Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.24.0.1
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
The Company adopted the Landsea Homes Corporation 2020 Stock Incentive Plan (the “Plan”) which provides for the grant of options, stock appreciation rights, restricted stock units (“RSUs”), and restricted stock, any of which may be performance-based, as determined by the Company’s Compensation Committee. The Company reserved a total of 6.0 million shares of common stock for issuance under the Plan. As of December 31, 2023, approximately 3.3 million shares of common stock remained available for issuance under the Plan.

In 2021, the Company granted long term performance share unit awards (“PSUs”) to certain executives under the Plan. The PSUs are earned based upon the Company’s performance over three years, measured by adjusted earnings per share (“EPS”) over fiscal years 2021, 2022 and 2023. Each award is conditioned upon the Company achieving adjusted EPS targets over these performance periods. Target awards of 100% will be earned if the Company’s adjusted EPS meets set thresholds in each of the performance periods. If adjusted EPS is below or above the target thresholds by defined amounts, an award may still be earned in a range between 50%-200% of the target.

In 2022, the Company granted long term PSUs to certain executives under the Plan. The PSUs are earned based upon the Company’s performance over three or five years, measured by cumulative revenue and return on equity (“ROE”) over fiscal years 2022-2024, and in some cases, 2022-2026. Each award is conditioned upon the Company achieving cumulative revenue and ROE targets over these performance periods. Target awards of 100% will be earned if the Company’s cumulative revenue and ROE meet set thresholds in each of the performance periods. If cumulative revenue and ROE is below or above the target thresholds by defined amounts, an award may still be earned in a range between 50%-400% of the target with amounts greater than 200% of the target paid in cash.

In 2023, the Company granted long term PSUs to certain executives under the Plan. The PSUs are earned based upon the Company’s performance over three years measured by cumulative revenue and average adjusted ROE over fiscal years 2023-2025. Each award is conditioned upon the Company achieving cumulative revenue and average adjusted ROE targets over these performance periods. Target awards of 100% will be earned if the Company’s cumulative revenue and ROE meet set thresholds in each of the performance periods. If cumulative revenue and average adjusted ROE is below or above the target thresholds by defined amounts, an award may still be earned in a range between 50%-200% of the target.
The following table presents a summary of the Company’s nonvested PSUs and RSUs as of December 31, 2023 and 2022 and changes during the years then ended:

Year Ended December 31,
2023 2022
Awards Weighted Average Grant Date Fair Value Awards Weighted Average Grant Date Fair Value
(in thousands, except fair value amounts)
Nonvested, beginning of the year 1,625  $ 8.82  768  $ 9.43 
Granted 298  8.28  1,135  8.48 
Vested (375) 8.68  (278) 9.19 
Forfeited (60) 9.02  —  — 
Nonvested, end of the year 1,488  $ 8.74  1,625  $ 8.82 

Most awards vest ratably over three to five years; however, some have been granted with different vesting schedules. The Company records actual forfeitures related to nonvested awards upon employee terminations.

The following table presents a summary of the Company’s stock options activity for the year ended December 31, 2023:

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, 2022
 684  $ 8.82 
Granted 228  6.46 
Exercised (4) 8.83 
Forfeited (222) 8.68 
Expired (2) 8.83 
Options outstanding at December 31, 2023
 684  $ 8.08  8.45 $ 3,462 
Options exercisable at December 31, 2023
 316  $ 8.82  8.05 $ 1,364 

Stock-based compensation expense totaled $3.1 million, $3.6 million, and $5.8 million during the years ended December 31, 2023, 2022, and 2021, respectively, and is included in general and administrative expenses on the consolidated statements of operations. The total intrinsic value of options exercised during the year ended December 31, 2023, was less than $0.1 million. No options were exercised during the years ended December 31, 2022 and 2021.

The following table presents a summary of the Company’s outstanding RSUs and PSUs, assuming the current estimated level of performance achievement:

December 31, 2023
(in thousands, except period)
Unvested units 1,488 
Remaining cost on unvested units $ 2,017 
Remaining vesting period 3.00 years

Stock-based compensation expense associated with the outstanding RSUs and PSUs is measured using the grant date fair value which is based on the closing price as of the grant date. 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.

During 2018, Landsea Holdings created a long-term incentive compensation program to enable key employees to participate in the Company’s future growth through the issuance of phantom equity awards. 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 Landsea Homes and the program was terminated.     
The Company recorded $2.7 million in general and administrative expenses during the year ended December 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.