Share-Based Compensation | 23. Share-Based Compensation 2021 Incentive Plan The E2open Parent Holdings, Inc. 2021 Omnibus Incentive Plan (2021 Incentive Plan) allows us to make equity and equity-based incentive awards to officers, employees, directors and consultants. There were 15,000,000 shares of Class A Common Stock reserved for issuance under the 2021 Incentive Plan as of February 28, 2022. The "evergreen" provision of the 2021 Incentive Plan provides for an annual automatic increase to the number of shares of Class A Common Stock available under the plan. As of March 1, 2022 and 2023, an additional 4,849,684 shares and 7,304,646 shares were reserved for issuance under the "evergreen " provision, respectively. Shares issued under the 2021 Incentive Plan can be granted as stock options, restricted stock awards, restricted stock units, performance stock awards, cash awards and other equity-based awards. No award may vest earlier than the first anniversary of the date of grant, except under limited conditions. Our board of directors, or its expressly approved delegees, have approved the grant of options, RSUs and restricted stock awards (RSAs) under the 2021 Incentive Plan. Options Options are either performance-based or time-based. The fiscal year 2022 options were performance-based and measured based on obtaining an organic growth target over a one-year period. The fiscal year 2023 options were performance-based and measured based on obtaining organic growth, adjusted EBITDA and net booking targets over a one-year period. A quarter of the options vest at the end of the performance period and the remaining options will vest equally over the following three years . The fiscal year 2024 options are time-based with one-third of the options vesting at the end of the first year with the remaining options vesting ratably each quarter over the remaining two-years . Our executive officers and senior management are granted these performance-based and time-based options. The performance target is set at 100 % at the grant date, and the probability of meeting the performance target is remeasured each quarter over the performance period and adjusted if needed. The performance target for the options granted during May 2021 was finalized in April 2022 above 100 % and adjusted accordingly. The performance target for the options granted in May 2022 was finalized in April 2023 below 100 % and adjusted accordingly. As of November 30, 2023, there were 1,215,252 unvested performance-based options and 901,246 unvested time-based options. RSUs The RSUs are either performance-based or time-based. The fiscal year 2022 performance-based RSUs were measured based on obtaining an organic growth target over a one-year period. The fiscal year 2023 performance-based RSUs were measured based on obtaining an organic growth, adjusted EBITDA and net bookings target over a one-year period. The fiscal year 2024 performance-based RSUs are measured based on obtaining an organic subscription revenue growth, constant currency adjusted EBITDA and net bookings target over a one-year period. A quarter of the RSUs will vest at the end of the performance period and the remaining RSUs will vest equally over the following three years. The performance target is set at 100 % at the date of grant, and the probability of meeting the performance target is remeasured each quarter over the performance period and adjusted if needed. The performance target for the performance-based RSUs granted during May 2021 was finalized in April 2022 above 100 % and adjusted accordingly. The performance target for the performance-based RSUs granted in May 2022 was finalized in April 2023 below 100 % and adjusted accordingly. The time-based RSUs for executive officers, senior management and employees granted during fiscal years 2022 and 2023 vest ratably over a three-year period. Beginning in fiscal year 2024, the time-based RSUs for executive officers, senior management and employees will vest one-third at the end of the first year and then ratably each quarter over the remaining two years. The time-based RSUs for non-employee directors of our board of directors have a one-year vesting period. During November 2023, executive officers and senior management received retention time-based RSUs which have an eighteen-month vesting period. The total retention awards granted during November 2023 were 2,052,680 . See Note 28, Subsequent Events for information regarding additional retention awards granted in December 2023. As of November 30, 2023, there were 3,514,740 performance-based RSUs, 9,778,141 time-based RSUs and 408,881 RSAs that were unvested and expected to vest. During fiscal 2023 and 2024, our board of directors approved a company-wide share-based compensation program under our 2021 Incentive Plan where all eligible employees received annual stock awards as part of their annual compensation package. The fiscal 2023 grant was awarded on October 1, 2022 and the fiscal 2024 grant was awarded on July 1, 2023. Future awards under this program are at the discretion of the board of directors and are not guaranteed for any fiscal year. For employees based in China, they are awarded cash-settled RSUs which will vest ratably over a three-year period. The cash-settled RSUs must be settled in cash and are accounted for as liability-type awards. The fair value of these cash-settled RSUs equals the value of our Class A Common Stock on the date of grant and is remeasured at the end of each reporting period at fair value. The change in fair value will be recorded in share-based compensation expense in the Condensed Consolidated Statements of Operations. T he liability for the cash-settled RSUs was negligible as of November 30, 2023 and is included in accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets. As of November 30, 2023, there w ere 37,479 unvested c ash-settled RSUs with a total intrinsic value of $ 0.1 milli on. As previously disclosed in our 2022 Form 10-K in Item 9B., Other Information , our former Chief Financial Officer entered into a Transition Agreement in which all of his outstanding stock awards accelerated vesting to August 31, 2022. Additionally, the exercise period for his options was extended from 90 days to one year with exercises permitted through August 31, 2023 . All of the options expired unexercised as of August 31, 2023. Restricted Stock Awards RSAs are time-based and granted to participants with the associated Class A Common Stock issued on the day of grant. The Class A Common Stock are issued with restrictions and voting rights. When the applicable vesting terms have been met, the restrictions are removed from the Class A Common Stock. Mr. Andrew Appel joined E2open as interim Chief Executive Officer on October 10, 2023. As part of his compensation, he received an initial RSA grant valued at $ 685,000 , or 275,101 shares, under our 2021 Incentive Plan which will vest after six months of issuance. If Mr. Appel's term continues past the initial six-month period, he will receive an additional monthly RSA grant valued at $ 100,000 that will vest after one month of issuance. Mr. Appel's Chief of Staff was awarded an RSA grant in November 2023 for 133,780 shares under our 2021 Incentive Plan which will vest after five months of issuance. As of November 30, 2023, there w ere 9,290,911 shares of Class A Common Stock available for grant under the 2021 Incentive Plan. Activity under the 2021 Incentive Plan related to options was as follows: Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (in years) Balance, February 28, 2023 4,833 $ 8.42 8.5 Granted 1,232 4.65 Forfeited/Expired ( 3,949 ) 7.82 Balance, November 30, 2023 2,116 $ 7.36 6.8 Vested and exercisable as of November 30, 2023 807 $ 9.28 3.6 Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (in years) Balance, February 28, 2022 2,524 $ 9.83 9.0 Granted 3,275 7.76 Forfeited ( 966 ) 9.85 Balance, November 30, 2022 4,833 $ 8.42 8.7 Vested and exercisable as of November 30, 2022 573 $ 9.82 5.2 As of November 30, 2023, there was $ 2.6 million of unrecognized compensation cost related to unvested options. The aggregate intrinsic value of the outstanding, vested and exercisable stock option awards was zero as of November 30, 2023 since our Class A Common Stock price was less than the exercise price of the stock option awards. Activity under the 2021 Incentive Plan related to RSUs and RSAs was as follows: Number of Units Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Recognition Period (in years) Balance, February 28, 2023 6,475 $ 8.44 2.4 Granted 12,235 5.26 Added by performance factor 39 9.02 Released ( 1,968 ) 8.36 Canceled and forfeited ( 3,079 ) 6.83 Balance, November 30, 2023 13,702 $ 5.77 2.1 Number of Units Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Recognition Period (in years) Balance, February 28, 2022 2,103 $ 12.47 2.7 Granted 5,645 7.45 Added by performance factor 300 12.87 Released ( 870 ) 12.12 Canceled and forfeited ( 560 ) 10.00 Balance, November 30, 2022 6,618 $ 8.46 2.6 As of November 30, 2023, there was $ 53.2 mi llion of unrecognized compensation cost related to unvested RSUs and RSAs. The aggregate intrinsic value of the RSUs and RSAs was $ 49.9 million as of November 30, 2023 which is the outstanding RSUs and RSAs valued at the closing price of our Class A Common Stock on November 30, 2023. Activity under the 2021 Incentive Plan related to cash-settled RSUs was as follows: Number of Units Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (in years) Balance, February 28, 2023 25 $ 6.07 2.6 Granted 24 5.60 Released ( 8 ) 6.07 Canceled and forfeited ( 4 ) 5.96 Balance, November 30, 2023 37 $ 5.78 2.3 Number of Units Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (in years) Balance, February 28, 2022 — $ — — Granted 25 6.07 Balance, November 30, 2022 25 $ 6.07 2.8 As of November 30, 2023, there was $ 0.1 million o f unrecognized compensation cost related to unvested cash-settled RSUs. The aggregate intrinsic value of the cash-settled RSUs was $ 0.1 million as of November 30, 2023 which is the outstanding cash-settled RSUs valued at the closing price of our Class A Common Stock on November 30, 2023. As previously disclosed in our August 31, 2023 Form 10-Q in Item 5., Other Information , our former Chief Operating Officer entered into a Release and Non-Competition Agreement (Separation Agreement) in which he will provide transition services until December 31, 2023 (Transition Period). As a result of his departure, his options, time-based RSUs and performance-based RSUs will be prorated as of December 31, 2023. The remaining unvested awards will be accelerated at 50 %. This will result in 189,039 options and 187,325 time-based and performance-based RSUs vesting as of December 31, 2023. The 2024 fiscal year performance-based RSUs will remain unvested until the performance metrics are determined in early fiscal 2025, at which point this award will accelerate and vest at 50 %. In accordance with our executive plan, our former Chief Executive Officer's options, time-based RSUs and performance-based RSUs were prorated as of his departure date, October 11, 2023, resulting in 134,920 options and 147,606 time-based and performance-based RSUs vesting. The 2024 fiscal year performance based RSUs will remain unvested until the performance metrics are determined in early fiscal 2025, at which point this award will accelerate and vest at 25 %. The estimated grant-date fair values of the options granted or modified during the nine months ended November 30, 2023 and 2022 were calculated using the Black-Scholes option-pricing valuation model, based on the following assumptions: Nine Months Ended November 30, 2023 2022 Expected term (in years) 0.68 - 6.25 6.25 Expected volatility 48.97 % - 56.84 % 44.17 % Risk-free interest rate 3.38 % - 5.30 % 2.91 % Expected dividend yield 0 % 0 % The assumptions and estimates were as follows: Expected Term : The expected term represents the weighted-average period the share-based awards are expected to remain outstanding and is calculated using the simplified method, as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The simplified method calculates the expected term as the midpoint between the vesting date and the contractual expiration date of the option. Expected Volatility : The expected stock price volatility assumption was determined based on the historical volatility of the Class A Common Stock. Risk-Free Interest Rate : The risk-free rate assumption was based on the U.S. Treasury instruments whose term was consistent with the option's expected term. Expected Dividend Yield : We do not currently declare or pay dividends on our common stock and do not expect to do so for the foreseeable future. The table below sets forth the functional classification in the Condensed Consolidated Statements of Operations of our equity-based compensation expense: Three Months Ended November 30, Nine Months Ended November 30, ($ in thousands) 2023 2022 2023 2022 Cost of revenue $ 1,304 $ 545 $ 3,059 $ 856 Research and development 1,665 938 4,177 2,181 Sales and marketing 1,556 901 3,444 2,560 General and administrative 2,316 2,413 8,048 7,542 Total share-based compensation $ 6,841 $ 4,797 $ 18,728 $ 13,139 |