Quarterly report pursuant to Section 13 or 15(d)

Equity Based Compensation

v3.22.1
Equity Based Compensation
 3 Months Ended
Mar. 31, 2022
Share-based Payment Arrangement [Abstract]  
Equity Based Compensation
 
21.
Equity Based Compensation
Restricted Stock Units
Pursuant to the terms of the A&R MLTIP, there are two types of equity based compensation granted to employees, henceforth referred to as Replacement Restricted Stock Units (“Replacement RSUs”) and Earnout Right Restricted Stock Units (“Earnout Right RSUs”). The issuance of the Replacement RSUs and Earnout Right RSUs by
pre-transaction
ownership to employees under the A&R MLTIP will be funded by the exchange of current Class A Common Stock and Class A LLC Units held by the unitholders of FoA Equity prior to the closing of the Business Combination. Therefore, the shares issued to employees under the A&R MLTIP will not result in incremental share ownership in the Company, and the total compensation costs associated with the vesting of the Replacement RSUs and Earnout Right RSUs will be directly allocated to the noncontrolling interest and, with respect to Blocker GP, to FoA in proportion to their sharing percentages of exchanged units.
Additionally, pursuant to the terms of the 2021 Omnibus Incentive Plan, the Company granted equity based compensation to certain employees and
non-employee
board of directors members, henceforth referred to as
Non-LTIP
Restricted Stock Units
(“Non-LTIP
RSUs”). Vested
Non-LTIP
RSUs will be settled with issuance of shares of Class A Common Stock of FoA to the participant and a respective count of Class A LLC units of FoA Equity to FoA.
Each type of RSUs is classified as equity and FoA accounts for the RSUs following the fair value method. Each type of RSUs’ fair values is fixed on the grant date and not remeasured unless the award is subsequently modified.
Replacement RSUs
Pursuant to the terms of the A&R MLTIP executed on October 28, 2020, the Company granted each employee who held Phantom Units in FoA Equity and remained employed as of the Replacement RSU grant date, April 1, 2021, in consideration for the cancellation of their Phantom Units, Replacement RSUs that will vest into shares of Class A Common Stock.
Following the terms of the A&R MLTIP, 25% of the Replacement RSUs vested on the Replacement RSU grant date, and the remaining 75% vest in equal installments on each of the first three anniversaries of the Closing of the Business Combination, subject to each holder’s continued employment.
Earnout Right RSUs
In addition to the Replacement RSUs, participants in the A&R MLTIP are entitled to receive additional Earnout Right RSUs depending on whether the Company achieves certain market-based conditions. The market-based vesting conditions have been factored into the grant date fair value measurement of the Earnout Right RSUs using a Monte Carlo simulation. The assumptions used in the Monte Carlo simulation model included a volatility rate of 60%, risk free rate of 1.14% and a weighted average expected term of 1.06 years for the first tranche of Earnout Right RSUs and 1.52 years for the second tranche of Earnout Right RSUs.
Earnout Right RSUs have the same service-based vesting conditions listed above for the Replacement RSUs along with market-based vesting conditions. The first tranche of Earnout Right RSUs vest upon satisfaction of the service-based vesting conditions and if, at any time during the six years following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $12.50 for any twenty
out of thirty consecutive trading days.
 
The second tranche of Earnout Right RSUs vest upon satisfaction of the service-based vesting conditions and if, at any time during the
six years
following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $
15.00
for any
twenty
out of thirty consecutive trading days.
Non-LTIP
RSUs
Pursuant to the terms of the 2021 Omnibus Incentive Plan executed on November 18, 2021, the Company granted
Non-LTIP
RSUs to employees and
non-employee
board of directors members. The RSUs granted have various grant dates and vesting schedules.
 
All vesting is subject to each holder’s continued employment and are subject to forfeiture if the participant leaves the company for reasons other than those permitted under the plan.
Employee Stock Purchase Plan
On January 1, 2022, FoA opened an initial offering period for our Employee Stock Purchase Plan (the “ESPP”) for the benefit of Company employees. Participation in the ESPP is voluntary and is open to any Company employee who satisfies the eligibility requirements under the ESPP other than the Company’s “officers” (as defined in Rule 16a-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The ESPP allows for shares of the Company’s Class A Common Stock to be purchased on behalf of participants, using funds contributed by participants through payroll deductions. Participants can contribute up to the lesser of 15% of the participant’s Base Earnings (as defined in the ESPP) or $50,000 per participant in any calendar year. The ESPP includes a matching component pursuant to which participating employees will be eligible to receive a grant of restricted stock units (“Match RSUs”) pursuant to and in accordance with the Company’s 2021 Omnibus Incentive Plan. The number of Match RSUs to be granted to participants with respect to each offering period will equal to 20% of the shares purchased by participants under the ESPP with respect to such offering period. The Company recorded $0.1 million in expense associated with the ESPP within salaries, benefits and related expenses on the Condensed Consolidated Statement of Operations (Unaudited) for the Successor three months ended March 31 2022.
A
 
summary of the each classification of RSU activity for the periods indicated is presented below in thousands, except for share information:
 
                      
Grant Date Fair Value
  
Replacement RSUs
   
Number of
Units
Unvested
    
Number
of Units
Vested
    
Total
Number of
Units
    
Weighted
Average
Price Per
Unit
     
Total Fair
Value (in
thousands)
  
Outstanding, December 31, 2021
   
 
10,392,226
 
  
 
20,640
 
  
 
10,412,866
 
  
$
9.48
 
   
$
98,714
 
Granted
   
 
—   
 
  
 
—   
 
  
 
—   
 
  
 
—   
 
   
 
—   
 
Vested
   
 
(722,398
) 
  
 
722,398
 
  
 
—   
 
  
 
—   
 
   
 
—   
 
Forfeited
   
 
—   
 
  
 
—   
 
  
 
—   
 
  
 
—   
 
   
 
—   
 
Settled
   
 
—   
 
  
 
(20,640
) 
  
 
(20,640
) 
  
 
9.48
 
   
 
(196
) 
    
 
 
    
 
 
    
 
 
    
 
 
     
 
 
  
Outstanding, March 31, 2022
   
 
9,669,828
 
  
 
722,398
 
  
 
10,392,226
 
  
$
9.48
 
   
$
98,518
 
    
 
 
    
 
 
    
 
 
    
 
 
     
 
 
  
On March 15, 2022, there was a good leaver event that resulted in 722,398 RSUs being vested. There are
 
3,704,860
Replacement RSUs
that
are scheduled to vest from April 
1
,
2022
to December 
31
,
2022
on the first anniversary of the Business Combination (
April 1, 2022
). Equity based compensation expense for the Replacement RSUs totaled $
15.3
 million and $
0
for the Successor
three
months ended March 
31
,
2022
and the Predecessor period from January 
1
,
2021
to March 
31
,
2021
, respectively. Unrecognized equity based compensation expense for the Replacement RSUs totaled $
51.9
 million as of
 March 
31
,
2022
.
 
                         
Grant Date Fair Value
  
Earnout Right RSUs
   
Number of
Units
Unvested
     
Number
of Units
Vested
     
Total
Number of
Units
     
Weighted
Average
Price Per
Unit
     
Total Fair
Value (in
thousands)
  
Outstanding, December 31, 2021
   
 
1,531,440
 
   
 
—  
 
   
 
1,531,440
 
   
$
8.91
 
   
$
13,638
 
Granted
      —           —          —           —           —     
Forfeited
      —           —          —           —           —     
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Outstanding, March 31, 2022
   
 
1,531,440
 
   
 
—  
 
   
 
1,531,440
 
   
$
8.91
 
   
$
13,638
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
No Earnout Right RSUs are scheduled to vest from April 1, 2022 to December 31, 2022. Equity based compensation expense for the Earnout Right RSUs totaled $2.2 million and $0 for the Successor three months ended March 31, 2022 and the Predecessor period from January 1, 2021 to March 31, 2021, respectively. Unrecognized equity based compensation expense for the Earnout Right RSUs totaled $4.0 million as of March 31, 2022.
 
 
                         
Grant Date Fair Value
  
Non-LTIP
RSUs
   
Number
of Units
Unvested
     
Number
of Units
Vested
     
Total
Number
of Units
     
Weighted
Average
Price Per
Unit
     
Total Fair
Value (in
thousands)
  
Outstanding, December 31, 2021
   
 
168,221
 
   
 
—  
 
   
 
168,221
 
   
$
5.35
 
   
$
900
 
Granted
      409,835        —          409,835        3.35        1,373  
Vested
      —          —          —          —          —    
Settled
      —          —          —          —          —    
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Outstanding, March 31, 2022
   
 
578,056
 
   
 
—  
 
   
 
578,056
 
   
$
3.93
 
   
$
2,273
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
219,987 of the
Non-LTIP
 RSUs are scheduled to vest from April 1, 2022 to December 31, 2022. Equity based compensation expense for the
Non-LTIP
RSUs totaled $0.4 million and $0 for the Successor three months ended March 31, 2022 and the Predecessor period from January 1, 2021 to March 31, 2021, respectively. Unrecognized equity based compensation expense for the
Non-LTIP
RSUs totaled $1.8 million
as of
March 31, 2022.
LTIP 
On January 1, 2015, the Company established an LTIP to compensate key employees. Any distributions are based on distributions received by equity holders of the Company in excess of the contributed equity capital, plus a designated return on contributed equity capital (the “Hurdle”).
The Phantom Units were accounted for as a profit-sharing arrangement, as they did not represent a substantive form of equity and were not indexed to the price of UFG common units.
In connection with the Closing of the Business Combination, which occurred on April 1, 2021, the holders of Phantom Units (1,077 units outstanding) received
one-time
lump sum cash payments totaling $24.0 million as it relates to the achievement of the Hurdle being met under the original terms of the Plan.
The cash payment of $24.0 million related to prior services provided solely for the benefit of the Company and not for ongoing services to be provided in the future that would benefit the post-combination entity. Given that the payment was triggered by the distributions made in connection with the successful closing of the Business Combination, the payment of $24.0 million was considered to have been incurred “on the line.” The balance of the Company’s obligation under the Plan was replaced by the issuance of Replacement RSUs and Earnout Right RSUs described above as governed by the A&R MLTIP.