Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.19.3
Stock-Based Compensation
 9 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
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, RSUs, performance-vesting restricted stock units (“PSUs”) and other stock-based awards to key employees, non-employee directors, advisors and consultants. Under the Wyndham Hotels & Resorts, Inc. 2018 Equity and Incentive Plan, which became effective on May 14, 2018, a maximum of 10.0 million shares of common stock may be awarded. As of September 30, 2019, 6.6 million shares remained available.
Incentive Equity Awards Granted by the Company
During 2019, Wyndham Hotels’ Board of Directors approved incentive equity award grants to employees of Wyndham Hotels in the form of RSUs, stock options and PSUs.
The activity related to the Company’s incentive equity awards for the nine months ended September 30, 2019 consisted of the following:
 
RSUs
 
Options
 
PSUs
 
Number of
RSUs
 
Weighted
Average
Grant Price
 
Number
of
Options
 
Weighted
Average
Exercise Price
 
Number
 of
PSUs
 
Weighted
Average
Grant Price
Balance as of December 31, 2018
0.5

 
$
61.31

 
0.5

 
$
61.40

 
—

 
$
—

Granted(a)
0.6

 
52.40

 
0.5

 
52.44

 
0.1

 
52.44

Vested/Exercised
(0.1
)
 
61.30

 
—

 
—

 
—

 
—

Canceled
(0.1
)
 
58.32

 
—

 
—

 
—

 
—

Balance as of September 30, 2019
0.9

(b) 
$
55.85

 
1.0

(c) 
$
56.96

 
0.1

(d) 
$
52.44


(a)
Represents awards granted by the Company primarily in February 2019.
(b)
RSUs outstanding as of September 30, 2019 are expected to vest over time and have an aggregate unrecognized compensation expense of $43 million, which is expected to be recognized over a weighted average period of 3.1 years.
(c)
Unvested options outstanding were 0.9 million with a weighted average exercise price of $56.30 as of September 30, 2019. Unvested options are expected to vest over time and have an aggregate unrecognized compensation expense of $9 million, which is expected to be recognized over a weighted average period of 3.1 years. The approximately 1.0 million options outstanding (0.1 million options exercisable) as of September 30, 2019 had no intrinsic value with a weighted average remaining contractual life of 7.0 years.
(d)
PSUs outstanding as of September 30, 2019 are expected to vest over time and have an aggregate unrecognized compensation expense of $5 million, which is expected to be recognized over a weighted average period of 2.6 years.

The fair value of stock options granted by Wyndham Hotels in February 2019 was estimated to be $10.46 per option 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.
 
2019
Grant date strike price
$52.44
Expected volatility
22.24%
Expected life
6.25 years
Risk-free interest rate
2.63%
Projected dividend yield
2.21%

Stock-Based Compensation Expense

Stock-based compensation expense was $4 million and $13 million for the three months ended September 30, 2019 and 2018. For the three months ended September 30, 2018, $10 million was recorded within separation-related costs on the Condensed Consolidated and Combined Statements of Income. Further, stock-based compensation expense was $15 million and $37 million for the nine months ended September 30, 2019 and 2018, respectively, of which $4 million and $30 million, respectively, was recorded within separation-related costs on the Condensed Consolidated and Combined Statements of Income.