Employee Benefit Plans

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Note 10. Employee Benefit Plans

Equity Incentive Plans

The Company’s equity incentive plans include the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2008 Employee Stock Purchase Plan (the “ESPP”). The Company has granted RSUs and PSAs under the 2015 Plan and purchase rights under the ESPP. In addition, in connection with certain past acquisitions, the Company has assumed or substituted stock options, RSUs, RSAs, and PSAs granted under the stock plans of the acquired companies. Such awards were converted into or replaced with the Company's stock options, RSUs, RSAs, and PSAs, respectively.

The 2015 Plan was adopted and approved by the Company's stockholders in May 2015 and had an initial authorized share reserve of 38.0 million shares of common stock, plus the addition of any shares subject to outstanding awards under the 2006 Equity Incentive Plan and the Amended and Restated 1996 Stock Plan that were outstanding as of May 19, 2015, and that subsequently expire or otherwise terminate, up to a maximum of an additional 29.0 million shares. In May 2017, May 2019, May 2022 and May 2023, the Company's stockholders approved an additional 23.0 million, 3.7 million, 4.5 million, and 7.0 million shares of common stock, respectively, for issuance under the 2015 Plan. As of December 31, 2023, an aggregate of 17.3 million shares were subject to outstanding equity awards and 2.3 million shares were available for future issuance under the 2015 Plan.

The ESPP was adopted and approved by the Company's stockholders in May 2008. In May 2020, the Company's stockholders approved an additional 8.0 million shares of common stock for issuance under the ESPP. To date, the Company's stockholders have approved a share reserve of 43.0 million shares of the Company's common stock for issuance under the ESPP. The ESPP permits eligible employees to acquire shares of the Company’s common stock at a 15% discount (as determined in the ESPP) through periodic payroll deductions of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000 worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar year. The ESPP provides 24 month offering periods with four 6-month purchase periods. A new 24-month offering period will commence every six months thereafter. The purchase price for the Company’s common stock under the ESPP is 85% of the lower of the fair market value of the shares at (1) the beginning of the applicable offering period or (2) the end of each 6-month purchase period during such offering period. The ESPP will continue in effect until February 25, 2028, unless terminated earlier under the provisions of the ESPP. As of December 31, 2023, approximately 39.4 million shares have been issued and 3.6 million shares remain available for future issuance under the ESPP.

RSU, RSA, and PSA Activities

RSUs generally vest over three years from the date of grant, and RSAs and PSAs generally vest over a period of one to three years provided that certain annual performance targets and other vesting criteria are met. Until vested, RSUs and PSAs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

The following table summarizes the Company’s RSU, RSA, and PSA activity and related information as of and for the year ended December 31, 2023 (in millions, except per share amounts and years):


	Outstanding RSUs, RSAs, and PSAs
	Number of Shares	Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at December 31, 2022	20.2	$	26.78
Granted(1)(2)	9.6	28.88
Vested(3)	(7.9)	26.04
Canceled	(1.7)	26.37
Balance at December 31, 2023	20.2	$	28.10	1.1	$	593.6

As of December 31, 2023
Vested and expected-to-vest RSUs, RSAs, and PSAs	17.6	$	27.67	1.1	$	518.8

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(1)Includes 7.8 million service-based, 1.4 million performance-based, and 0.4 million market-based awards. The number of shares subject to performance-based and market-based conditions represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The grant date fair value of RSUs and PSAs was reduced by the present value of dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested.

(2)The weighted-average grant-date fair value of RSUs, RSAs, and PSAs granted and assumed or substituted during 2023, 2022, and 2021 was $28.88, $29.62, and $26.21, respectively. The grant date fair value of RSUs and PSAs was reduced by the present value of dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested. During 2023, the Company declared a quarterly cash dividend of $0.22 per share of common stock on January 31, 2023, April 25, 2023, July 27, 2023, and October 26, 2023.

(3)Total fair value of RSUs, RSAs, and PSAs vested during 2023, 2022, and 2021 was $206.8 million, $202.2 million, and $184.2 million, respectively.

Shares Available for Grant

The following table presents the stock activity and the total number of shares available for grant under the 2015 Plan (in millions):


			Number of Shares
Balance as of December 31, 2022			3.4
Additional shares authorized			7.0
Options, RSUs, and PSAs granted			(9.3)
RSUs and PSAs canceled			1.2

Balance as of December 31, 2023			2.3

Employee Stock Purchase Plan

During 2023, 2022, and 2021, employees purchased 2.6 million, 2.6 million, and 2.8 million shares of common stock through the ESPP at an average exercise price of $23.53, $21.59, and $19.81 per share, respectively.

Valuation Assumptions

The weighted-average assumptions used and the resulting estimates of fair value for ESPP purchase rights and market-based RSUs were as follows:


	Years Ended December 31,
	2023	2022	2021
ESPP Purchase Rights:
Volatility	28%	29%	32%
Risk-free interest rate	4.6%	1.1%	0.1%
Expected life (years)	1.3	1.3	1.3
Dividend yield	2.8%	2.5%	3.0%
Weighted-average fair value per share	$7.97	$8.84	$6.96

Market-based RSUs:
Volatility	28%	30%	30%
Risk-free interest rate	4.3%	1.7%	0.2%
Dividend yield	2.8%	2.5%	3.4%
Weighted-average fair value per share	$37.45	$47.96	$30.70

Share-Based Compensation Expense

Share-based compensation expense associated with stock options, RSUs, RSAs, PSAs, and ESPP purchase rights was recorded in the following cost and expense categories in the Company's Consolidated Statements of Operations (in millions):


	Years Ended December 31,
	2023		2022		2021
Cost of revenues - Product	$	6.7	$	5.9	$	5.3
Cost of revenues - Service	20.8		17.4		18.2
Research and development	129.2		84.0		93.1
Sales and marketing	85.2		59.1		65.9
General and administrative	37.5		42.9		40.1
Total	$	279.4	$	209.3	$	222.6

The following table summarizes share-based compensation expense by award type (in millions):


	Years Ended December 31,
	2023		2022		2021
Stock options	$	2.2	$	5.4	$	9.3
RSUs, RSAs, and PSAs	249.1		181.9		196.2
ESPP Purchase Rights	28.1		22.0		17.1
Total	$	279.4	$	209.3	$	222.6

For the years ended December 31, 2023, 2022, and 2021, the Company recognized tax benefits on total stock-based compensation expense, which are reflected in the income tax provision in the Consolidated Statements of Operations, of $36.9 million, $25.7 million, and $28.2 million, respectively.

For the years ended December 31, 2023, 2022, and 2021, the realized tax benefit related to awards vested or exercised during the period was $34.4 million, $38.6 million, and $31.7 million, respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the research and development tax credit.

As of December 31, 2023, the total unrecognized compensation cost related to unvested share-based awards was $383.4 million to be recognized over a weighted-average period of 1.8 years.

401(k) Plan

The Company maintains a savings and retirement plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended (the "IRC"). Employees meeting the eligibility requirements, as defined under the IRC, may contribute up to the statutory limits each year. The Company currently matches 30% of all eligible employee contributions which vest immediately. The Company’s matching contributions to the plan totaled $27.3 million, $23.5 million, and $22.3 million during 2023, 2022, and 2021, respectively.

Deferred Compensation Plan

The Company’s NQDC plan is an unfunded and unsecured deferred compensation arrangement. Under the NQDC plan, officers and other senior employees may elect to defer a portion of their compensation and contribute such amounts to one or more investment funds. As of December 31, 2023, the liability of the Company to the plan participants was $38.0 million, of which $2.5 million was included within other accrued liabilities and $35.5 million was included in other long-term liabilities on the Consolidated Balance Sheets. The Company had investments of $38.0 million correlating to the deferred compensation obligations, of which $2.5 million was included within prepaid expenses and other current assets and $35.5 million was included within other long-term assets on the Consolidated Balance Sheets. As of December 31, 2022, the liability of the Company was $28.1 million, of which $2.4 million was included within other accrued liabilities and $25.7 million was included in other long-term liabilities on the Consolidated Balance Sheets. The Company had investments of $28.1 million correlating to the deferred compensation obligations, of which $2.4 million was included within prepaid expenses and other current assets and $25.7 million was included within other long-term assets on the Consolidated Balance Sheets.