SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors may grant stock options, restricted stock, stock units, stock appreciation rights, common stock or performance awards to officers, directors and key employees. As of December 31, 2022, there were approximately 103,274 restricted stock units, performance awards and stock options outstanding to officers, directors and key employees. The exercise price, terms and other conditions applicable to each form of share-based compensation under our plans are generally determined by the Compensation Committee of our Board at the time of grant and may vary.

In May 2021, our shareholders approved the amendment and restatement to the 2018 Team, Inc. Equity Incentive Plan (the “2018 Plan”). The 2018 Plan replaced the 2016 Team, Inc. Equity Incentive Plan. The amendment and restatement to the 2018 Plan increased the shares available for issuance by 3.0 million shares of Common Stock, before the reverse stock split discussed below. Shares issued in connection with our share-based compensation are issued out of authorized but unissued common stock.

On December 21, 2022, we completed a reverse stock split of our outstanding common stock at a ratio of one-for-ten. The Reverse Stock Split effected a proportionate reduction in shares available for issuance under our 2018 Plan. We have made proportionate adjustments to the number of stock units outstanding and issuable upon exercise or vesting of our outstanding awards as well as the applicable exercise prices and weighted average fair value. No fractional shares were issued in connection with the Reverse Stock Split.

Compensation expense related to share-based compensation totaled $0.2 million and $7.0 million for the years ended December 31, 2022 and 2021, respectively. Share-based compensation expense reflects an estimate of expected forfeitures. As of December 31, 2022, $1.4 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.4 years. The recognized income tax benefit totaled $0.0 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively.

Stock units are settled with common stock upon vesting unless it is not legally feasible to issue shares, in which case the value of the award is settled in cash. We determine the fair value of each stock unit based on the market price on the date of grant. Stock units generally vest in annual installments over three or four years and the expense associated with the units is recognized over the same vesting period. We also grant common stock to our directors which typically vests immediately. Compensation expense related to stock units and director stock grants totaled $1.5 million and $4.4 million for the years ended December 31, 2022 and 2021, respectively.

Transactions involving our stock units and director stock grants for the twelve months ended December 31, 2022 are summarized below:


	Twelve Months Ended December 31, 2022
	No. of Stock Units	Weighted Average Fair Value
	(in thousands)
Stock and stock units, beginning of year	80	$	73.06
Changes during the year:
Granted	79	$	8.56

Vested and settled	(42)	$	80.51
Cancelled	(19)	$	66.86
Stock and stock units, end of year	98	$	19.55

The intrinsic value of stock units and director stock grants vested during the years ended December 31, 2022 and 2021 was $0.5 million and $1.2 million, respectively.

We have a performance stock unit award program whereby we grant Long-Term Performance Stock Unit (“LTPSU”) awards to our executive officers. Under this program, we communicate “target awards” to the executive officers during the first year of a performance period. LTPSU awards cliff vest with the achievement of the performance goals and completion of the required service period. Settlement occurs with common stock as soon as practicable following the vesting date. LTPSU awards granted in 2020 (the “2020 Awards”) and in 2021 (the “2021 Awards”) are subject to a two-year performance period and a concurrent two-year service period. There were no LTPSU awards granted during 2022. For the LTPSU awards, the performance goal is separated into two independent performance factors based on (i) relative shareholder return (“RTSR”) as measured against a designated peer group and (ii) results of operations over the two-year performance period, with possible payouts ranging from 0% to 200% of the target awards for each of the two performance factors. The 2020 Awards vested as of March 15, 2021 at the RTSR performance target level of 25% and the results of operations performance metric at 0% of the target level.

The RTSR and the stock price milestone factors are considered to be market conditions under GAAP. For performance units subject to market conditions, we determine the fair value of the performance units based on the results of a Monte Carlo simulation, which uses market-based inputs as of the date of grant to simulate future stock returns. Compensation expense for awards with market conditions is recognized on a straight-line basis over the longer of (i) the minimum required service period and (ii) the service period derived from the Monte Carlo simulation, separately for each vesting tranche. For performance units subject to market conditions, because the expected outcome is incorporated into the grant date fair value through the Monte Carlo simulation, compensation expense is not subsequently adjusted for changes in the expected or actual performance outcome. For performance units not subject to market conditions, we determine the fair value of each performance unit based on the market price of our common stock on the date of grant. For these awards, we recognize compensation expense over the vesting term on a straight-line basis based upon the performance target that is probable of being met, subject to adjustment for changes in the expected or actual performance outcome. For performance awards, we recorded income of $1.3 million and expense of $2.6 million for the years ended December 31, 2022 and 2021, respectively.

Transactions involving our performance awards during the twelve months ended December 31, 2022 are summarized below:


	Twelve Months Ended December 31, 2022
	Performance Units Subject to Market Conditions			Performance Units Not Subject to Market Conditions
	No. of Stock Units1	Weighted Average Fair Value		No. of Stock Units1	Weighted Average Fair Value
	(in thousands)			(in thousands)
Performance stock units, beginning of period	68	$	64.88	22	$	98.65
Changes during the period:


Cancelled and forfeited	(66)	$	62.08	(20)	$	96.23
Performance stock units, end of period	2	$	149.60	2	$	116.90

__________________________

1 Performance units with variable payouts are shown at target level of performance.

The intrinsic value of performance stock unit awards vested during the year ended December 31, 2021 was $0.3 million. There were no performance stock units vested during the year ended December 31, 2022.

We determine the fair value of each stock option at the grant date using a Black-Scholes model and recognize the resulting expense of our stock option awards over the period during which an employee is required to provide services in exchange for the awards, usually the vesting period. There was no compensation expense related to stock options for the years ended December 31, 2022 and 2021. Our options typically vest in equal annual installments over a four-year service period. Expense related to an option grant is recognized on a straight-line basis over the specified vesting period for those options. Stock options generally have a ten-year term.

Transactions involving our stock options for the twelve months ended December 31, 2022 are summarized below:


	Twelve Months Ended December 31, 2022
	No. of Options	Weighted Average Exercise Price
	(in thousands)
Shares under option, beginning of year	2	$	316.80
Changes during the year:




Expired	(1)	$	(277.13)
Shares under option, end of year	1	$	356.03
Exercisable at end of year	1	$	356.03

No stock options were granted during the years ended December 31, 2022 and 2021. Options exercisable as of December 31, 2022 had a weighted-average remaining contractual life of 0.6 years, and exercise prices ranging from $320.50 to $504.70. There were no stock option awards exercised during the years ended December 31, 2022 and 2021