Stock-based Compensation and Equity Grants

6 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock-based Compensation and Equity Grants

Stock-Based Compensation and Equity Grants

Stock-based compensation expense

Options issued under equity incentive plans were designated as either incentive stock or non-statutory stock options. No option is granted with a term of more than 10 years from the date of grant. Exercisability of option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued shares. As of March 31, 2022, there were 1.4 million options available for grant.

Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our Consolidated Statements of Operations:

		Three Months Ended				Six Months Ended
	Ref	March 31,				March 31,
(in thousands)		2022		2021		2022		2021
DLH employees	(a)	$	647	$	270	$	985	$	612
Non-employee directors	(b)	162		116		324		232
Total stock option expense		$	809	$	386	$	1,309	$	844

Ref (a): Included in this amount are equity grants of restricted stock units to Named Executive Officers ("NEO"), which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to NEO and non-NEO company employees. The restricted stock units totaled 161,485 restricted stock units issued and outstanding at March 31, 2022.

Ref (b): Equity grants of restricted stock units were made in accordance with DLH compensation policy for non-employee directors and a total of 53,510 restricted stock units were issued and outstanding at March 31, 2022.

Unrecognized stock-based compensation expense (in thousands)

		March 31,
	Ref	2022
Unrecognized expense for DLH employees	(a)	$	5,982
Unrecognized expense for non-employee directors		324
Total unrecognized expense		$	6,306

Ref (a): The remaining compensation expense is recognized as the requisite service is rendered. The compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For options that vest based on the Company's common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo binomial model that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the derived service period determined in the valuation. On a weighted average basis, this expense is expected to be recognized within the next 4.39 years.

Stock option activity for the six months ended March 31, 2022

The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock.

				(in years)
				Weighted
		Weighted		Average	(in thousands)
	(in thousands)	Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
Options outstanding, September 30, 2021	2,374	$	5.60	5.6	$	15,899
Exercised	(26)	$	10.08	—	—
Granted	250	$	16.01	—	$	—
Options outstanding, March 31, 2022	2,598	$	6.56	5.5	$	32,159

Stock options shares outstanding, vested and unvested for the periods ended (in thousands):

		Number of Shares
		March 31,	September 30,
	Ref	2022	2021
Vested and exercisable	(a)	2,348	1,662
Unvested	(b)	250	712
Options outstanding		2,598	2,374

Ref (a): Weighted average exercise price of vested and exercisable shares was $5.55 and $3.91 at March 31, 2022 and September 30, 2021, respectively. Aggregate intrinsic value was approximately $31.4 million and $13.9 million at March 31, 2022 and September 30, 2021, respectively. Weighted average contractual term remaining was 5.1 years and 4.0 years at March 31, 2022 and September 30, 2021, respectively.

Ref (b): Certain awards vest upon satisfaction of certain performance criteria.