Stock-Based Compensation

12 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Total stock-based compensation expense for the fiscal years ended June 30, 2022, June 30, 2021, and June 30, 2020 was $7.9 million, $8.2 million and $9.9 million, respectively. Measured but unrecognized stock-based compensation expense at June 30, 2022 was $9.0 million, all of which related to nonvested deferred shares which are expected to be recognized as expense over a weighted average period of 1.7 years. We recognized excess tax expense of $1.0 million, $1.8 million, and $0.2 million related to stock-based compensation vesting for the fiscal years ended June 30, 2022, 2021, and 2020, respectively.

Plan Information

In November 2020, our stockholders approved the Matrix Service Company 2020 Stock and Incentive Compensation Plan (the "2020 Plan"), which provides stock-based and cash-based incentives for officers, directors and other key employees. Stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and cash-based awards can be issued under this plan. Upon approval of the 2020 Plan, the 2018 Stock and Incentive Compensation Plan ("2018 Plan") was frozen with the exception of normal vesting and other activity associated with awards previously granted under the 2018 Plan. The 2018 Plan was preceded by the 2016 Stock Incentive Plan ("2016 Plan"), which was frozen upon approval of the 2018 Plan with the exception of normal vesting, forfeiture and other activity associated with awards previously granted under the 2016 Plan. Shares awarded under either the 2018 Plan or 2016 Plan that are subsequently forfeited or net settled for tax withholding purposes are returned to the treasury share pool and become available for grant under the 2020 Plan.

Awards totaling 1,725,000 shares have been authorized under the 2020 Plan. There were 1,392,706 shares available for grant under the 2020 Plan as of June 30, 2022.

Stock Options

We did not award any new stock options in fiscal years 2022, 2021, or 2020. The 19,550 options outstanding as of June 30, 2021 were exercised in the second quarter of fiscal 2022 at a weighted average exercise price of $10.19 per share. There were no options outstanding at June 30, 2022. The total intrinsic value of stock options exercised were less than $0.1 million during fiscal 2022 and $0.1 million during fiscal 2021. No stock options were exercised in fiscal 2020.

Nonvested Deferred Shares

We have issued nonvested deferred shares under the following types of arrangements:

•Time-based awards—Employee awards generally vest in four equal annual installments beginning one year after the grant date. Beginning in fiscal 2019, the award agreements contain a provision that accelerates the vesting for retirement eligible participants and participants that become retirement eligible during the vesting period and who elect to retire more than one year after the date of the award. The award is forfeited if retirement occurs before the first anniversary of the award. Settlement still occurs on the normal vesting schedules. Director awards vest one year after the grant date.

•Market-based awards—These awards are in the form of performance units which vest 3 years after the grant date only if our common stock achieves certain levels of total shareholder return when compared to the total shareholder return of a peer group of companies as selected by the Compensation Committee of the Board of Directors. The payout can range from zero to 200% of the original award depending on the Company's relative total shareholder return during the performance period. These awards are settled in stock. As of June 30, 2022, there were approximately 163,000, 340,000, and 389,000 performance units that are scheduled to vest in fiscal 2023, fiscal 2024, and fiscal 2025, respectively, assuming target performance.

All awards under the 2020 Plan vest upon the death or disability of the participant or upon a change of control of the Company, provided that the successor company fails to assume or replace the awards in connection with that change of control event. If the successor company does assume the awards, then vesting of the awards will be accelerated in the event of an involuntary termination or other material adverse event that occurs in connection with or following the change of control. All awards prior to the 2020 Plan vest upon the death or disability of the participant or upon a change of control of the Company.

The grant date fair value of the time-based awards is determined by the market value of our common stock on the grant date. The grant date fair value of the market-based awards is calculated using a Monte Carlo model. For the fiscal 2022 grant, the model estimated the fair value of the award based on approximately 100,000 simulations of the future prices of our common stock compared to the future prices of the common stock of its peer companies based on historical volatilities. The model also took into account the expected dividends over the performance period of those peer companies which pay cash dividends.

Nonvested deferred share activity for the fiscal year ended June 30, 2022 is as follows:


	Shares	Weighted Average Grant Date Fair Value per Share
Nonvested shares at June 30, 2021	1,280,707	$	17.07
Shares granted	696,227	$	14.13

Shares vested and released	(268,403)	$	13.92
Shares canceled	(242,743)	$	25.50
Nonvested shares at June 30, 2022	1,465,788	$	14.86

There were 665,597 and 490,322 deferred shares granted in fiscal 2021 and 2020 with average grant date fair values of $10.60 and $21.79 per share, respectively. There were 515,218 and 542,279 deferred shares that vested and were released in fiscal 2021 and 2020 with weighted average fair values of $16.99 and $19.43 per share, respectively. There were 119,904 deferred shares cancelled in fiscal 2021 with an average grant date fair value of $20.67. No deferred shares were cancelled in fiscal 2020.

Cash-Settled Restricted Share Units

We granted 231,219 and 238,848 cash-settled restricted share units during fiscal years 2022 and 2021, respectively; with weighted average fair values of $2.6 million and $2.3 million, respectively. No cash-settled restricted share units were granted in fiscal year 2020. There were 53,333 shares vested and released in fiscal 2022 with a weighted average fair value of $0.5 million. There were no cash-settled restricted shares vested or released in fiscal 2021 or 2020. There were 25,355 shares cancelled in fiscal 2022 with a weighted average fair value of $0.3 million. There were no cash-settled restricted shares cancelled in fiscal 2021 or 2020.

The grant date fair value of these awards is based on the price of our common stock and the number of shares awarded on the date of grant. The award must be settled in cash and is accounted for as a liability-type award. The expense is recognized over the requisite service period with remeasurement at the end of each reporting period at fair value until settlement. The requisite service period is based on the vesting provisions of the awards which generally occur in four equal annual installments beginning one year after the grant date. These awards contain the same retirement provisions described for time-based awards in the nonvested deferred shares section above.

We recognized $0.6 million and $1.0 million of expense in fiscal years 2022 and 2021, respectively, for cash-settled restricted share units, which was included in selling, general and administrative expenses and cost of revenue in the Consolidated Statements of Income. As of June 30, 2022, the liability for cash-settled restricted share units was $0.9 million and is included in accrued wages and benefits in the Consolidated Balance Sheets.