Wyndham Hotels & Resorts, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]


16. STOCK-BASED COMPENSATION

The Company has a stock-based compensation plan available to grant non-qualified stock options, incentive stock options, stock-settled appreciation rights (“SSARs”), RSUs, performance-vesting restricted stock units (“PSUs”) and/or other stock-based awards to key employees and non-employee directors. Under the Wyndham Hotels & Resorts, Inc. 2018 Equity and Incentive Plan (“Stock Plan”), which became effective on May 14, 2018, a maximum of 10.0 million shares of common stock may be awarded. As of December 31, 2022, 5.2 million shares remained available.

During 2022, the Company granted incentive equity awards totaling $30 million to key employees and senior officers in the form of RSUs. The RSUs generally vest ratably over a period of four years based on continuous service. Additionally, the Company approved incentive equity awards to key employees and senior officers in the form of PSUs with a maximum grant value of $12 million. The PSUs generally cliff vest on the third anniversary of the grant date based on continuous service with the number of shares earned (0% to 200% of the target award) depending on the extent to which the Company achieves the specified performance metrics.

Incentive Equity Awards Granted by the Company

The activity related to the Company’s incentive equity awards for the year ended December 31, 2022 consisted of the following:


	RSUs				PSUs
	Number of RSUs		Weighted Average Grant Price		Number of PSUs		Weighted Average Grant Price
Balance as of December 31, 2021	1.2		$	60.37	0.3		$	57.51
Granted (a)	0.3		81.71		0.1	(b)	82.74
Vested	(0.4)		58.58		—		—
Canceled	(0.1)		66.08		(0.1)		55.26
Balance as of December 31, 2022	1.0	(c)	$	67.90	0.3	(d)	$	69.82

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(a)Represents awards granted by the Company primarily in March 2022.

(b)Represents awards granted by the Company at the maximum achievement level of 200% of target payout. Actual shares that may be issued can range from 0% to 200% of target.

(c)RSUs outstanding as of December 31, 2022 have an unrecognized compensation expense of $48 million, which is expected to be recognized over a weighted average period of 2.5 years.

(d)PSUs outstanding as of December 31, 2022 have an aggregate maximum potential unrecognized compensation expense of $16 million, which may be recognized over a weighted average period of 1.6 years based on attainment of targets.

The activity related to stock options granted by the Company for the year ended December 31, 2022 consisted of the following:


	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2021	1.1		$	56.04
Granted	—		—
Exercised	(0.1)		58.87
Canceled	—		—
Outstanding as of December 31, 2022	1.0		$	55.90	3.6	$	16
Unvested as of December 31, 2022	0.4	(a)	$	55.17	3.9	$	6
Exercisable as of December 31, 2022	0.6		$	56.30	3.5	$	10

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(a)Unvested options as of December 31, 2022 are expected to vest over time and have an aggregate unrecognized compensation expense of $2 million, which will be recognized over a weighted average period of 1.5 years.

The fair value of stock options granted by the Company were estimated on the date of the grant using the Black-Scholes option-pricing model with the relevant assumptions outlined in the table below. Expected volatility is based on both historical and implied volatilities of the stock of comparable companies over the estimated expected life of the options. The expected life represents the period of time the options are expected to be outstanding. The risk-free interest rate is based on yields on U.S. Treasury strips with a maturity similar to the estimated expected life of the options. The projected dividend yield was based on the Company’s anticipated annual dividend divided by the price of the Company’s stock on the date of the grant.


	2021	2020
Grant date fair value	$19.58	$8.59
Grant date strike price	$65.21	$53.40
Expected volatility	40.18%	24.30%
Expected life	4.25 years	4.25 years
Risk-free interest rate	0.40%	1.21%
Projected dividend yield	0.98%	2.40%

Stock-Based Compensation Expense

Stock-based compensation expense was $33 million, $28 million and $21 million for 2022, 2021 and 2020, respectively. In 2020, $2 million was recorded within restructuring costs on the Consolidated Statements of Income/(Loss).