|12 Months Ended
Dec. 31, 2022
|Share-Based Payment Arrangement [Abstract]
Stock-based compensation is awarded to employees and directors of the Company and accounted for in accordance with ASC 718, "Compensation—Stock Compensation". Stock-based compensation expense is recognized for equity awards over the vesting period based on their grant-date fair value. Stock-based compensation expense is included within the same financial statement caption where the recipient’s other compensation is reported. The Company accounts for forfeitures as they occur. The Company uses various forms of long-term incentives including, but not limited to restricted stock units ("RSUs") and performance-based restricted units ("PSUs"), provided that the granting of such equity awards is in accordance with the Company's 2021 Omnibus Incentive Plan (the "2021 Plan").
2021 Omnibus Incentive Plan
The purpose of the 2021 Plan is to motivate and reward employees and other individuals to perform at their highest level and contribute significantly to the success of the Company.
The Company adopted and obtained stockholder approval at the special meeting of the stockholders on October 19, 2021 of the 2021 Plan. The Company initially reserved 19,952,329 shares of Class A common stock for issuance pursuant to awards under the 2021 Plan. The total number of shares of Class A common stock available for issuance under the 2021 Plan will be increased on the first day of each fiscal year following the date on which the 2021 Plan was adopted in an amount equal to the least of (i) three percent (3%) of the outstanding shares of Class A common stock on the last day of the immediately preceding fiscal year, (ii) 9,976,164 shares of Class A common stock and (iii) such number of shares of Class A common stock as determined by the Committee (as defined and designated under the 2021 Plan) in its discretion. Pursuant to these automatic increase provisions, the number of shares of Class A common stock reserved for issuance pursuant to awards under the 2021 Plan increased to 25,938,028 shares at January 1, 2022. Any employee, director or consultant of the Company or any of its subsidiaries or affiliates is eligible to receive an award under the 2021 Plan, to the extent that an offer of such award is permitted by applicable law, stock market or exchange rules, and regulations or accounting or tax rules and regulations. The 2021 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, RSUs, PSUs, other share-based awards, or any combination thereof. Each award will be set forth in a separate grant notice or agreement and will indicate the type and terms and conditions of the award.
As of December 31, 2022, there were 23,554,298 shares available to be granted under the 2021 Plan, assuming the PSUs previously granted vest at 100% of their performance targets.
The table below summarizes certain data for our stock-based compensation plans (in millions):
(1) Tax benefit (expense) was zero related to Profits Interests expense for the year ended December 31, 2022, Successor Stub Period from October 20, 2021 through December 31, 2021, and Predecessor Stub Period from July 1, 2021 through October 19, 2021.
Restricted Stock Units
RSUs represent a right to receive one share of our Class A common stock that is both nontransferable and forfeitable unless and until certain conditions are satisfied. Certain RSUs vest ratably over various service periods ranging from to five years. The fair value of the RSUs is determined using the Company’s share price on the grant date.
Performance-based Restricted Stock Units
PSUs vest over a three year performance period and are subject to service and performance/market vesting conditions. The number of PSUs to be earned is determined based upon attainment of certain performance goals over the course of the performance period. Fifty percent (50%) of the PSU awards shall vest based on a market condition determined by the Company’s relative total shareholder return (TSR) during the performance period measured as a comparative percentile to the Company’s peers in the Russell 2000 Industrials index with interpolated achievement levels. The remaining fifty percent (50%) of the PSU awards shall vest based on performance condition determined by the Company’s organic revenue growth percentage during the performance period with interpolated achievement levels. If certain minimum performance levels are not attained in the performance period, none of the PSUs will become vested. PSUs are considered variable in that compensation could range from zero to 200% of the award agreement's target contingent on the performance level attained. The fair value of the performance condition PSUs is determined using the Company’s share price on the grant date. The fair value of the market condition PSUs is determined using a Monte Carlo simulation model on the grant date with the following assumptions:
(1) Expected volatility is based on historical volatilities from a group of comparable entities for a time period similar to
that of the expected term.
(2) The risk-free rate is based on an average of U.S. Treasury yields in effect at the time of grant corresponding with the
Director Restricted Stock Units
Members of the Company's Board of Directors ("Director(s)") may elect to receive their quarterly retainer fees in the form of shares of Class A common stock. The retainers are paid quarterly, in arrears in the form of cash or stock at the Director's election. Directors also receive annual grants of RSUs ("Director RSUs") that vest quarterly in four installments over the four quarters of the Director's service following the grant date. The RSUs granted to a new non-employee director are subject to service vesting conditions with each award vesting in three equal quarterly installments on December 15, 2022, March 15, 2023, and June 15, 2023. The expense will be recognized on a straight-line basis over the related service period for each tranche of awards. The number of RSUs granted is determined by the closing price of Mirion's Class A common stock on the grant date.
Activity of our RSUs, PSUs, and Director RSUs is as follows:
Unrecognized compensation cost and weighted average periods remaining for non-vested awards as of December 31, 2022 are as follows (in millions):
In addition, during the year ended December 31, 2022, certain members of the Company's Directors elected to receive their quarterly retainer fees in the form of shares of Class A common stock. As such, the Company recorded related stock-based compensation expense for $0.3 million in the same period.
In conjunction with entering into the Business Combination Agreement on June 17, 2021, the Sponsor issued 4,200,000 Profits Interests to Lawrence Kingsley, the current Chairman of the Board of Directors of the Company, 3,200,000 Profits Interests to Thomas Logan, the Chief Executive Officer of Mirion, and 700,000 Profits Interests to Brian Schopfer, the Chief Financial Officer of Mirion. The Profits Interests are intended to be treated as profits interests for U.S. income tax purposes, pursuant to which Messrs. Logan, Schopfer and Kingsley will have an indirect interest in the founder shares held by the Sponsor.
The Profits Interests are subject to service vesting conditions and market vesting conditions. Fifty percent (50%) of the Profits Interests granted to each of Messrs. Logan and Schopfer service-vest on each of the second and third anniversaries of the Closing, and fifty percent (50%) of the Profits Interests granted to Mr. Kingsley service-vest on each of the first and second anniversaries of the Closing), subject in each case to the continuous service of the grantee on such date. The market vesting conditions require that the price per share of Mirion's Class A common stock must meet or exceed certain established thresholds for 20 out of 30 trading days before the fifth anniversary of the Closing Date). The expense will be recognized on a straight-line basis over the related service period for each tranche of awards.
As the Profits Interests included the completion of the Business Combination as a vesting condition, the expense that accumulated prior to the Business Combination was recorded on the last day of the Predecessor Period.
Of the Profits Interests, 3.2 million have a market vesting threshold price of $12 per share of Mirion Class A common stock, 2.0 million have a threshold price of $14 per share of Mirion Class A common stock, and 3.0 million have a threshold price of $16 per share of Mirion Class A common stock.
The fair value of the Profits Interests are estimated based on a valuation model using Monte Carlo simulations, for the $12, $14, and $16 per share performance vesting conditions, with the following assumptions:
(1) Cost of equity based on a group of comparable entities
(2) The risk-free rate is based on an average of U.S. Treasury yields in effect at the time of grant corresponding with the expected term.
(3) Expected volatility is based on historical volatilities from a group of comparable entities for a time period similar to
that of the expected term and the expected term.
(4) Expected term is based on probability and expected timing of market events.
No additional Profits Interests have been granted after the June 17, 2021 grant. As of December 31, 2022 there is $16.1 million of unrecognized expense to be recognized over a weighted average period remaining of approximately 1.2 years.
Prior to the Business Combination, the Company accounted for share-based compensation related to restricted share awards granted to certain employees by recognizing the grant date fair value of the awards over the requisite service period, which is equal to the vesting period. The Company had the option to buy back the unvested awards upon termination of employment at the lesser of the original issuance price paid by employees or the fair value of the shares on the buy-back date. The Company estimated the value of the restricted share awards by using the Black-Scholes option valuation model, which requires the use of certain subjective assumptions. Significant assumptions include management’s estimates of the estimated share price volatility, the expected life of the awards and related employee forfeiture rates.
As of the Closing Date, Mirion TopCo's board of directors had authorized the issuance of 1,483,795 A Ordinary shares for the fair value at the time of issuance (the "Predecessor Shares"). The Predecessor Shares were issued subject to certain vesting conditions, restrictions on transfer and repurchase rights by Mirion, other employees of the Company or by investors in Mirion. Under the service-vesting conditions, the Predecessor Shares, vested over four years, with one-quarter vesting after one year of service, and the remainder vesting in equal installments over the subsequent thirty-six months.
Vesting of all Predecessor Shares was subject to acceleration in the event of certain change of control transactions. The Predecessor Shares had voting rights and participated in dividends and distributions, if declared; however, the holders of the Predecessor Shares forfeited their voting rights upon termination of employment regardless of vesting status.
The unvested Predecessor Shares were subject to repurchase at a price equal to the lesser of (i) the fair value at the issuance date or (ii) the fair value of the Predecessor Shares as determined on the repurchase date. The Company determined that this repurchase right was a forfeiture provision and accounted for the Predecessor Shares issued to management as a share-based compensation arrangement, with a requisite service period of four years. The fair value of the Predecessor Shares was estimated using the Black-Scholes option-pricing model, with the following assumptions:
(1) The risk-free rate is based on an average of U.S. Treasury yields in effect at the time of grant corresponding with the expected term.
(2) Expected volatility is based on historical volatilities from a group of comparable entities for a time period similar to
that of the expected term and the expected term.
(3) Expected term is based on probability and expected timing of market events.
No Predecessor Shares were issued during the fiscal year ended June 30, 2021 or during the Predecessor Stub Period from July 1, 2021 through October 19, 2021.
A summary of restricted stock activity within the Company’s equity plans and changes for the years ended June 30, 2021, and 2020 and the Predecessor Stub Period, is as follows:
The Company repurchased from and reissued 144,219 Predecessor Shares to members of the management team during fiscal year ended June 30, 2021. Any forfeited Predecessor Shares of restricted common stock were treated as a cancellation with remaining unrecognized expense for the unvested awards recognized on the date of cancellation. The Company did not reverse previously recognized compensation expenses as a result of these cancellations. No Predecessor Shares were repurchased or reissued during the fiscal year ended June 30, 2021 and through October 19, 2021.Total share-based compensation expense in our consolidated statement of operations and comprehensive loss for fiscal years June 30, 2021 and 2020 was $0.0 million and $0.2 million, respectively. The total value of the Predecessor Shares was amortized as compensation expense ratably over the vesting period of each individual tranche, beginning at the grant date.