In April 2022, Excelerate adopted the Excelerate Long-Term Incentive Plan (the “LTI Plan”). The LTI Plan was adopted to promote and closely align the interests of Excelerate's employees, officers, non-employee directors and other service providers and its stockholders by providing stock-based compensation and other performance-based compensation. The LTI Plan allows for the initial grant of up to 10.8 million shares, stock options, stock appreciation rights, alone or in conjunction with other awards; restricted stock and restricted stock units, including performance vested units; incentive bonuses, which may be paid in cash, stock or a combination thereof; and other stock-based awards. The share pool will be increased on January 1st of each calendar year beginning in 2023 by a number of shares equal to 4% of the outstanding shares of Class A Common Stock on the preceding December 31st. The LTI Plan is administered by the Compensation Committee of the Company’s board of directors.

The Company’s stock option and restricted stock unit awards both qualify as equity awards and are amortized into “Selling, general and administrative expense” and “Cost of revenue and vessel operating expenses” on the Consolidated Statements of Income on a straight-line basis. Stock options were granted to certain employees of Excelerate and vest over five years and expire ten years from the date of grant. The Company also issued restricted stock units to directors and certain employees that vest ratably over either one or three years. In 2023, the Company issued performance units to certain employees that cliff vest in three years. The performance units contain both a market condition related to Excelerate’s relative Total Shareholder Return as compared to its peer group and a performance condition related to the Company’s EBITDA.

For the three and six months ended June 30, 2023 and 2022, the Company recognized long-term incentive compensation expense for both its stock options and restricted stock unit awards as shown below (in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Stock-based compensation expense	$	1,074	$	270	$	1,431	$	270

The following table summarizes stock option activity for the six months ended June 30, 2023 and provides information for outstanding and exercisable options as of June 30, 2023:


	Number of Options			Weighted Average Exercise Price
				(per share)
Outstanding at January 1, 2023		323,023		$	24.00
Granted		—			—
Exercised		—			—
Forfeited or expired		(4,338	)		24.00
Outstanding at June 30, 2023		318,685		$	24.00
Exercisable at June 30, 2023		64,581		$	24.00

As of June 30, 2023, the Company had $3.2 million in unrecognized compensation costs related to its stock options that it expects to recognize over a weighted average period of 3.8 years.

The following table summarizes restricted stock unit activity for the six months ended June 30, 2023 and provides information for unvested shares as of June 30, 2023:


	Number of Shares			Weighted Average Fair Value
				(per share)
Unvested at January 1, 2023		37,754		$	23.61
Granted		264,801			21.61
Vested		—			—
Forfeited		(1,388	)		21.62
Unvested at June 30, 2023		301,167		$	21.86

As of June 30, 2023 the Company had $5.5 million in unrecognized compensation costs related to its restricted stock unit awards that it expects to recognize over a weighted average period of 2.5 years.

The performance units entitle the holder to between zero and two shares of the Company’s Class A Common Stock based on results as compared to performance and market conditions. The performance condition relates to the Company’s EBITDA and the market condition relates to Excelerate’s relative Total Shareholder Return as compared to its peer group. Changes in the Company’s expected EBITDA performance as compared to award metrics will be recorded to the consolidated statement of income over the vesting period.

The fair value of the Company’s performance units is calculated based on a Monte Carlo simulation of the grant’s market condition, which requires management to make assumptions regarding the risk-free interest rates, expected dividend yields and the expected volatility of the Company’s stock calculated based on a period of time generally commensurate with the expected term of the award. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the median of the historical volatility of the companies that comprise the Vanguard Energy ETF market index as of January 1, 2023 over the expected life of the granted units. The Company uses estimates of forfeitures to estimate the expected term of the units grants. The reversal of any expense due to forfeitures is accounted for as they occur.


	2023
Risk-free interest rate		3.9	%
Expected volatility		58.0	%
Expected term	2.76 years

The following table summarizes performance unit activity for the six months ended June 30, 2023 and provides information for unvested performance units (reflected at target performance) as of June 30, 2023:


	Number of Units		Weighted Average Fair Value
			(per unit)
Unvested at January 1, 2023		—	$	—
Granted		84,699		28.16
Vested		—		—
Forfeited		—		—
Unvested at June 30, 2023		84,699	$	28.16

As of June 30, 2023, the Company had $2.2 million in unrecognized compensation costs related to its performance units that it expects to recognize over a weighted average period of 2.6 years.