Share-based Awards |
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| Share-based Awards | Share-based Awards For a discussion of our share-based incentive plans, refer to NOTE 8—Share-based Awards in our 2024 Form 10-K. Share-based Award Activity During the 26 weeks ended June 28, 2025, we granted time-based stock options, which have a ten-year term and vest in annual installments over a three-year period, subject to continued employment. In addition, during the 26 weeks ended June 28, 2025, we granted a one-time, special new hire stock option award with a ten-year term to our President and Chief Executive Officer. Under this award, one-third of such stock options vest and become exercisable three years after the grant date, subject to continued employment. The remaining two-thirds of those stock options vest based upon the achievement of certain price targets of the Company's common stock during the three-year period following the grant date. Any options that vest based on achievement of stock price targets, regardless of when such options vest, will not be exercisable until the third anniversary of the grant date, subject to the recipient's continued employment at that time. The fair value of stock option grants is determined on the grant date. For time-based stock options, a Black-Scholes valuation model is used to estimate the fair value of the awards. For market-based stock options, a Monte Carlo simulation model is used to estimate the fair value of the awards. Time-based stock options and market-based stock options granted during the 26 weeks ended June 28, 2025 had weighted-average grant date fair values per share of $5.68 and $4.65, respectively. We determine the input assumptions for the Black-Scholes stock option valuation model as follows: •Expected term — The expected term represents the period that a stock option award is expected to be outstanding. We have limited historical exercise data from which to derive expected term input assumptions. Consequently, we calculate the expected term using the SEC simplified method whereby the expected term of a stock option award is equal to the average of the award's contractual term and vesting term. •Volatility — We have limited historical data from which to derive stock price volatility input assumptions. Consequently, we estimate stock price volatility for our common stock by using a time-weighted average methodology, placing proportional weight on our volatility over our full trading history and the average volatility of industry peers over the expected term. Industry peers consist of several public companies in our industry which are of similar size, complexity and stage of development. •Risk-free interest rate — The risk-free interest rate is based on the U.S. Treasury yield curve on a stock option award's grant date. Maturities that approximate the expected term of the stock option award were used to interpolate the risk-free rate. •Dividend yield — Dividend yield is assumed to be zero as we have not historically paid and do not expect to pay cash dividends on our common shares issued. The grant date fair value of time-based stock options awarded during the 26 weeks ended June 28, 2025 was estimated using the Black-Scholes valuation model with the following weighted-average assumptions:
The following table summarizes stock option activity under all equity incentive plans during the 26 weeks ended June 28, 2025:
The following table summarizes time-based restricted stock unit ("RSU") activity under all equity incentive plans during the 26 weeks ended June 28, 2025:
The following table summarizes performance-based restricted stock unit ("PSU") activity under the Grocery Outlet Holding Corp. 2019 Incentive Plan during the 26 weeks ended June 28, 2025:
_______________________ (1)Represents initial grant of PSUs based on performance target level achievement of 100%. (2)Represents the year-to-date adjustment to previously granted PSUs based on performance expectations as of June 28, 2025. (3)Up to an additional 1,699,431 PSUs could potentially be included if the actual performance level achievement exceeds the current expected target performance level of achievement (with 200% being the maximum performance level achievement). Share-based Compensation Expense We recognize compensation expense for stock options, RSUs and PSUs by amortizing the grant date fair value on a straight-line basis over the expected vesting period to the extent we determine the achievement of the grant's service or performance vesting requirements is probable. We recognize share-based award forfeitures in the period such forfeitures occur. Share-based compensation expense consisted of the following (amounts in thousands):
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