Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Stock-Based Compensation

Stock-Based Compensation

20. Stock-Based Compensation

The Company has several stock-based compensation plans that allow for grants of restricted stock, restricted shares, performance share units, performance shares and restricted stock units to its employees and non-employee directors. The Company’s stock-based compensation plans are administered by the Compensation Committee of the Board of Directors. For the years ended December 31, 2023, 2022 and 2021, stock-based compensation expense was $9.6 million, $10.3 million and $13.1 million, respectively, and the related income tax benefit was $2.3 million, $2.5 million and $3.1 million, respectively. For the years ended December 31, 2023, 2022 and 2021, all common stock issuances in connection with stock-based compensation arrangements were issued from unissued shares.

As of December 31, 2023, total shares authorized under the Company’s stock-based compensation plan for employees were 5.6 million shares, of which 2.5 million shares were available for future grants. As of December 31, 2023, total shares authorized under the 2016 Non-Employee Director Plan were 268,941 shares, of which 128,434 shares were available for future grants.

Restricted Share Awards

Restricted share awards (“Restricted Stock”) provide grantees with rights to shares of common stock contingent upon completion of a service period. Restricted Stock generally vests and any restrictions will lapse over a period of three years in equal annual installments on each of the first, second and third anniversaries of the grant date, provided that the grantee remain continuously employed through the applicable vesting date, subject to certain exceptions. Grantees have the right to receive all dividends without restrictions at the times and in the manner paid to shareholders generally. The fair value of Restricted Stock is determined based on the closing price of FHI’s common stock on the date of grant. The Company recognizes compensation expense related to Restricted Stock on a straight-line basis over the vesting period for service-based awards.

The following presents the Company’s Restricted Stock activity for the years ended December 31, 2023, 2022 and 2021:

			Weighted
	Number		Average Grant
	of Shares		Date Fair Value
Unvested as of December 31, 2020	262,377	$	26.35
Granted	—		—
Vested	(105,330)		26.46
Forfeited	(7,172)		26.15
Unvested as of December 31, 2021	149,875	$	26.28
Granted	—		—
Vested	(87,490)		26.44
Forfeited	(15,528)		26.28
Unvested as of December 31, 2022	46,857	$	25.96
Granted	—		—
Vested	(45,756)		25.96
Forfeited	(1,101)		26.14
Unvested as of December 31, 2023	—	$	—

For the years ended December 31, 2023, 2022 and 2021, the Company granted no shares of Restricted Stock to key employees.

The total grant date fair value of Restricted Stock that vested for the years ended December 31, 2023, 2022, and 2021 was $1.2 million, $2.3 million and $2.8 million, respectively. Unrecognized compensation expense related to unvested Restricted Stock was nil, nil and $1.1 million as of December 31, 2023, 2022 and 2021, respectively.

Performance Share Units and Performance Share Awards

Performance share units (“PSUs”) and performance share awards (“PSAs”) (collectively, “Performance Awards”) are an award of units or shares in which the recipient’s rights in the units or shares are contingent on the achievement of pre-established performance goals. At the end of the performance period, the Compensation Committee will determine to what extent the performance goals originally outlined when the Performance Awards were granted have been achieved. Depending on the level of performance achieved, 0-200% of the original grant (target number) of PSUs will be earned and will vest and 0-200% of the original grant (target number) of PSAs will be earned and will vest. All remaining unvested PSUs or PSAs will be immediately forfeited. Employees must be continuously employed by the Company from the grant date through the applicable vesting date, with any unvested Performance Awards being forfeited upon termination of employment, subject to certain exceptions. Following vesting, the Company will issue one share of FHI common stock for each vested PSU and evidence of ownership of one share of FHI common stock for each vested PSA. The fair value of Performance Awards is estimated based on the use of a Monte Carlo simulation or based on the closing price of FHI’s common stock on the date of grant and is amortized on a straight-line basis over the vesting period. For PSUs, grantees have no voting rights until the shares of common stock underlying vested PSUs are delivered to the grantee. Conversely, for PSAs, grantees have full voting rights as of the grant date.

The Performance Awards are governed by the Company’s Long-Term Incentive Plan (the “LTIP”), which is designed to reward selected key employees for their individual performance and the Company’s performance measured over multi-year performance cycles. Awards related to the LTIP provide for equity-based awards based on the Company’s profitability and market conditions that are based on the Company’s performance relative to peer groups over a three-year performance period.

The following presents the Company’s Performance Award activity for the years ended December 31, 2023, 2022 and 2021:

			Weighted
	Number		Average Grant
	of Shares		Date Fair Value
Unvested as of December 31, 2020	857,282	$	25.43
Granted	376,810		27.07
Vested	(214,163)		22.57
Forfeited	(77,423)		24.62
Unvested as of December 31, 2021	942,506	$	26.70
Granted	350,922		28.57
Vested	(203,855)		27.02
Forfeited	(135,439)		26.63
Unvested as of December 31, 2022	954,134	$	27.36
Granted	447,130		26.72
Vested	(193,065)		25.96
Forfeited	(98,731)		26.21
Unvested as of December 31, 2023	1,109,468	$	27.44

For the years ended December 31, 2023, 2022 and 2021, the Company granted 447,130, 350,922 and 376,810 Performance Awards, respectively, to key employees. The Company granted these Performance Awards in connection with its LTIP for the three-year performance periods which began on January 1, 2023, 2022 and 2021. These awards have performance conditions that are based on the Company’s profitability and market conditions that are based on the Company’s performance relative to peer groups.

The total grant date fair value of Performance Awards that vested for the years ended December 31, 2023, 2022 and 2021, was $5.0 million, $5.5 million and $4.8 million, respectively. Unrecognized compensation expense related to unvested Performance Awards was $8.2 million, $7.3 million and $6.1 million as of December 31, 2023, 2022 and 2021, respectively. The unrecognized compensation expense as of December 31, 2023 is expected to be recognized over a weighted average vesting period of 1.3 years.

Restricted Stock Units

Restricted stock units (“RSUs”) are an award of units that correspond in number and value to a specified number of shares of FHI’s common stock that are subject to vesting requirements, including certain service conditions, and transferability restrictions. RSUs do not represent actual ownership of common stock and grantees have no voting rights until the shares of common stock underlying the RSUs are delivered. Following vesting, the Company will issue one share of FHI common stock for each vested RSU. The fair value of RSUs is valued based on the closing price of FHI’s common stock on the date of grant and is amortized on a straight-line basis over the vesting period.

The following presents the Company’s RSU activity for the years ended December 31, 2023, 2022 and 2021:

			Weighted
	Number		Average Grant
	of Shares		Date Fair Value
Unvested as of December 31, 2020	43,550	$	21.93
Granted	198,771		27.13
Vested	(49,519)		23.08
Forfeited	(7,473)		26.37
Unvested as of December 31, 2021	185,329	$	27.09
Granted	169,497		28.35
Vested	(74,178)		27.18
Forfeited	(17,488)		26.80
Unvested as of December 31, 2022	263,160	$	27.91
Granted	232,280		25.57
Vested	(122,036)		27.75
Forfeited	(27,843)		27.38
Unvested as of December 31, 2023	345,561	$	26.50

For the year ended December 31, 2023, the Company granted 29,704 RSUs to non-employee directors with a weighted-average grant date fair value of $18.85 and 202,576 RSUs were granted to employees with a weighted-average grant date fair value of $26.28. For the year ended December 31, 2022, the Company granted 20,023 RSUs to non-employee directors with a weighted-average grant date fair value of $27.66 and 149,474 RSUs were granted to employees with a weighted-average grant date fair value of $28.44. For the year ended December 31, 2021, the Company granted 21,839 RSUs to non-employee directors with a weighted-average grant date fair value of $27.36 and 176,932 RSUs were granted to employees with a weighted-average grant date fair value of $27.10. The awards will vest on various dates.

The total grant date fair value of RSUs that vested during the years ended December 31, 2023, 2022 and 2021 was $3.4 million, $2.0 million and $1.0 million, respectively. Unrecognized compensation expense related to unvested RSUs was $5.2 million, $4.1 million and $3.3 million as of December 31, 2023, 2022 and 2021, respectively. The unrecognized compensation expense as of December 31, 2023 is expected to be recognized over a weighted average vesting period of 0.9 years.

For all awards of PSUs, PSAs, and RSUs, dividend equivalents will accrue from the date of grant and the Company, upon delivery of the common stock, with respect to the vested PSUs and RSUs, and evidence of ownership of the shares, with respect to the vested PSAs, will pay to each grantee a cash amount equal to the product of all cash dividends paid on a share of common stock from the grant date to such delivery date and the number of shares of common stock underlying such vested PSUs, PSAs, and RSUs, as applicable, on such delivery date.

Employee Stock Purchase Plan

The Company also has an employee stock purchase plan (“ESPP”) which permits employees to periodically purchase Company stock on a payroll deduction basis. Participant purchases through the ESPP receive a discount of 5% from the closing price of FHI’s common stock on the exercise date. Participants are required to adhere to a two-year holding period with regards to shares purchased through the ESPP. The ESPP has been determined to be non-compensatory in nature. As a result, the Company expects that expenses related to the ESPP will not be material. As of December 31, 2023, total shares authorized under the Company’s ESPP were 600,000 shares, of which 498,653 shares of common stock were available for future purchases. The Company issued 16,226 shares, 16,680 shares and 21,070 shares of common stock to employee participants in 2023, 2022 and 2021, respectively.