Stock-Based Compensation

3 Months Ended

Mar. 31, 2025

Share-Based Payment Arrangement [Abstract]

11. Stock-Based Compensation

We recognize stock-based compensation expense associated with stock options and restricted stock units ("RSUs"), and stock purchase rights. Stock options and RSUs are granted under the 2014 Stock Option Plan of Hotshine Holdings, Inc. (the “2014 Plan”) and 2021 Incentive Award Plan (the “2021 Plan”) while stock purchase rights are granted under the 2021 Employee Stock Purchase Plan (“2021 ESPP”).

Refer to our 2024 Form 10-K for additional details on employee stock incentive plans.

The grant date fair value of Time Vesting Options granted is determined using the Black-Scholes option-pricing model. The grant date fair value of stock purchase rights granted under the 2021 ESPP is determined using the Black-Scholes option-pricing model.

2021 ESPP

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant date fair value of stock purchase rights granted under the 2021 ESPP during the periods presented:


	Three Months Ended March 31,
	2025	2024
Expected volatility	42.14%	49.59%
Risk-free interest rate	4.44%	5.38%
Expected term (in years)	0.49	0.49
Expected dividend yield	None	None

Stock Options

A summary of our stock option activity during the period presented is as follows:


	Time Vesting Options			Performance Vesting Options			Total Number of Stock Options			Weighted-Average Exercise Price
Outstanding as of December 31, 2024		9,137,994			1,897,467			11,035,461		$	5.70
Granted		-			-			-		$	-
Exercised		(600,525	)		(382,625	)		(983,150	)	$	1.73
Forfeited		(128,966	)		-			(128,966	)	$	10.15
Outstanding as of March 31, 2025		8,408,503			1,514,842			9,923,345		$	6.03
Options vested or expected to vest as of March 31, 2025		8,133,351			1,514,842			9,648,193		$	7.55
Options exercisable as of March 31, 2025		5,358,696			1,514,842			6,873,538		$	4.69

The number and weighted-average grant date fair value of stock options during the period presented are as follows:


	Number of Stock Options					Weighted-Average Grant Date Fair Value
	Time Vesting Options			Performance Vesting Options		Time Vesting Options		Performance Vesting Options
Non-vested as of December 31, 2024		3,544,956			—	$	4.05		—
Granted		—			—	$	-		—
Vested		(418,686	)		—	$	3.57		—
Forfeited		(76,462	)		—	$	4.61		—
Non-vested as of March 31, 2025		3,049,808			—	$	4.13		—

There were no Time Vesting Options granted during the three months ended March 31, 2025. There were no Performance Vesting Options granted during the three months ended March 31, 2025.

The fair value of shares attributable to stock options that vested during the three months ended March 31, 2025 was $3,390.

As of March 31, 2025, the weighted-average remaining contractual life of outstanding stock options was approximately 5.35 years.

Restricted Stock Units

A summary of our RSU activity during the period presented is as follows:


	Restricted Stock Units			Weighted-Average Grant Date Fair Value
Unvested as of December 31, 2024		4,812,481		$	8.10
Granted		—			-
Vested		(137,425	)		9.13
Forfeited		(168,459	)		7.67
Unvested as of March 31, 2025		4,506,597		$	8.08

There were no RSUs granted during the three months ended March 31, 2025.

The fair value of shares attributable to RSUs that vested during the three months ended March 31, 2025 was $1,156.

As of March 31, 2025, the weighted-average remaining contractual life of outstanding RSUs was approximately 8.65 years.

Stock-Based Compensation Expense

We estimated a forfeiture rate of 10.03% for awards with service-based vesting conditions based on historical experience and future expectations of the vesting of these share-based payments. We used this rate as an assumption in calculating stock-based compensation expense for Time Vesting Options, RSUs, and stock purchase rights granted under the 2021 ESPP.

Total stock-based compensation expense, by caption, recorded in the consolidated statements of operations for the periods presented is as follows:


	Three Months Ended March 31,
	2025		2024
Cost of labor and chemicals	$	2,782	$	2,473
General and administrative		4,061		3,773
Total stock-based compensation expense	$	6,843	$	6,246

Total stock-based compensation expense, by award type, recorded in the consolidated statements of operations for the periods presented is as follows:


	Three Months Ended March 31,
	2025		2024
Time Vesting Options	$	1,863	$	1,577
RSUs		4,788		4,407
2021 ESPP		192		262
Total stock-based compensation expense	$	6,843	$	6,246

As of March 31, 2025, total unrecognized compensation expense related to unvested Time Vesting Options was $5,331, which is expected to be recognized over a weighted-average period of 1.77 years.

As of March 31, 2025, there was no unrecognized compensation expense related to unvested Performance Vesting Options as the completion of the IPO satisfied the performance condition and as a result, all outstanding Performance Vesting Options vested.

As of March 31, 2025, total unrecognized compensation expense related to unvested RSUs was $12,945, which is expected to be recognized over a weighted-average period of 1.80 years.

As of March 31, 2025, total unrecognized compensation expense related to unvested stock purchase rights under the 2021 ESPP was $105, which is expected to be recognized over a weighted-average period of 0.12 years.

Share-Based Payment Valuation

Stock Options

Restricted Stock Units

Stock-Based Compensation Expense

Mister Car Wash, Inc. 10-Q