Travel + Leisure Co. 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, Noncash Expense [Abstract]

The Company has a stock-based compensation plan available to grant RSUs, PSUs, stock-settled appreciation rights, NQs, and other stock-based awards to key employees, non-employee directors, advisors, and consultants.

The Wyndham Worldwide Corporation 2006 Equity and Incentive Plan was originally adopted in 2006 and was amended and restated in its entirety and approved by shareholders on May 17, 2018, (the “Amended and Restated Equity Incentive Plan”). Under the Amended and Restated Equity Incentive Plan, a maximum of 15.7 million shares of common stock may be awarded. As of December 31, 2022, 10.8 million shares remain available.

Incentive Equity Awards Granted by the Company

During the year ended December 31, 2022, the Company granted incentive equity awards to key employees and senior officers of $34 million in the form of RSUs and $13 million in the form of PSUs. Of these awards, the majority of RSUs will vest ratably over a period of four years. The majority of PSUs will cliff vest on the third anniversary of the grant date, contingent upon the Company achieving certain performance metrics.

During the year ended December 31, 2021, the Company granted incentive equity awards of $35 million in the form of RSUs, $7 million in the form of PSUs, and $2 million in the form of stock options. During 2020, the Company granted incentive equity awards of $35 million in the form of RSUs, $8 million in the form of PSUs, and $8 million in the form of stock options.

The activity related to incentive equity awards granted by the Company to key employees and senior officers for the year ended December 31, 2022, consisted of the following (in millions, except grant prices):


	Balance as of December 31, 2021		Granted		Vested/Exercised (a)		Cancelled / Forfeited (b)		Balance as of December 31, 2022
RSUs
Number of RSUs	1.8		0.7		(0.5)		(0.2)		1.8		(c)
Weighted average grant price	$	47.83	$	51.37	$	47.63	$	47.97	$	48.79

PSUs
Number of PSUs	0.4		0.3		—		(0.2)		0.5		(d)
Weighted average grant price	$	48.18	$	52.87	$	—	$	45.11	$	51.26





NQs
Number of NQs	2.3		—		—		—		2.3		(e)
Weighted average grant price	$	45.32	$	—	$	—	$	—	$	45.36

(a)Upon exercise of NQs and vesting of RSUs and PSUs, the Company issues new shares to participants.

(b)The Company recognizes cancellations and forfeitures as they occur.

(c)Aggregate unrecognized compensation expense related to RSUs was $50 million as of December 31, 2022, which is expected to be recognized over a weighted average period of 2.5 years.

(d)Aggregate unrecognized compensation expense related to PSUs that are probable of vesting was $14 million as of December 31, 2022, which is expected to be recognized over a weighted average period of 2.0 years. The maximum amount of compensation expense associated with PSUs that are not probable of vesting could range up to $20 million which would be recognized over a weighted average period of 1.3 years.

(e)There were 1.4 million NQs which were exercisable as of December 31, 2022. These NQs will expire over a weighted average period of 6.1 years and carry a weighted average grant date fair value of $8.52. Unrecognized compensation expense for the NQs was $4 million as of December 31, 2022, which is expected to be recognized over a weighted average period of 1.7 years.

The Company did not grant any stock options during 2022. The fair value of stock options granted by the Company during 2021 and 2020 were estimated on the dates of these grants using the Black-Scholes option-pricing model with the relevant weighted average assumptions outlined in the table below. Expected volatility was based on both historical and implied volatilities of the Company’s stock and the stock of comparable companies over the estimated expected life for options.

The expected life represents the period of time these awards 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.


Stock Options	2021	2020
Grant date fair value	$18.87	$7.27		-	$7.28
Grant date strike price	$59.00	$41.04
Expected volatility	44.80%	32.60	%	-	32.88%
Expected life (a)	6.25 years	6.25		-	7.50 years
Risk-free interest rate	1.09%	0.95	%	-	1.03%
Projected dividend yield	3.12%	4.87%

(a)The maximum contractual term for these options is 10 years.

The total intrinsic value of exercised options were less than $1 million and $1 million during 2022 and 2021. There were no options exercised during 2020. The fair value of shares that vested during 2022, 2021, and 2020 were $33 million, $33 million, and $12 million.

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense of $45 million, $32 million, and $20 million during 2022, 2021, and 2020, related to the incentive equity awards granted to key employees, senior officers, and non-employee directors. During 2022, such stock-based compensation expense includes $3 million which has been classified within Restructuring on the Consolidated Statements of Income/(Loss). The Company recognized $12 million, $9 million, and $2 million of associated tax benefits during 2022, 2021, and 2020.

The Company paid $7 million, $9 million, and $2 million of taxes for the net share settlement of incentive equity awards that vested during 2022, 2021, and 2020. Such amounts are included within Financing activities on the Consolidated Statements of Cash Flows.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan which allows eligible employees to purchase common shares of Company stock through payroll deductions at a 10% discount from the fair market value at the grant date. The Company issued 0.3 million, 0.1 million, and 0.2 million shares during 2022, 2021, and 2020 and recognized $1 million of compensation expense related to grants under this plan in each period. The value of shares issued under this plan was $9 million, $8 million, and $7 million during 2022, 2021, and 2020.