Landsea Homes Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based CompensationDuring 2018, Landsea Holdings created a long-term incentive compensation program designed to align the interests of Landsea Holdings, the Company, and its executives by enabling key employees to participate in the Company’s future growth through the issuance of phantom equity awards. Landsea Holdings’ phantom equity awards issued on or after January 1, 2018 were accounted for pursuant to ASC 710, Compensation, as the value was not based on the shares of comparable public entities or other equity but was instead based on the book value of Landsea Holdings’' equity. Landsea Holdings measured the value of the phantom equity awards on a quarterly basis using the intrinsic value method and pushed down the expense to the Company since the employees who participated in the long-term incentive compensation program primarily benefited the Company. In connection with the Merger all of the

phantom equity awards vested and were either paid out in cash or were converted to stock of LHC and the program was terminated. The Company recorded $2.7 million in general and administrative expenses in the three months ended March 31, 2021 related to the accelerated vesting of the phantom awards. The Company paid cash of $2.9 million for the phantom stock awards and granted 0.2 million shares with a grant date value of $1.9 million at the time of the Merger.

The following table presents a summary of the Company’s nonvested PSUs and RSUs for the nine months ended September 30, 2022:


	Awards	Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested, at December 31, 2021	768	$	9.43
Granted	1,136	8.48
Vested	(278)	9.19
Forfeited	—	—
Nonvested, at September 30, 2022	1,626	$	8.82

The following table presents a summary of the Company’s stock options activity for the nine months ended September 30, 2022:


	Number of Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)			(in years)	(in thousands)
Options outstanding at December 31, 2021	—	$	—
Granted	744	8.82
Exercised	—	—
Forfeited	(60)	8.83
Options outstanding at September 30, 2022(1)	684	$	8.82	9.46	$	—
Options exercisable at September 30, 2022	—	$	—	—	$	—

(1) As of September 30, 2022, the stock options were out-of-the-money, as the exercise price of the stock options exceeded the average market price of the Company’s common stock.

Stock-based compensation expense totaled $0.9 million and $2.8 million during the three and nine months ended September 30, 2022, respectively, and is included in general and administrative expenses on the consolidated statements of operations. For the three and nine months ended September 30, 2021, stock-based compensation expense was $1.2 million and $4.1 million, respectively.

The following table presents a summary of the Company’s outstanding RSUs and PSUs, assuming the current estimated level of performance achievement (in thousands, except years):


	September 30, 2022
	(in thousands, except period)
Unvested units	1,626
Remaining cost on unvested units	$	4,415
Remaining vesting period	4.25 years

Stock-based compensation expense associated with the outstanding RSUs and PSUs is measured using the grant date fair value. The expense associated with the PSUs also incorporates the estimated achievement of the established performance criteria at the end of each reporting period until the performance period ends.