Equity-Based Compensation |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-Based Compensation |
Common Unit Awards
In connection with the closing of the Business Combinations, unvested incentive unit awards granted under the then-current equity plan were converted into Common Units, which were paired with an equal number of shares of the Company’s Class V common stock, and remained subject to the original vesting conditions. If a forfeiture of unvested Common Units occurred, the associated shares of Class V common stock were also forfeited.
During the year ended December 31, 2023, there were no Common Unit awards granted and the total fair value of Common Unit awards vested was $0.5 million.
As of December 31, 2023, all Common Unit awards had vested. The Common Unit awards vested ratably over a period between one month and two years, so long as the grantee stayed employed.
2021 Incentive Award Plan
In connection with the Business Combinations, the Company’s Board of Directors adopted, and its stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), effective on its adoption date, in order to facilitate the grant of cash and equity incentives to employees, consultants, and directors of the Company and certain affiliates. The 2021 Plan provides that the initial aggregate number of shares reserved and available for issuance is 14.6 million plus an increase each January 1, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 1% of the aggregate number of shares of Class A common stock and Class V common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as is determined by the Company’s Board of Directors. Since January 1, 2022, the aggregate number of shares of Class A common stock reserved and available for issuance under the 2021 Plan has increased by a total of 8.0 million pursuant to the automatic annual increase provision under the 2021 Plan. As of December 31, 2024, the number of shares of Class A common stock reserved and available for issuance under the 2021 Plan was 7.0 million.
The 2021 Plan allows for the grant of (i) stock options, including incentive stock options, (ii) stock appreciation rights, (iii) restricted stock awards (“RSAs”), (iv) restricted stock unit (“RSU”) awards, or (v) other stock or cash based awards as may be determined by the plan’s administrator from time to time. The term of each option award shall be no more than 10 years from the date of grant. The Company’s policy for issuing shares upon stock option exercise is to issue new shares of Class A common stock. The P3 LLC A&R LLC Agreement states that P3 LLC will maintain at all times a
one-to-one ratio between the number of Common Units owned by the Company and the number of outstanding shares of Class A common stock, including, but not limited to, those issued as result of stock option exercises and settlement of RSU awards granted under the 2021 Plan.
The 2021 Plan also permits the grant of dividend equivalent units that entitle the holder to an amount based on the value of the dividends per share paid on the Company’s Class A common stock, which are accumulated on RSUs during the vesting period.
The following table summarizes time-based stock option activity under the 2021 Plan for the year ended December 31, 2024:
The following additional disclosures are provided for time-based stock options:
The following table summarizes performance-based stock option activity under the 2021 Plan for the year ended December 31, 2024:
The following additional disclosures are provided for performance-based stock options:
The vesting criteria for 0.1 million performance-based stock option awards has not yet been achieved; therefore, no expense has been recorded.
There were no stock options exercised during the years ended December 31, 2024 and 2023.
The weighted average assumptions used in estimating the grant date fair value of stock options are listed in the table below:
Time-based stock options vest ratably over a period between and five years, so long as the optionee continues to provide services to the Company. As of December 31, 2024, there was $1.9 million and $2.1 million of unrecognized equity-based compensation cost related to unvested time-based and performance-based stock options under the 2021 Plan, respectively, which is expected to be recognized over a weighted-average period of 2.0 years and 8.0 years, respectively.
The following table summarizes RSU activity under the 2021 Plan for the year ended December 31, 2024:
The following additional disclosures are provided for RSU awards:
In August 2023, the Company granted an aggregate of 2.5 million RSUs pursuant to the 2021 Plan to the Company’s then Chief Executive Officer, Dr. Abdou, and Chief Medical Officer, Dr. Bacchus (collectively, the “Executives”), in full satisfaction of the “Second Bonus” earned by each Executive during the year ended December 31, 2022 pursuant to the terms of the transaction bonus agreements, dated May 2022, entered into between each Executive and the Company and P3 Health Group Management, LLC in connection with the consummation of the Business Combinations (together, the “RSU Transaction Bonuses”). The RSUs were fully vested at the time of grant. The fair value of the RSUs granted was $5.6 million, $0.6 million of which was recorded in equity-based compensation during the year ended December 31, 2023. The RSUs were settled in Class A common stock and the Company timely paid $0.7 million in withholding taxes attributable to the vesting of the RSUs to the Internal Revenue Service on behalf of Dr. Abdou on January 10, 2024. Dr. Abdou repaid such sum to the Company on May 2, 2024.
RSUs typically vest ratably over a period between and four years, so long as the grantee continues to provide services to the Company. As of December 31, 2024, total equity-based compensation cost related to all unvested RSUs under the 2021 Plan was $3.5 million, which is expected to be recognized over a weighted average period of 2.1 years.
2024 Employee Inducement Incentive Award Plan
On May 7, 2024, the Board of Directors adopted the Company’s 2024 Employment Inducement Incentive Award Plan (the “2024 Plan”), effective on its adoption date. The 2024 Plan provides for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and other stock or cash-based awards to prospective employees, and contains terms and conditions intended to comply with the inducement award exception under the Nasdaq Listing Rules. The Board of Directors has reserved 16.5 million shares of the Class A common stock for issuance pursuant to awards granted under the 2024 Plan. In accordance with Nasdaq Stock Market Rule 5635(c)(4), awards under the 2024 Plan may only be made to individuals not previously employed by the Company or individuals being rehired following a bona fide period of interruption of employment, as an inducement material to such individuals’ entering into employment with the Company. As of December 31, 2024, there were no shares of Class A common stock reserved and available for issuance under the 2024 Plan.
The term of each option award shall be no more than 10 years from the date of grant. The Company’s policy for issuing shares upon stock option exercise is to issue new shares of Class A common stock. The P3 LLC A&R LLC Agreement states that P3 LLC will maintain at all times a one-to-one ratio between the number of Common Units owned by the Company and the number of outstanding shares of Class A common stock, including, but not limited to, those issued as result of stock option exercises and settlement of RSU awards granted under the 2024 Plan.
The following table summarizes stock option activity under the 2024 Plan for the year ended December 31, 2024:
The following additional disclosures are provided for stock options:
The weighted average assumptions used in estimating the grant date fair value of stock options are listed in the table below:
As of December 31, 2024, there was $4.8 million of unrecognized equity-based compensation cost related to unvested stock options under the 2024 Plan, which is expected to be recognized over a weighted-average period of 3.4 years.
The following table summarizes RSU activity under the 2024 Plan for the year ended December 31, 2024:
The following additional disclosures are provided for RSU awards:
The RSU award will be subject to both service-vesting and performance-vesting conditions, such that both conditions must be satisfied for the RSUs to vest. The applicable vesting date will be the later of the date on which the applicable “service-vesting condition” is satisfied and the date on which the “performance-vesting condition” is satisfied. The service-vesting condition will be satisfied (i) with respect to 25% of the underlying shares on the first anniversary of the effective date of employment, and (ii) as to the remaining 75% of the underlying shares, in substantially equal installments on each quarterly anniversary over the three-year period thereafter. The performance-vesting condition will be satisfied upon the closing of the first underwritten offering and sale of the Company’s Class A common stock following the effective date of employment, subject to continued employment through such date. As of December 31, 2024, total equity-based compensation cost related to all unvested RSUs under the 2024 Plan was $2.7 million, which is expected to be recognized over a weighted average period of 3.4 years.
Compensation Expense
Equity-based compensation recorded within corporate, general and administrative expense on the consolidated statements of operations was $5.8 million and $6.0 million during the years ended December 31, 2024 and 2023, respectively.
The Company did not recognize any tax benefits related to equity-based compensation for the years ended December 31, 2024 and 2023.
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