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Stock-Based Compensation
9 Months Ended
Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation

9. Stock-Based Compensation

Stock-based compensation plan

In 2008, the Company adopted its 2008 Stock Option/Stock Issuance Plan, and, in 2017, adopted the Zeta Global Holdings Corp. 2017 Incentive Plan (collectively, the “Plans”).

The Plans permitted the issuance of stock options, restricted stock and restricted stock units to employees, officers, consultants or advisors and non-employee directors of the Company. Options granted under the Plans expire no later than ten years from the grant date. Prior to the IPO, the restricted stock and restricted stock units granted under the Plans generally did not vest until a change in control. Upon a change in control, restricted stock and restricted stock units vest as to 25% of the shares with the balance of the shares vesting in equal quarterly installments following the change in control over the remainder of a five-year term from the original date of grant. The restricted stock and restricted stock units fully vest upon a change in control to the extent five years has passed from the original date of grant of the restricted stock or restricted stock units. Since the vesting of these awards was contingent upon the change of control event, which was not considered probable until it occurred, the Company did not record any stock-based compensation for such awards prior to the IPO, a change in control event. The stock-based compensation has been recognized following the vesting of restricted stock, restricted stock units and options as described below. The Company ceased granting awards under the Plans following its adoption of the 2021 Plan (as defined below) in connection with the IPO.

In connection with the IPO, the Company adopted the Zeta Global Holdings Corp. 2021 Incentive Award Plan (the “2021 Plan”), which was effective as of the day prior to the first public trading date of the Company's Class A common stock and under which restricted stock, restricted stock units and options have been granted to service providers. With certain exceptions, the equity awards granted under the 2021 Plan generally vest over four years, with 25% of the shares vesting upon the first anniversary of the grant date and the remainder of the shares vesting in equal quarterly installments thereafter.

During the three months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense of $47,177 and $57,672, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense of $151,974 and $179,746, respectively.

Restricted Stock and Restricted Stock Units

As noted above, the Company’s restricted stock and restricted stock units granted prior to the IPO did not vest until a change of control. On March 24, 2021, the Company’s board of directors approved a modification in the vesting terms of its restricted stock and restricted stock unit awards. This modification was accounted for under the guidance in ASC 718-20-35-3. Given the vesting of the modified awards contained a performance condition associated with the IPO, the Company had determined that the modification was considered improbable-to-improbable under ASC 718-20-55-118 through 119. The Company recognized compensation expense over the modified vesting terms, based on the fair value as of the date of modification.

During the nine months ended September 30, 2023, the Company's board of directors approved the modification of the vesting schedule of certain awards granted prior to the IPO to accelerate the vesting of those grants. These modifications were accounted for in accordance with ASC 718-20-35-3 and did not have any material impact on the stock-based compensation during the nine months ended September 30, 2023. There were no such modifications during the nine months ended September 30, 2024.

Following is the activity of restricted stock and restricted stock units granted by the Company:

 

Shares

 

 

Weighted Average
Grant Date Fair
Value

 

Non-vested as of January 1, 2024

 

 

49,698,329

 

 

$

10.54

 

Granted (1)

 

 

6,671,667

 

 

 

11.31

 

Vested

 

 

(18,680,640

)

 

 

10.10

 

Forfeited (2)

 

 

(760,161

)

 

 

9.72

 

Non-vested as of September 30, 2024 (3)

 

 

36,929,195

 

 

$

10.92

 

 

(1)
During the nine months ended September 30, 2024, the Company granted 1,548,667 shares of restricted stock and 5,123,000 restricted stock units to its employees, advisors and non-employee directors.
(2)
During the nine months ended September 30, 2024, 654,706 shares of restricted stock and 105,455 restricted stock units were forfeited.
(3)
Includes 24,048,565 unvested shares of Class A restricted stock, 7,391,948 unvested shares of Class B restricted stock and 5,488,682 unvested restricted stock units as of September 30, 2024.

Stock options

Following is the summary of transactions under the Plans and the 2021 Plan:

 

 

Number of
options

 

 

Weighted
average
exercise
price

 

 

Weighted
average
remaining
contractual
life (years)

 

 

Aggregate
intrinsic
value (per share)

 

Outstanding options as of January 1, 2024

 

 

2,619,937

 

 

$

8.49

 

 

 

4.97

 

 

 

0.57

 

Granted

 

 

1,832,802

 

 

 

10.81

 

 

 

 

 

 

 

Exercised

 

 

(408,205

)

 

 

7.31

 

 

 

 

 

 

 

Forfeited

 

 

(136,942

)

 

 

9.62

 

 

 

 

 

 

 

Outstanding options as of September 30, 2024

 

 

3,907,592

 

 

$

9.66

 

 

 

8.58

 

 

 

20.32

 

As of September 30, 2024, the Company had 861,116 outstanding exercisable options with a weighted-average exercise price of $8.61. Options granted by the Company expire no later than ten years from the grant date.

The Company granted 1,832,802 options during the nine months ended September 30, 2024. The Company determined the estimated fair value of the options using the Black-Scholes-Merton method as $5.93. The following assumptions were used by the Company for the options valuation:

 

 

 

As of

 

 

September 30, 2024

Dividend yield

 

0.0%

Volatility

 

50.1%

Expected term (years)

 

6.45

Risk-free rate of interest

 

4.3%

 

Performance Stock Unit (“PSU”) Award

On April 3, 2024, the Compensation Committee of the Board of Directors approved the grant of 2,989,850 target PSUs under the 2021 Plan (the “2024 PSUs”). Upon achievement of certain conditions described below, the 2024 PSUs could result in the issuance of up to 5,979,700 shares of Class A common stock. The 2024 PSUs are earned on the determination date, which is after the end of each fiscal quarter beginning with the three-month period ending on December 31, 2024 and ending with, and including, the three-month period ending on December 31, 2028. The Company expects to make the first determination in January 2025 as to the number of 2024 PSUs earned, if any, with respect to the three-month period ending on December 31, 2024.

The 2024 PSUs shall be earned as a percentage of the 2024 PSUs granted, based on the 20-day volume-weighted average closing price per share (“VWAP”) for such quarter. In no event shall (i) any 2024 PSUs be earned if the VWAP for the applicable quarter is below $10.30 and (ii) more than 200% of the target 2024 PSUs be earned if the VWAP is at or above $22.66. The number of 2024 PSUs earned for such quarter shall be reduced by the number of 2024 PSUs, if any, earned in any prior quarter.

Each 2024 PSU represents the right to receive shares of Class A common stock as set forth in the 2024 PSU grant agreement or, at the option of the Company, an equivalent amount of cash. Participants have no right to the distribution of any shares or payment of any cash until the time the 2024 PSUs are earned and have vested. Each 2024 PSU provides for the right to receive a dividend equivalent to the value of any ordinary cash dividends paid on substantially all the outstanding shares of Class A common stock if the 2024 PSUs are earned and vested. Earned 2024 PSUs vest as to 33.33% on the date the Company determines the number of 2024 PSUs that are earned for such quarter, and the remaining earned 2024 PSUs vest in equal quarterly installments ending on the second anniversary of such determination date, subject to accelerated vesting in connection with certain qualifying terminations of employment or a change in control.

The Company engaged a third-party valuation firm to determine the estimated fair value of the PSUs using the Monte Carlo simulation method, which was determined as $17.83 per PSU issued during the nine months ended September 30, 2024 using the following assumptions:

 

 

As of

 

 

September 30, 2024

Dividend yield

 

0.0%

Volatility

 

50.0%

Expected term (years)

 

6.74

Risk-free rate of interest

 

4.3%

Following is the summary of PSUs under the Company’s 2021 Plan:

 

Number of
PSUs

 

 

Weighted Average
Grant Date Fair
Value

 

Outstanding as of January 1, 2024

 

 

4,755,675

 

 

$

15.34

 

Granted

 

 

2,989,850

 

 

 

17.83

 

Performance Adjustment

 

 

308,643

 

 

 

5.17

 

Vested

 

 

(1,216,178

)

 

 

11.96

 

Forfeited

 

 

(40,810

)

 

 

20.66

 

Outstanding as of September 30, 2024

 

 

6,797,180

 

 

$

16.55

 

The number of shares to be issued upon achievement of the applicable performance condition and satisfaction of the vesting schedule are specified in the applicable PSU award agreements. The PSUs are earned on the applicable determination date, which is after the end of each fiscal quarter, based on the 20-day VWAP for such fiscal quarter. Of the total PSUs granted by the Company, the Company determined that 3,662,817 PSUs were earned through September 30, 2024, of which 2,276,261 earned PSUs remained unvested. The performance adjustment shown in the table above reflects the incremental PSUs that were earned in excess of target (100%). In the table above, the number of PSUs are presented at 100% of the specified target shares, with adjustments for awards that vested and for the performance adjustment.

2021 Employee Stock Purchase Plan (“ESPP”)

The Company maintains the 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The 2021 ESPP permits participants to purchase the Company’s Class A common stock through contributions up to a specified percentage of their eligible compensation. The maximum number of shares that may be purchased by a participant during any offering period is capped at 10,000. In addition, no employee will be permitted to accrue the right to purchase shares under the Section 423 component at a rate in excess of $25 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of the Company's Class A common stock as of the first day of the offering period).

The 2021 ESPP has consecutive offering periods of approximately six months in length commencing each year on December 1 and June 1 and ending on each May 31 and November 30, as applicable. The Company determined the estimated fair value of the shares purchased under the 2021 ESPP using the Black-Scholes-Merton method.

During the nine months ended September 30, 2024, the Company issued 212,650 shares of Class A common stock related to the ESPP offering that ended on May 31, 2024.

The fair value of shares for the offering that commenced on June 1, 2024 was estimated at $4.86 per share, using the following assumptions, and expected to result in an issuance of approximately 142,104 shares of Class A common stock under this offering that will end on November 30, 2024.

 

 

 

As of

 

 

September 30, 2024

Dividend yield

 

0.0%

Risk-free rate of interest

 

5.4%

Volatility

 

49.7%

 

Unrecognized compensation expense

The Company has $228,350 of unrecognized compensation expense related to its 36,929,195 unvested restricted stock and RSUs, 6,797,180 PSUs, 3,046,476 options and approximately 142,104 shares of Class A common stock to be issued under the 2021 ESPP offering that will end on November 30, 2024. This unrecognized stock-based compensation will be recognized over a weighted average period of 1.21 years.