Construction Partners, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

Share-Based Compensation

3 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

The Equity Incentive Plan was initially approved by the Company’s stockholders in 2016, was amended and restated in April 2018, and was further amended in May 2019. In connection with the 2018 amendment and restatement, the Company reserved 2,000,000 shares of Class A common stock for issuance pursuant to awards granted thereunder. In March 2024, the Company’s stockholders approved an increase in such share reserve by an additional 1,000,000 shares. At December 31, 2024, there were 1,038,726 shares of Class A common stock remaining available for issuance under the Equity Incentive Plan.

The Restricted Stock Plan was approved by the Company’s stockholders and adopted by the Company in March 2024. At that time, the Company reserved 2,000,000 shares of Class B common stock for issuance pursuant to awards granted thereunder. At December 31, 2024, there were 1,939,000 shares of Class B common stock remaining available for issuance under the Restricted Stock Plan.

The following table summarizes the components of share-based compensation expense included in general and administrative expenses and acquisition-related expenses in the Consolidated Statements of Comprehensive Income (Loss) during the three months ended December 31, 2024 and 2023 (unaudited, in thousands):


	For the Three Months Ended December 31,
	2024		2023
Equity classified awards	$	13,674	$	2,783
Liability classified awards	729		106
Employee stock purchase plan	322		157
Total share-based compensation expense	$	14,725	$	3,046

Restricted Stock - Equity Classified Awards

The Company measures and recognizes stock-based compensation expense, net of forfeitures, over the requisite vesting periods for all stock-based payment awards made, and recognizes forfeitures as they occur. Stock-based compensation is included in general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss). A summary of the changes in the Company’s restricted stock is as follows (in thousands, except share data):


	For the Three Months Ended December 31,
	2024			2023
	RSUs		Weighted Average Grant Date Fair Value Per RSU	RSUs		Weighted Average Grant Date Fair Value Per RSU
Unvested shares, beginning balance	509,171		31.59	824,280		28.41
Shares awarded	196,793		80.21	80,113		43.68
Shares vested	(16,793)		95.90	(12,302)		43.75
Shares forfeited	(1,635)		30.78	(524)		30.49
Unvested shares, ending balance	687,536		43.95	891,567		29.55

Aggregate grant date fair value of shares awarded	$	15,785		$	3,500
Compensation expense recorded upon vesting of awards	$	3,256		$	2,406
Unrecognized compensation expense at fiscal year-end	$	19,146		$	10,859
Weighted average recognition period remaining, in years	4.0			2.8

The restricted shares granted under the Equity Incentive Plan will vest, as applicable, as follows:


Fiscal Year						Number of Shares

2025						367,914
2026						85,867
2027						23,755
2028						105,000
2029						105,000
Total						687,536

Performance Stock Units - Equity Classified Awards

PSUs provide for the issuance of shares of Class A common stock upon vesting, which occurs at the end of the performance period based on achievement of certain Company performance metrics established by the Compensation Committee of the Company’s Board of Directors. The final number of shares of common stock issuable upon vesting of PSUs can range from 0% to 150% of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of the Company’s Board of Directors. The achievement of performance goals is modified by the total stockholder return ranking of the Company against the Russell 2000 Index over the performance period and can increase or decrease the achieved award by up to 15%. The Company recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of Company performance metrics, multiplied by the fair value of the total number of shares of common stock that the Company anticipates will be issued based on such achievement.

During the three months ended December 31, 2024, the Company awarded PSUs representing a target of 79,000 Class A shares and 61,000 Class B shares to certain members of Company management under the Equity Incentive Plan. These grants are classified as equity awards. The aggregate grant date fair value of these PSU awards was $9.8 million. During the three months ended December 31, 2024 and 2023, the Company recorded compensation expense in connection with PSUs in the amount of $10.4 million and $0.4 million, respectively, which is reflected as general and administrative expenses and acquisition-related expenses in the Company’s Consolidated Statements of Comprehensive Income (Loss). At December 31, 2024, the Company forecasted 170,900 shares of Class A common stock underlying PSUs as unvested and approximately $3.5 million of unrecognized compensation expense related to PSU awards, which will be recognized over a remaining weighted-average period of 1.9 years. During the three months ended December 31, 2024, 136,917 shares of Class A and 61,000 shares of Class B common stock underlying PSUs were vested and issued.

Cash-Settled Restricted Stock Units - Liability Classified Awards

During the three months ended December 31, 2024, the Company did not grant any cash-settled restricted stock units (“RSUs”) to employees of the Company under the Equity Incentive Plan. The Company elects to account for forfeitures as they occur. Compensation expense associated with prior awards for the three months ended December 31, 2024 and 2023 was $0.7 million and $0.1 million, respectively, which is reflected as general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss). As of December 31, 2024 and 2023, the liability for cash-settled RSUs was $2.5 million and $0.1 million, respectively, and is included in accrued expenses and other current liabilities and other long-term liabilities. At December 31, 2024, there was approximately $4.3 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.8 years.

The grant date fair value of cash-settled RSU awards is based on the price of the Company’s Class A common stock and the number of RSUs awarded on the date of grant. The awards are settled in cash and are accounted for as liability-type awards. The expense is recognized over the requisite service period with remeasurement at the end of each reporting period at fair value until settlement. The requisite service period is based on the vesting provisions of the awards, which generally occurs in four equal annual installments beginning on the date of the first fiscal year-end after the grant date.

Employee Stock Purchase Plan

The Construction Partners, Inc. Employee Stock Purchase Plan (the “ESPP”) became effective on May 13, 2021. The ESPP provides eligible employees of the Company an opportunity to purchase shares of the Company’s Class A common stock at a discounted rate using funds withheld through payroll deductions. The maximum number of shares of Class A common stock offered under the ESPP is 1,000,000. The first offering period under the ESPP commenced on July 1, 2023. Since that date, participants have purchased 58,117 shares under the ESPP. Compensation expense associated with the ESPP for the three months ended December 31, 2024 and 2023 was $0.3 million and $0.2 million, respectively, and is included in general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).