common stock reserved and available for issuance under the 2021 ESPP Plan shall be cumulatively increased by the lessor of (i) 15.0 million shares of Class A common stock, (ii) one percent 1.0% of the number of shares of Class A common stock issued and outstanding on the immediately preceding December 31st, or (iii) such lesser number of shares determined by the administrator appointed by the Board of Directors.

The 2021 Plan provides for the grant of incentive and nonqualified stock option, restricted stock units (“RSUs”), restricted share awards, stock appreciation awards, unrestricted stock awards, and cash-based awards to employees, directors, and consultants of the Company.

Market Condition Options

On June 3, 2021, in connection with the closing of the Business Combination, the Company granted 12.8 million stock options with market conditions (“Market Condition Awards”) to several executive officers and directors of the Company. The Market Condition Awards vest when the Company’s stock price meets specified hurdle prices and stays above those prices for 20 consecutive days. Once the market condition is satisfied, the applicable percentage of the Market Condition Awards will vest 50% on each of the first and second anniversaries so long as the optionee stays employed. The fair value of the Market Condition Awards is based on a Monte Carlo simulation for each hurdle price. The unrecognized compensation cost of the Market Condition Awards as of December 31, 2021 was $42.0 million, which is expected to be recognized over the weighted average remaining service period of 2.4 years.

The number of Market Condition Awards that vest is subject to the Company’s stock price equaling or exceeding certain hurdle prices for 20 consecutive trading days from June 3, 2021 to

June 3

, 2024 (i.e., the period from the grant date to the end date of the performance period).

Stock Option Valuation

The Monte-Carlo simulation model is used to estimate the fair value of the Market Condition Awards. The Monte-Carlo simulation model calculates multiple potential outcomes for an award and establishes a fair value based on the most likely outcome. Key assumptions for the Monte-Carlo simulation model include the risk-free rate, expected volatility, expected dividends and the expected cost of equity. The fair values were calculated using the Monte-Carlo model with the following assumptions as of the grant date on June 3, 2021:


	As of June 3, 2021
Closing Cano share price as of valuation date	$	14.75
Risk-free interest rate		1.68% - 2.0	%
Expected volatility		45.0	%
Expected dividend yield		0.0	%
Expected cost of equity		9.0	%

A summary of the status of unvested Market Condition Awards granted under the 2021 Plan from January 1, 2021 through December 31, 2021 is presented below:


	Shares			Weighted Average Grant Date Fair Value
Balance, January 1, 2021		—			—
Granted		12,831,184		$	4.23
Vested		—			—
Forfeitures		(127,486	)		4.23

Balance, December 31, 2021		12,703,698		$	4.23

Restricted Stock Units

During 2021, the Company granted 5,188,722 time-based RSUs to certain employees of the Company. The RSUs vest over a four-year period commencing on the grant date, with one fourth of the RSUs vesting at the end of the first anniversary of the vesting commencement date and the remainder of the RSUs vesting yearly over the following three years. The fair value of RSUs is based on the closing price of the Company’s Class A common stock on the grant date. The unrecognized compensation cost of the RSUs as of December 31, 2021 was $62.5 million, which is expected to be recognized over the weighted average remaining service period of 3.3 years. In addition, certain RSUs were granted to a nonemployee and included a discretionary performance condition which has been deemed not probable of being met and as such no expense has been recorded.

A summary of the status of unvested RSUs granted under the 2021 Plan from January 1, 2021 through December 31, 2021 is presented below:


	Shares				Weighted Average Grant Date Fair Value
Balance, January 1, 2021		—				—
Granted		5,188,722		$	$	14.20
Vested		—				—
Forfeitures		(21,200	)			14.75

Balance, December 31, 2021		5,167,522		$	$	14.20

The Company recorded compensation expenses of $23.5 million, $0.5 million and $0.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company recorded compensation expense related to the ESPP of $4.5 million for the year ended December 31, 2021

The total stock-based compensation expense related to all the stock-based awards granted by the former Parent is reported in the consolidated statement of operations as compensation expense within the selling, general and administrative expense caption.