Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.20.4
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
15. 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 other stock-based awards to key employees, non-employee directors, advisors and consultants. 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, 2020, 5.8 million shares remained available.
Incentive equity awards granted by the Company
Wyndham Hotels’ Board 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 year ended December 31, 2020 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, 2019 0.8  $ 55.75  0.1  $ 52.44 
Granted (a)
0.6  53.01  0.1  53.40 
Vested
 (0.3) 56.07  —  — 
Canceled
 (0.2) 54.71  —  — 
Balance as of December 31, 2020 0.9 
(b)
 $ 54.15  0.2 
(c)
 $ 52.93 
_____________________
(a)Represents awards granted by the Company primarily in February 2020.
(b)RSUs outstanding as of December 31, 2020 are expected to vest over time and have an aggregate unrecognized compensation expense of $35 million, which is expected to be recognized over a weighted average period of 2.6 years.
(c)PSUs outstanding as of December 31, 2020 are expected to vest over time and have an aggregate unrecognized compensation expense of $9 million, which may be recognized over a weighted average period of 1.7 years based on attainment of targets.
The activity related to stock options granted by the Company for the year ended December 31, 2020 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, 2019 0.9  $ 56.96 
Granted
 0.6  53.40 
Exercised
 —  — 
Canceled
 (0.1) 54.72 
Expired
 —  — 
Outstanding as of December 31, 2020
 1.4  $ 55.57  5.5 $ 6 
Unvested as of December 31, 2020
 1.0 
(a)
 $ 54.54  5.7 $ 5 
Exercisable as of December 31, 2020
 0.4  $ 57.94  5.1 $ 1 
_____________________
(a)Unvested options as of December 31, 2020 are expected to vest over time and have an aggregate unrecognized compensation expense of $7 million, which is expected to be recognized over a weighted average period of 2.6 years.

The fair value of stock options granted by the Company during 2020, 2019 and 2018 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.
2020 2019 2018
Grant date fair value $8.59 $10.46 $11.72
Grant date strike price $53.40 $52.44 $61.40
Expected volatility 24.30% 22.24% 22.72%
Expected life 4.25 years 6.25 years 4.25 years
Risk-free interest rate 1.21% 2.63% 2.73%
Projected dividend yield 2.40% 2.21% 1.63%
Incentive equity award modification
In August 2017, in conjunction with the anticipated spin-off of Wyndham Hotels, the Wyndham Worldwide Board approved certain modifications to the incentive equity awards granted by Wyndham Worldwide. Such modifications were contingent upon the spin-off becoming probable. On May 9, 2018, Wyndham Worldwide’s Board approved the spin-off of Wyndham Hotels, resulting in an accelerated vesting of 0.4 million RSUs and 0.1 million PSUs for all outstanding equity awards granted prior to 2018.
Stock-based compensation expense
Stock-based compensation expense was $21 million, $20 million and $45 million for 2020, 2019 and 2018, respectively. In 2020 and 2019, $2 million and $1 million, respectively was recorded within restructuring costs on the Consolidated and Combined Statements of Income (Loss). Further for 2019 and 2018, $4 million and $36 million, respectively, was recorded within separation-related costs on the Consolidated and Combined Statements of Income (Loss). In 2018, separation-related costs included $15 million of expense as a result of the modification of the Stock Plan.