Stock-Based Compensation

3 Months Ended

Mar. 29, 2025

Share-Based Payment Arrangement [Abstract]

13. STOCK-BASED COMPENSATION

On April 12, 2021, the Company’s stockholders approved the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Omnibus Equity Plan”), which became effective on April 22, 2021. The 2021 Omnibus Equity Plan provides for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock units and other stock-based and cash-based awards. The maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director under the 2021 Omnibus Equity Plan during any one fiscal year, together with any cash fees paid to such non-employee director during such fiscal year, is $750,000.

On May 2, 2023, at the 2023 annual meeting of stockholders of the Company, the stockholders approved the first amendment (the “Equity Plan First Amendment”) to the 2021 Omnibus Equity Plan, which was previously approved by the Board. The Equity Plan First Amendment became effective upon stockholder approval, and provides for (i) an increase by 8,000,000 shares of the share pool, i.e. the maximum number of shares of the Company’s common stock that may be issued pursuant to awards granted under the 2021 Omnibus Equity Plan, (ii) a prohibition on recycling of shares withheld or remitted to pay taxes for all awards, (iii) a minimum vesting period of one year for all awards, with an exception for shares representing 5% of the share pool, and (iv) a prohibition on the transfer of stock options and stock appreciation rights for value or to third-party financial institutions without stockholder approval.

Except as amended by the Equity Plan First Amendment, the other terms of the 2021 Omnibus Equity Plan remain in full force and effect. Subsequent to the Equity Plan First Amendment, the maximum aggregate number of shares reserved for issuance under the 2021 Omnibus Equity Plan is 21,170,212 shares.

The following table summarizes the Company’s stock-based compensation expense (in thousands):



	Fiscal Quarter Ended
	March 29, 2025		March 30, 2024
Selling, general, and administrative	$	1,971	$	1,243
	$	1,971	$	1,243

As of March 29, 2025, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $15.7 million, which is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units

The following table represents the Company’s restricted stock units activity during the fiscal quarter ended March 29, 2025:


		Weighted-
		Average Grant-
	Shares	Date Fair Value
Outstanding at January 1, 2025	4,200,759	$	3.12
Granted	798,077		7.31
Vested	(941,370)		3.20
Forfeited	(56,405)		3.16
Outstanding at March 29, 2025	4,001,061	$	3.93

Stock Options

The following table represents the Company’s stock option activity during the fiscal quarter ended March 29, 2025:


			Weighted-	Weighted-
			Average	Average
		Exercise Price		Remaining	Aggregate
	Shares	per Share		Contract Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding at January 1, 2025	1,383,738	$	15.20
Granted	—		—
Exercised	—		—
Forfeited	—		—
Expired	—		—
Outstanding at March 29, 2025	1,383,738	$	15.20	6.61	$	83
Vested and expected to vest at March 29, 2025	1,383,738	$	15.20	6.61	$	83
Options exercisable at March 29, 2025	976,745	$	15.72	6.58	$	42

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

Stock Appreciation Rights

The following table represents the Company’s stock appreciation rights activity during the quarter ended March 29, 2025:


			Weighted-	Weighted-
			Average	Average
		Exercise Price		Remaining	Aggregate
	Shares	per Share		Contract Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding at January 1, 2025	660,556	$	3.15
Granted	—		—
Exercised	—		—
Forfeited	—		—
Outstanding at March 29, 2025	660,556	$	3.15	8.13	$	2,168
Vested and expected to vest at March 29, 2025	660,556	$	3.15	8.13	$	2,168
Stock appreciation rights exercisable at March 29, 2025	292,602	$	3.19	8.12	$	949

The aggregate intrinsic value of stock appreciation rights is calculated as the difference between the strike price of the stock appreciation rights and the fair value of the Company’s common stock for those stock appreciation rights that had strike prices lower than the fair value of the Company’s common stock.

Performance Stock Units

During the fiscal quarter ended March 29, 2025 the Compensation Committee of the Board approved the grant of performance stock units (“PSUs”) as a portion of the annual equity award to the Company’s executive officers.

Thirty-three percent of the target number of PSUs awarded on the date of grant will be earned annually at 0% to 200% of the target number of PSUs based on the Company’s achievement of Adjusted EBITDA (with 100% of PSUs being earned at target performance, and linear interpolation between threshold and target and maximum performance) as defined in the award agreement, for each year of the three-year performance period beginning January 1, 2025 and ending December 31, 2027. Any earned PSUs cliff vest on the third anniversary of the grant date. Adjusted EBITDA is considered a performance condition and the grant date fair value corresponds with management’s expectation of the probable outcome of the performance condition as of the grant date. The grant date fair value is determined based on the fair market value of the Company’s stock at market close on the grant date multiplied by the target number of shares subject to the award and adjusted for management's expectation of the probable outcome of the performance condition. The probability of achieving the performance criteria is assessed quarterly during the performance period. Compensation expense related to unvested PSUs is recognized ratably over the performance period.

The following table represents the Company’s PSU activity during the fiscal quarter ended March 29, 2025:


			Weighted-
			Average
			Grant Date
	Shares		Fair Value

Outstanding at January 1, 2025	807,771	$	2.91
Granted	325,613		7.33
Adjustment for performance achievement ⁽¹⁾	—		—
Forfeited	—		—
Outstanding at March 29, 2025	1,133,384	$	4.18

(1)

Represents the adjustment to previously granted PSUs based on performance expectations as of the end of each respective fiscal year.

(2)

An additional 325,613 PSUs could potentially be included if the maximum performance level of 200% is earned for all PSUs granted during the fiscal quarter ended March 29, 2025.

Latham Group, Inc. 10-Q