Equity-Based Compensation

9 Months Ended

Sep. 30, 2021

Equity-Based Compensation

Equity-Based Compensation

8. Equity-Based Compensation

Class B Incentive Units

The Company’s management, through the Company’s affiliation with its shareholder and former parent, EQT, participated in a 2017 Class B Profits Interest Unit Incentive Plan (the “Class B Plan”), whereby EQT was authorized to issue a total of 6,366,891 Profit Interest Units (“Class B Units”), representing the right to share a portion of the value appreciation in EQT.

The majority of the employee grant agreements for the Class B Units were comprised of 50% time-based vesting units (“Time-based Units”) and 50% performance-based vesting units (“Performance-based Units”). The Time-based Units generally vest over a five-year period; the Performance-based Units would vest if EQT achieved specified levels of return on investment at the time of (i) a change in control, (ii) a reduction in holdings of the Company by EQT to 10% or less following an IPO or (iii) certain distributions to EQT. There were also certain grant agreements for the Class B Units that were entirely comprised of Time-based Units. Upon vesting, the holder of Class B Units received a right to a fractional portion of the profits and distributions of the parent in excess of a “participation threshold” determined in accordance with the EQT limited partnership agreement.

In addition to the performance conditions above, the Chief Executive Officer’s performance-based Class B Units also vested if the aggregate value attributable to the IPO equaled or exceeded an amount equivalent to the return on investment performance targets.

As of September 30, 2020, 6,328,153 Class B Units were issued and outstanding to Company employees. The Company granted 1,357,404 units and recorded actual forfeitures of 377,626 units during the nine months ended September 30, 2020.

The fair value of the Time-based Units that vested solely upon continued employment was measured at the grant date and was recognized as cost over the employee’s requisite service period, which was generally five years. The expense related to the vesting of the Time-based Units was recorded on the Company’s books because the Company directly benefited from the services provided by Class B Unit holders. The Company recorded compensation expense related to the Class B Units of $1,181 and $2,286 for the three and nine months ended September 30, 2020.

Restricted Stock

Effective as of December 10, 2020, all vested Class B Units were exchanged by EQT for shares of common stock of the Company held by EQT, and unvested Class B Units were exchanged for shares of restricted common stock of the Company. Based on the IPO price of $23.00 per share, the Company issued 5,941,693 shares of restricted common stock to holders of unvested Class B Units in exchange for such unvested Class B Units.

Share-based compensation for the restricted stock exchanged for the Time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years.  Share-based compensation for the restricted stock exchanged for the Performance-based Class B Units is recognized using the accelerated attribution approach. A summary of the restricted stock is shown below:

		WEIGHTED-
		AVERAGE
		GRANT DATE
	SHARES	FAIR VALUE
Non-vested restricted stock as of December 31, 2020	5,941,693	$	23.00
Granted	—		—
Vested	(1,724,979)		23.00
Forfeited	(141,057)		23.00
Non-vested restricted stock as of September 30, 2021	4,075,657	$	23.00

The Company did not authorize or issue any restricted stock during the nine-month period ended September 30, 2021.

Equity-based compensation expense related to the restricted stock exchanged for Performance-based Class B Units was $3,120 and $10,144 for the three and nine months ended September 30, 2021, respectively. At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $14,072, which is expected to be recognized over a weighted-average period of 26 months.

Equity-based compensation expense related to the restricted stock exchanged for Time-based Class B Units were $767 and $2,298 for the three and nine months ended September 30, 2021 respectively. At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $7,230, which is expected to be recognized over a weighted-average period of 35.2 months.

Restricted Stock Units

Restricted stock units (“RSUs”) represent the right to receive shares of the Company’s common stock at a specified date in the future. The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant.

A summary of the Company’s RSU activity is as follows:

		WEIGHTED-
		AVERAGE
		GRANT DATE
	UNITS	FAIR VALUE
Non-vested RSUs as of December 31, 2020	30,052	$	23.00
Granted	1,027,512		27.47
Vested	(24,728)		23.00
Forfeited	(48,956)		26.86
Non-vested RSUs as of September 30, 2021	983,880	$	27.48

The number of RSUs vested includes 10,003 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation expense related to the RSUs was $2,362 and $4,898 for three and nine months ended September 30, 2021, respectively. At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding RSUs was $22,559, which is expected to be recognized over a weighted-average period of 29.3 months.

Performance Stock Units

Performance stock units (“PSUs”) are issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds including year over year revenue growth and unlevered free cash flow growth.

Share-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach. The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost. The following table presents a summary of activity on the PSUs for the period ended September 30, 2021.

A summary of the Company’s PSU activity is as follows:

		WEIGHTED-
		AVERAGE
		GRANT DATE
	UNITS	FAIR VALUE
Non-vested PSUs as of December 31, 2020	—	$	—
Granted	400,354		27.01
Vested	—		—
Forfeited	(11,905)		27.45
Non-vested PSUs as of September 30, 2021	388,449	$	27.00

Equity-based compensation expense related to the PSUs was $1,916 and $3,506 for the three and nine months ended September 30, 2021. At September 30, 2021, the total unrecognized equity-based compensation expense related to outstanding PSUs was $6,982, which is expected to be recognized over a weighted-average period of 19.5 months.

The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive (loss) income for each period presented:

	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2021		2020		2021		2020
Cost of revenues	$	1,442	$	53	$	3,738	$	151
Sales and marketing		602		34		1,636		99
Research and development		514		34		1,528		97
General and administrative expenses		5,607		1,060		13,944		1,939
Total	$	8,165	$	1,181	$	20,846	$	2,286