Annual Report 2022

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Equity-settled share-based payment transactions with employees

In 2016, adidas announced the introduction of an open-ended employee stock purchase plan (the ‘plan’). The plan is operated on a quarterly basis, with each calendar quarter referred to as an ‘investment quarter.’

The plan enables employees to purchase adidas AG shares with a 15% discount (‘investment shares’) and to benefit from free matching shares. Currently, eligible employees of adidas AG and 17 other subsidiaries can participate in the plan. Up to two weeks before the start of an investment quarter each eligible employee can enroll for the plan. The company accepts enrollment requests on the first day of the relevant investment quarter. This is the grant date for the investment and matching shares. The fair value at the vesting date is equivalent to the fair value of the granted equity instruments at this date. The employees invest an amount up to 10% of their gross base salary per quarter in the plan. A few days after the end of the investment quarter the shares are purchased on the market at fair market value and transferred to the employees. Thereby the amount invested during the quarter plus the top-up from adidas is used. These shares can be sold at any time by the employee. If the shares are held for a period of one year after the last day of an investment quarter, employees will receive, as a one-off, free matching shares (one matching share for every six adidas AG shares acquired). This plan currently constitutes an equity-settled share-based payment for both elements. For the component of the matching shares relating to the specific period of service an appropriate discount is taken into account. The effects are presented in the following table:

Equity-settled share-based payment transactions with employees

 

 

As at Dec. 31, 2021

 

As at December 31, 2022

 

 

17th
investment quarter

 

17th
investment quarter

 

18th
investment quarter

 

19th
investment quarter

 

20th
investment quarter

 

21st
investment quarter

Grant date

 

Oct. 1, 2021

 

Oct. 1, 2021

 

Jan. 3, 2022

 

Apr. 1, 2022

 

Jul. 1, 2022

 

Oct. 3, 2022

Share price at grant date (in €)

 

270.25

 

270.75

 

259.10

 

210.10

 

167.64

 

119.00

Share price at December 31 (in €)

 

253.20

 

 

 

 

 

 

 

 

 

127.46

Number of granted investment shares based on the share price as at December 31

 

28,614

 

 

 

 

 

 

 

 

 

48,555

Number of actually purchased investment shares1, 2

 

 

28,872

 

33,915

 

38,075

 

59,469

 

Outstanding granted matching shares based on the share price as at December 31 or actually purchased investment shares

 

4,769

 

 

5,652

 

6,346

 

9,911

 

7,465

Average remaining vesting period in months as at December 31 (in months)

 

12

 

 

3

 

6

 

9

 

12

1

17th investment quarter: Thereof 14,131 own treasury shares used for investment shares.

2

18th investment quarter: Thereof 17,867 own treasury shares used for investment shares.

The matching shares in the amount of € 3.0 million are exercised within the fourth investment quarter 2021 to the first investment quarter 2023 (thereof 3,278 own treasury shares are used for matching shares).

The number of forfeited matching shares during the period amounted to 3,557 (2021: 3,681).

As at December 31, 2022, the total expenses recognized relating to investment shares amounted to € 4.3 million (2021: € 3.7 million).

Expenses recognized relating to vesting of matching shares amounted to € 3.3 million in 2022 (2021: € 3.0 million).

As at December 31, 2022, a total amount of € 5 million (2021: € 6 million) was invested by the participants in the stock purchase plan and was not yet transferred into shares by the end of December 2022. Therefore, this amount has been included in ‘Other current financial liabilities.’  SEE NOTE 18

Further information about the purchase of shares for the employee stock purchase plan is provided in these Notes.  SEE NOTE 26

Equity-settled share-based payment transactions with third parties

In 2016, adidas entered into a promotion and advertising contract that includes a share-based payment transaction with third parties. The contract has a general duration of five years until 2021 with an automated renewal option of one year if no termination has taken place. In 2022 the contract has been terminated. The first part of the agreement grants a transfer of basic shares, which correspond to a value of US $ 5 million each year. In 2022 a transfer of bonus shares took place.  SEE NOTE 26

As at January 1, 2022 (grant date), an amount of US $ 5 million was recognized as expenses for basic shares over the vesting period of twelve months.

The second part of the agreement grants bonus shares of US $ 5 million if certain conditions are fulfilled. This option can be granted twice. In 2022, the second option of bonus shares was granted, so that 26,868 shares were transferred. The shares from the tenth tranche of the share buyback program with an average share price of € 273.50 were used for compensation. Due to this utilization, the provision for the second option was used in the fiscal year (2021: € 4 million).

Equity-settled share-based payment for executive board members

In 2018, adidas established a Long-Term Incentive Plan (LTIP) for Executive Board members. In the reporting year, a change in accounting policy was made for this item so that the LTIP is now accounted for as equity-settled share-based payment. In the previous year, the LTIP was recorded as cash-settled share-based payment as an accrual.

In implementation of the ‘Own the Game’ strategy applicable from the 2021 financial year, the LTIP 2021/2025 pursues the goal of aligning the long-term performance-based variable remuneration of the Executive Board with the performance of the company and thus with the interests of the shareholders. Against this background, the LTIP 2021/2025 is share-based. It consists of five annual tranches (2021 to 2025), each with a term of five years. Each of the five annual tranches consists of a performance year and a subsequent four-year holding period. For the 2021/2025 LTIP, the Supervisory Board has set financial and ESG-related performance criteria for each of the five performance years.

The annual LTIP tranche (‘Grant Amount’) is paid to the Executive Board members after approval of the consolidated financial statements and is to be fully invested by the Executive Board members in the acquisition of adidas AG shares. The shares acquired are subject to a holding period, which ends at the end of the fourth financial year following the performance year. Only after the end of the holding period can the Executive Board members dispose of the shares.

As of December 31, 2022, the total number of adidas AG shares acquired since 2018 as part of the variable performance-based compensation and subject to a holding period amounts to 78,698 no-par-value shares (2021: 43,243 no-par-value shares). The number of adidas AG shares acquired by the members of the Executive Board is shown individually below:

LTI bonus: acquisition of shares in the context of the long-term variable compensation in €

LTIP tranche

 

2021

 

2020

 

2019

 

2018

Grant amount

 

14,182,500

 

1,482,105

 

9,244,573

 

9,015,692

Payout amount

 

7,449,357

 

778,475

 

4,825,271

 

4,702,793

Purchase price

 

210.10

 

270.75

 

255.00

 

219.20

Number of purchased shares

 

35,455

 

2,872

 

18,920

 

21,451

End of lock-up period

 

Dec. 31, 2025

 

Dec. 31, 2024

 

Dec. 31, 2023

 

Dec. 31, 2022

Cash-settled share-based payment transactions with employees

In 2017, adidas implemented a Long-Term Incentive Plan (LTIP), which is a share-based remuneration scheme with cash settlement. RSUs (Restricted Stock Units) are granted on the condition that the beneficiary is employed for three or four years by adidas AG or one of its subsidiaries in a position where they are not under notice during that period. This minimum period of employment pertains to the calendar year in which the RSUs are granted and the three subsequent calendar years. As an exception in 2022, RSUs were granted with a minimum term of employment of one and two years, respectively. 

The total value of the cash remuneration payable to senior management is recalculated on each reporting date and on the settlement date, based on the fair value of the RSUs, and recognized through an appropriate increase in the provision as personnel expenses that are spread over the period of service of the beneficiary. Furthermore, social security contributions are considered in the calculation of the fair value, if appropriate for the respective country regulations and the seniority of the participants. All changes to the subsequent measurement of this provision are reported under personnel expenses.

Once a year, one tranche with a three-year term and another with a four-year term are issued. The number of RSUs granted depends on the seniority of the beneficiaries. In addition, for the four-year plan, the number of RSUs also depends on the achievement of a financial and ESG-related target. In 2022, the option to issue two new tranches with a two-year and a one-year maturity was exercised.

The value of one RSU is the average price of the adidas AG share as quoted for the first 20 stock exchange trading days in January of the respective financial year. The effects are presented in the following table:

Cash-settled share-based payment transactions with employees

 

 

As at December 31, 2022

 

 

 

 

Plan year

 

2019

 

2020

 

2021

 

2022

Tranche

 

4-year tranche

 

3-year tranche

 

4-year tranche

 

3-year tranche

 

4-year tranche

 

3-year tranche

 

4-year tranche

 

3-year tranche

 

2-year tranche

 

1-year tranche

Share price as at December 31 (in €)

 

127.46

 

 

125.77

 

127.46

 

121.70

 

125.77

 

117.13

 

121.70

 

125.77

 

127.46

Number of granted RSUs based on the share price as at December 31 (in €)

 

108,039

 

 

24,667

 

102,877

 

227,521

 

37,745

 

102,523

 

236,945

 

2,149

 

2,149

Average risk-free interest rate based on the share price as at December 31

 

1.07%

 

 

1.28%

 

1.07%

 

1.55%

 

1.28%

 

1.74%

 

1.55%

 

1.28%

 

1.07%

Average remaining vesting period as at December 31 (in months)

 

 

 

12

 

 

24

 

12

 

36

 

24

 

12

 

Cash-settled share-based payment transactions with employees

 

 

As at December 31, 2021

Plan year

 

2018

 

2019

 

2020

 

2021

Tranche

 

4-year tranche

 

3-year tranche

 

4-year tranche

 

3-year tranche

 

4-year tranche

 

3-year tranche

 

4-year tranche

 

3-year tranche

Share price as at December 31 (in €)

 

253.20

 

 

249.69

 

253.20

 

245.86

 

249.69

 

241.79

 

245.86

Number of granted RSUs based on the share price as at December 31 (in €)

 

174,199

 

 

144,646

 

195,116

 

31,826

 

131,444

 

284,570

 

47,922

Average risk-free interest rate based on the share price as at December 31

 

0.86%

 

 

0.80%

 

0.86%

 

0.77%

 

0.80%

 

0.75%

 

0.77%

Average remaining vesting period as at December 31 (in months)

 

 

 

12

 

 

24

 

12

 

36

 

24

The fair value is based on the closing price of the adidas AG share on December 31, 2022, adjusted for future dividend payments.

In 2022, this resulted in an expense of € 36 million (2021: € 53 million). The corresponding provision amounted to € 57 million (2021: € 162 million).

Performance
Under the ‘Performance’ category, we subsume all footwear, apparel and ‘accessories and gear’ products which are of a more technical nature, built for sport and worn for sport. These are, among others, products from our most important sport categories: Football, Training, Running, and Outdoor.