STOCKHOLDERS' EQUITY |
6.STOCKHOLDERS’ EQUITY The following table represents a share reconciliation of the Company’s common stock issued for the periods presented: | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | 2023 | | 2022 | | 2023 | | 2022 | Common stock: | | | | | | | | | Balance, beginning of quarter | | 177,900,083 | | 163,286,569 | | 171,656,030 | | 155,516,284 | Shares issued for stock options exercised | | 610,132 | | 681,139 | | 802,939 | | 2,044,193 | Agent growth incentive stock compensation | | 387,999 | | 1,184,446 | | 1,774,438 | | 2,098,770 | Agent equity stock compensation | | 1,985,169 | | 3,410,310 | | 6,649,976 | | 8,903,217 | Balance, end of quarter | | 180,883,383 | | 168,562,464 | | 180,883,383 | | 168,562,464 | | | | | | | | | |
The Company’s equity programs described below are administered under the stockholder approved 2015 Equity Incentive Plan. The purpose of the equity plan is to retain the services of valued employees, directors, officers, agents, and consultants and to incentivize such persons to make contributions to the Company and motivate excellent performance. Agent Equity Program The Company provides agents and brokers the opportunity to elect to receive 5% of commissions earned from each completed real estate transaction in the form of common stock (the “Agent Equity Program” or “AEP”). If agents and brokers elect to receive portions of their commissions in common stock, they are entitled to receive the equivalent number of shares of common stock, based on the fixed monetary value of the commission payable. The Company recognizes a 10% discount on these issuances as an additional cost of sales charge during the periods presented. During the three months ended September 30, 2023 and 2022, the Company issued 1,985,169 and 3,410,310 shares of common stock, respectively, to agents and brokers with a value of $38,897 and $44,395, respectively, inclusive of discount. During the nine months ended September 30, 2023 and 2022, the Company issued 6,649,976 and 8,903,217 shares of common stock, respectively, to agents and brokers with a value of $104,548 and $131,230, respectively, inclusive of discount. Agent Growth Incentive Program The Company administers an equity incentive program whereby agents and brokers become eligible to receive awards of the Company’s common stock through agent attraction and performance benchmarks (the “Agent Growth Incentive Program” or “AGIP”). The incentive program encourages greater performance and awards agents with common stock based on achievement of performance milestones. Awards typically vest after performance benchmarks are reached and three years of subsequent service is provided to the Company. Share-based performance awards are based on a fixed-dollar amount of shares based on the achievement of performance metrics. As such, the awards are classified as liabilities until the number of share awards becomes fixed once the performance metric is achieved. For the three months ended September 30, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $11,764 and $5,800, respectively, of which the total amount of stock compensation attributable to liability classified awards was $1,458 and ($985), respectively. For the nine months ended September 30, 2023 and 2022 the Company’s stock compensation expense attributable to the Agent Growth Incentive Program was $29,912 and $22,828, respectively, of which the total amount of stock compensation attributable to liability classified awards was $2,796 and $3,466, respectively. The following table illustrates changes in the Company’s stock compensation liability for the periods presented: | | | | | Amount | Balance, December 31, 2022 | | $ 3,885 | Stock grant liability increase year to date | | 2,796 | Stock grants reclassified from liability to equity year to date | | (1,094) | Balance, September 30, 2023 | | $ 5,587 |
Stock Option Awards Stock options are granted to directors, officers, certain employees and consultants with an exercise price equal to the fair market value of common stock on the grant date and the stock options expire 10 years from the date of grant. These options typically have time-based restrictions with equal and periodically graded vesting over a three-year period. During the three months ended September 30, 2023 and 2022 the Company granted 445,380 and 394,657 stock options, respectively, to employees with an estimated grant date fair value of $10.71 and $8.50 per share, respectively. During the nine months ended September 30, 2023 and 2022, the Company granted 1,973,943 and 1,167,042 stock options, respectively, to employees with an estimated grant date fair value of $8.87 and $11.21 per share, respectively. The fair value was calculated using a Black Scholes-Merton option pricing model. Stock Repurchase Plan In December 2018, the Company’s board of directors (the “Board”) approved a stock repurchase program authorizing the Company to purchase up to $25.0 million of its common stock, which was later amended in November 2019 increasing the authorized repurchase amount to $75.0 million. In December 2020, the Board approved another amendment to the repurchase plan, increasing the total amount authorized to be purchased from $75.0 million to $400.0 million. In May 2022, the Board approved an increase to the total amount of its buyback program from $400.0 million to $500.0 million. In June 2023, the Board approved an increase to the total amount of its buyback program from $500.0 million to $1.0 billion. Purchases under the repurchase program may be made in the open market or through a 10b5-1 plan and are expected to comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and number of shares repurchased depends upon market conditions. The repurchase program does not require the Company to acquire a specific number of shares. The cost of the shares that are repurchased is funded from cash and cash equivalents on hand. 10b5-1 Repurchase Plan The Company maintains an internal stock repurchase program with program changes subject to Board consent. From time to time, the Company adopts written trading plans pursuant to Rule 10b5-1 of the Exchange Act to conduct repurchases on the open market. On January 10, 2022, the Company and Stephens Inc. entered into a form of Issuer Repurchase Plan (“Issuer Repurchase Plan”) which authorized Stephens to repurchase up to $10.0 million of its common stock per month. On May 3, 2022, the Board approved and on May 6, 2022, the Company entered into a form of first amendment to the Issuer Repurchase Plan to increase monthly repurchases from $10.0 million of its common stock per month up to $20.0 million. On September 27, 2022, the Board approved, and the Company entered into, a form of second amendment to the Issuer Repurchase Plan, to decrease the monthly repurchases from $20.0 million of its common stock per month to $13.3 million, in anticipation of volume decreases in connection with the contraction in the real estate market. On December 27, 2022, the Board approved, and the Company entered into, a form of third amendment to the Issuer Repurchase Plan, to decrease the monthly repurchases from $13.3 million of its common stock per month to $10.0 million, in connection with ongoing contractions in the real estate market. On May 10, 2023, the Board approved and, on May 11, 2023, the Company entered into, a form of fourth amendment to the Issuer Repurchase Plan, to increase the monthly repurchase amounts during 2023 due to actual and projected changes in the Company’s cash and cash equivalents; specifically, to permit purchases of up to: (i) $17.0 million during May 2023, (ii) $22.0 million during June 2023, (iii) $18.67 million during any calendar month commencing July 1, 2023 through and including September 30, 2023, and (iv) $12.0 million during any calendar month commencing October 1, 2023 through and including December 31, 2023. On June 26, 2023, the Board approved, and the Company entered into, a form of fifth amendment to the Issuer Repurchase Plan to increase the maximum aggregate buyback from $500.0 million to $1.0 billion in accordance with the repurchase program limit. For accounting purposes, common stock repurchased under the stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method. These shares are considered issued but not outstanding. The following table shows the share changes in treasury stock for the periods presented: | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | 2023 | | 2022 | | 2023 | | 2022 | Treasury stock: | | | | | | | | | Balance, beginning of quarter | | 24,311,897 | | 11,487,691 | | 18,816,791 | | 6,751,692 | Repurchases of common stock | | 2,761,943 | | 4,716,026 | | 8,257,049 | | 9,452,025 | Forfeiture to treasury stock for acquisition | | 10,728 | | - | | 10,728 | | - | Issuance of treasury stock for acquisition | | - | | (343,331) | | - | | (343,331) | Balance, end of quarter | | 27,084,568 | | 15,860,386 | | 27,084,568 | | 15,860,386 |
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