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 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 units; incentive bonuses, which may be paid in cash, stock or a combination thereof; and other stock-based awards. The share pool increases on January 1st of each calendar year 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 expenses 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 years ended December 31, 2023 and 2022, the Company recognized long-term incentive compensation expense for all of its awards as shown below (in thousands):


	For the years ended December 31,
	2023		2022
Stock-based compensation expense	$	3,639	$	956

The fair value of stock options is estimated on the date of the grant using a Black-Scholes valuation model, 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 fair value of Excelerate’s common stock on the grant date, including 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. The expected dividend yield is based on the expected dividend payout as a portion of total share value. Expected volatility is based on the median of the historical volatility of fifteen of the Company’s peers over the expected life of the granted options. The Company uses estimates of forfeitures to estimate the expected term of the options granted. The reversal of any expense due to forfeitures is accounted for as they occur. The table below describes the assumptions used to value the options granted in 2022. No options were granted in 2023.


	2022
Risk-free interest rate		2.7	%
Expected dividend yield		0.4	%
Expected volatility		58.5	%
Expected term	6.5 years

The following table summarizes stock option activity for the year ended December 31, 2023 and provides information for outstanding and exercisable options as of December 31, 2023:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
				(per share)		(years)
Outstanding at January 1, 2023		323,023		$	24.00
Granted		—			—
Exercised		—			—
Forfeited or expired		(5,422	)		24.00
Outstanding at December 31, 2023		317,601			24.00		8.1
Exercisable at December 31, 2023		74,164			24.00		7.4

No options were granted in 2023. The fair value of the options granted in 2022 was $4.6 million. As of December 31, 2023, the Company had $2.7 million in unrecognized compensation costs related to its stock options that it expects to recognize over a weighted average period of 3.3 years. No options were exercised in 2023.

The following table summarizes restricted stock unit activity for the year ended December 31, 2023 and provides information for unvested shares as of December 31, 2023:


	Number of Shares			Weighted Average Fair Value
				(per share)
Unvested at January 1, 2023		37,754		$	23.61
Granted		314,721			20.77
Vested		(32,937	)		21.68
Forfeited		(1,388	)		21.62
Unvested at December 31, 2023		318,150			20.88

The fair value of the awards granted in 2023 and 2022 was $6.5 million and $0.9 million, respectively. The fair value of awards that vested in 2023 was $0.7 million. No awards vested in 2022. As of December 31, 2023, the Company had $4.9 million in unrecognized compensation costs related to its restricted stock unit awards that it expects to recognize over a weighted average period of 2.2 years.

In 2023, the Company granted performance units which 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 grants. The reversal of any expense due to forfeitures is accounted for as they occur.

The following table summarizes performance unit activity for the year ended December 31, 2023 and provides information for unvested performance units (reflected at target performance) as of December 31, 2023:


	Number of Units		Weighted Average Fair Value
			(per unit)
Unvested at January 1, 2023		—	$	—
Granted		84,699		27.85
Vested		—		—
Forfeited		—		—
Unvested at December 31, 2023		84,699		28.80

The fair value of the performance units granted in 2023 was $2.4 million. As of December 31, 2023, the Company had $1.8 million in unrecognized compensation costs related to its performance units that it expects to recognize over a weighted average period of 2.1 years.