Quarterly report [Sections 13 or 15(d)]

Equity-Based Compensation

v3.25.1
Equity-Based Compensation
3 Months Ended
Mar. 31, 2025
Share-Based Payment Arrangement [Abstract]  
Equity-Based Compensation Equity-Based Compensation
The Ryan Specialty Holdings, Inc., 2021 Omnibus Incentive Plan (the “Omnibus Plan”) governs, among other things, the
types of awards the Company can grant to employees as equity-based compensation awards. The Omnibus Plan provides
for potential grants of the following awards: (i) stock options, (ii) stock appreciation rights, (iii) restricted stock awards,
(iv) performance awards, (v) other stock-based awards, (vi) other cash-based awards, and (vii) analogous equity awards
made in equity of the LLC.
IPO-Related Awards
As a result of the Organizational Transactions, pre-IPO holders of LLC Units that were granted as incentive awards, which
had historically been classified as equity and vested pro rata over five years, were required to exchange their LLC Units for
either Restricted Stock or Restricted Common Units. Additionally, Reload Options or Reload Class C Incentive Units were
issued to employees in order to protect against the dilution of their existing awards upon exchange to the new awards.
Separately, certain employees were granted one or more of the following new awards: (i) Restricted Stock Units (“RSUs”),
(ii) Staking Options, (iii) Restricted LLC Units (“RLUs”), or (iv) Staking Class C Incentive Units. The terms of these
awards are described below. All awards granted as part of the Organizational Transactions and the IPO are subject to non-
linear transfer restrictions for at least the five-year period following the IPO.
Incentive Awards
As part of the Company’s annual compensation process, the Company issues certain employees and directors equity-based
compensation awards (“Incentive Awards”). Additionally, the Company offers Incentive Awards to certain new hires.
These Incentive Awards typically take the form of (i) RSUs, (ii) RLUs, (iii) Class C Incentive Units, (iv) Stock Options,
(v) Performance Stock Units (“PSUs”), and (vi) Performance LLC Units (“PLUs”). The terms of these awards are
described below.
Restricted Stock and Restricted Common Units
As part of the Organizational Transactions, certain existing employee unitholders were granted Restricted Stock or
Restricted Common Units in exchange for their LLC Units. The Restricted Stock and Restricted Common Units follow the
vesting schedule of the LLC Units for which they were exchanged. LLC Units historically vested pro rata over 5 years.
Three Months Ended March 31, 2025
Restricted Stock
Weighted Average
Grant Date
Fair Value
Restricted
Common Units
Weighted Average
Grant Date
Fair Value
Unvested at beginning of period
413,820
$21.15
135,991
$23.84
Granted
Vested
Forfeited
Unvested at end of period
413,820
$21.15
135,991
$23.84
Restricted Stock Units (RSUs)
IPO RSUs
Related to the IPO, the Company granted RSUs to certain employees. The IPO RSUs vest either pro rata over 5 years from
the grant date or over 10 years from the grant date, with 10% vesting in each of years 3 through 9 and 30% vesting in year
10.
Incentive RSUs
Incentive RSUs vest either 100% 3 or 5 years from the grant date, pro rata over 3 or 5 years from the grant date, over 5
years from the grant date, with one-third of the grant vesting in each of years 3, 4 and 5, or over 7 years from the grant
date, with 20% vesting in each of years 3 through 7.
Upon vesting, RSUs automatically convert on a one-for-one basis into Class A common stock.
Three Months Ended March 31, 2025
IPO RSUs
Incentive RSUs
Restricted
Stock Units
Weighted Average
Grant Date
Fair Value
Restricted
Stock Units
Weighted Average
Grant Date
Fair Value
Unvested at beginning of period
2,699,966
$23.14
2,374,687
$43.33
Granted
444,725
69.47
Vested
(15,993)
23.11
(18,825)
37.20
Forfeited
(8,572)
23.34
(8,889)
56.24
Unvested at end of period
2,675,401
$23.14
2,791,698
$47.49
Stock Options
Reload and Staking Options
As part of the Organizational Transactions and IPO, certain employees were granted Reload Options or Staking Options
that entitle the award holder to future purchases of Class A common stock, on a one-for-one basis, at the IPO price of
$23.50. The Reload Options either vested 100% 3 years from the grant date or vest over 5 years from the grant date, with
one-third of the grant vesting in each of years 3, 4 and 5. In general, vested Reload Options are exercisable up to the tenth
anniversary of the grant date. The Staking Options vest over 10 years from the grant date, with 10% vesting in each of
years 3 through 9 and 30% vesting in year 10. In general, vested Staking Options are exercisable up to the eleventh
anniversary of the grant date.
Incentive Options
Incentive Options entitle the award holder to future purchases of Class A common stock, on a one-for-one basis, at the
respective exercise prices. The Incentive Options vest either over 5 years from the grant date, with one-third of the grant
vesting in each of years 3, 4 and 5 or pro rata over 7 years from the grant date. In general, vested Incentive Options are
exercisable up to the tenth anniversary of the grant date.
Three Months Ended March 31, 2025
Reload
Options1
Staking
Options1
Incentive
Options
Incentive Options
Weighted Average
Exercise Price
Outstanding at beginning of period
3,870,764
66,667
281,652
$43.97
Granted
Exercised
(71,135)
Forfeited
Outstanding at end of period
3,799,629
66,667
281,652
$43.97
1As the Reload and Staking Options were one-time grants at the IPO, the weighted average exercise price for any
movements in these awards will perpetually be $23.50. As such, the values are not presented in the table above.
As of March 31, 2025, there were 6,666 and 1,486,150 exercisable Staking and Reload Options, respectively, and no
exercisable Incentive Options. The aggregate intrinsic values and weighted average remaining contractual terms of Stock
Options outstanding and exercisable as of March 31, 2025, were as follows:
Aggregate intrinsic value ($ in thousands):
Reload Options outstanding
$191,387
Reload Options exercisable
74,857
Staking Options outstanding
3,358
Staking Options exercisable
336
Incentive Options outstanding
8,421
Incentive Options exercisable
Weighted-average remaining contractual term (in years):
Reload Options outstanding
6.1
Reload Options exercisable
6.0
Staking Options outstanding
7.3
Staking Options exercisable
7.3
Incentive Options outstanding
8.0
Incentive Options exercisable
Restricted LLC Units (RLUs)
IPO RLUs
Related to the IPO, the Company granted RLUs to certain employees that vest either pro rata over 5 years from the grant
date or over 10 years from the grant date, with 10% vesting in each of years 3 through 9 and 30% vesting in year 10.
Incentive RLUs
Incentive RLUs vest either 100% 3 years from the grant date, pro rata over 3 or 5 years from the grant date, or over 7 years
from the grant date, with 20% vesting in each of years 3 through 7.
Upon vesting, RLUs convert on a one-for-one basis into either LLC Common Units or Class A common stock at the
election of the Company.
Three Months Ended March 31, 2025
IPO RLUs
Incentive RLUs
Restricted
LLC Units
Weighted Average
Grant Date
Fair Value
Restricted
LLC Units
Weighted Average
Grant Date
Fair Value
Unvested at beginning of period
1,293,538
$25.10
686,712
$44.30
Granted
Vested
Forfeited
Unvested at end of period
1,293,538
$25.10
686,712
$44.30
Class C Incentive Units
Reload and Staking Class C Incentive Units
As part of the Organizational Transactions and IPO, certain employees were granted Reload Class C Incentive Units or
Staking Class C Incentive Units, which are profits interests. When the value of Class A common stock exceeds the
participation threshold, vested profits interests may be exchanged for LLC Common Units of equal value. On exchange,
the LLC Common Units are immediately redeemed on a one-for-one basis for Class A common stock. The Reload Class C
Incentive Units either vested 100% 3 years from the grant date or vest over 5 years from the grant date, with one-third of
the grant vesting in each of years 3, 4 and 5. The Staking Class C Incentive Units vest either pro rata over 5 years from the
grant date or over 10 years from the grant date, with 10% vesting in each of years 3 through 9 and 30% vesting in year 10.
Class C Incentive Units
Class C Incentive Units are profits interests. When the value of Class A common stock exceeds the participation threshold,
vested profits interests may be exchanged for LLC Common Units of equal value. On exchange, the LLC Common Units
are immediately redeemed on a one-for-one basis for Class A common stock. The Class C Incentive Units vest over 8 years
from the grant date, with 15% vesting in each of years 3 through 7 and 25% vesting in year 8, or over 7 years from the
grant date, with 20% vesting in each of years 3 through 7.
Three Months Ended March 31, 2025
Reload Class C
Incentive Units
Staking Class C
Incentive Units
Class C
Incentive Units
Class C Incentive
Units Weighted
Average
Participation
Threshold
Unvested at beginning of period
952,595
1,605,003
495,822
$36.80
Granted
Vested
Forfeited
Unvested at end of period
952,595
1,605,003
495,822
$36.75
As the Reload and Staking Class C Incentive Units were one-time grants at the IPO, the weighted average participation
threshold for these awards will be consistent across any type of movement. The weighted average participation threshold
for Reload and Staking Class C Incentive Units was $23.29 and $23.34 as of March 31, 2025 and December 31, 2024,
respectively. The decrease in the participation thresholds for the various types of Class C Incentive Units was due to the
distributions declared with respect to these awards during the three months ended March 31, 2025.
Performance Based Awards
Performance Stock Units (PSUs) and Performance LLC Units (PLUs)
Performance-based equity awards, PSUs and PLUs, are subject to the achievement of several defined performance and
market metrics. All performance awards are subject to a total shareholder return (“TSR”) compound annual growth rate
(“CAGR”) target and one or more of the following metrics: (i) an Adjusted EBITDAC margin target, (ii) an Organic
revenue CAGR target, or (iii) an individual revenue target. The TSR CAGR is calculated from the base price, as outlined in
the respective grant agreements, to the volume weighted average price (“VWAP”) of Class A common stock for the period
specified by the grant agreement plus dividends paid to Class A common shareholders. A minimum threshold for the TSR
CAGR, as well as the targets for the other metrics, as applicable, must all be met in order for the awards to vest.
In general, the PSUs and PLUs vest 5 years from the grant date. PSUs represent the right to receive Class A common
shares and PLUs represent the right to receive LLC Common Units upon vesting. If the minimum threshold of the TSR
CAGR is achieved, and the other required targets are achieved, the TSR CAGR target and, if applicable, the individual
revenue target, will determine how many Class A common shares or LLC Common Units, as applicable, the awards vest
into. Assuming the minimum thresholds are met, the awards will vest into between 75% and 150% of the applicable target
stock or units, which will be calculated on a graduated basis. Confirmation of the targets will not occur until after earnings
are reported for the final fiscal year in the award’s performance period. The probability of achieving the performance
metrics is assessed each reporting period for expense purposes.
Three Months Ended March 31, 2025
PSUs
PLUs
Performance
Stock Units
Weighted Average
Grant Date
Fair Value
Performance
LLC Units
Weighted Average
Grant Date
Fair Value
Unvested at beginning of period
366,996
$27.99
487,218
$24.40
Granted
1,291,255
27.53
Vested
Forfeited
Unvested at end of period
1,658,251
$27.63
487,218
$24.40
The fair value of the performance-based awards granted during the three months ended March 31, 2025, was determined
using the Monte Carlo simulation valuation model with the following assumptions:
Volatility
23.6%
Time to maturity (years)
4.8
Risk-free rate
4.0%
RYAN stock price at valuation date
$69.47
The use of a valuation model for the PSUs requires management to make certain assumptions with respect to selected
model inputs. Expected volatility was calculated based on the observed volatility for comparable companies. The time to
maturity was based on the stock price CAGR target through the end of the performance period. The risk-free interest rate
was based on U.S. Treasury rates commensurate with the performance period. The RYAN stock price at the valuation date
is the base for the stock price CAGR target.
Non-Employee Director Stock Grants
The Company grants RSUs to non-employee directors serving as members of the Company’s Board of Directors (“Director
Stock Grants”), with the exception of the one director who has agreed to forgo any compensation for their service to the
Board. The Director Stock Grants are fully vested upon grant. The next grant is anticipated to occur in the second quarter
of 2025 concurrent with the annual shareholders’ meeting.
Dividend Equivalents and Declared Distributions
A majority of the Company’s unvested equity-based compensation awards, with the exception of Options and Class C
Incentive Units, are entitled to accrue dividend equivalents if the award vests into Class A common stock (“Dividend
Equivalents”) or declared distributions if the award vests into LLC Common Units (“Declared Distributions”) over the
period the underlying award vests. The Dividend Equivalents and Declared Distributions will be paid in cash to award
holders at the time the underlying award vests. If an award holder forfeits their underlying award, the accrued Dividend
Equivalents or Declared Distributions will also be forfeit. Class C Incentive Units do not accrue cash distributions but
instead have their participation thresholds lowered by each Declared Distribution. Options do not participate in dividends.
As of March 31, 2025, the Company accrued $1.1 million and $0.1 million related to Dividend Equivalents and Declared
Distributions, respectively, in Accounts payable and accrued liabilities, and $3.6 million and $0.5 million related to
Dividend Equivalents and Declared Distributions, respectively, in Other non-current liabilities on the Consolidated Balance
Sheets. As of December 31, 2024, the Company accrued $0.9 million and $0.1 million related to Dividend Equivalents and
Declared Distributions, respectively, in Accounts payable and accrued liabilities, and $2.9 million and $0.4 million related
to Dividend Equivalents and Declared Distributions, respectively, in Other non-current liabilities on the Consolidated
Balance Sheets.
Equity-Based Compensation Expense
As of March 31, 2025, the unrecognized equity-based compensation expense related to each type of equity-based
compensation award described above and the related weighted-average remaining expense period were as follows:
Amount
Weighted Average
Remaining Expense
Period (Years)
Restricted Stock
$568
0.2
IPO RSUs
24,582
3.1
Incentive RSUs
78,160
2.8
Reload Options
713
0.5
Staking Options
146
0.2
Incentive Options
1,416
1.2
PSUs
42,651
5.0
Restricted Common Units
297
0.1
IPO RLUs
15,598
4.4
Incentive RLUs
17,265
1.7
Reload Class C Incentive Units
467
0.7
Staking Class C Incentive Units
8,290
3.9
Class C Incentive Units
4,852
3.4
PLUs
9,224
3.8
Total unrecognized equity-based compensation expense
$204,229
The following table includes the equity-based compensation the Company recognized by award type from the view of
expense related to pre-IPO and post-IPO awards. The table also presents the unrecognized equity-based compensation
expense as of March 31, 2025, in the same view.
Recognized
Unrecognized
Three Months Ended March 31,
As of
March 31, 2025
2025
2024
IPO awards
IPO RSUs and Staking Options
$2,666
$3,013
$24,728
IPO RLUs and Staking Class C Incentive Units
1,964
2,548
23,888
Incremental Restricted Stock and Reload Options
402
954
997
Incremental Restricted Common Units and Reload Class C
Incentive Units
271
1,279
675
Pre-IPO incentive awards
Restricted Stock
164
427
284
Restricted Common Units
48
208
89
Post-IPO incentive awards
Incentive RSUs
8,834
5,983
78,160
Incentive RLUs
2,013
1,578
17,265
Incentive Options
813
201
1,416
Class C Incentive Units
509
515
4,852
PSUs
1,083
125
42,651
PLUs
606
198
9,224
Other expense
Director Stock Grants
500
281
Total equity-based compensation expense
$19,873
$17,310
$204,229