
5. STOCKHOLDERS’ EQUITY

As of October 2, 2022, approximately 1.8 million shares remained available for future grants under the 2015 Stock and Incentive Compensation Plan.


	Restricted Stock Units (RSU)	Performance Stock Units (PSU)(1)	Weighted-Average Grant Date Fair Value per Share
Units in thousands			RSU		PSU
Outstanding at January 2, 2022	1,130	328	$	345.66	$	466.42
Awarded	1,175	(111)	$	316.48	$	476.80
Vested	(109)	—	$	386.20	$	—
Cancelled	(149)	(34)	$	343.26	$	423.89
Outstanding at October 2, 2022	2,047	183	$	326.88	$	468.11

(1)The number of units reflect the estimated number of shares to be issued at the end of the performance period. Awarded units are presented net of performance adjustments.


Units in thousands	Options	Weighted-Average Exercise Price		Performance Stock Options(1)	Weighted-Average Exercise Price
Outstanding at January 2, 2022	8	$	66.42	17	$	85.54
Granted	180	$	330.25	—	$	—
Exercised	(1)	$	6.55	—	$	—

Outstanding at October 2, 2022	187	$	319.72	17	$	85.54
Exercisable at October 2, 2022	8	$	71.09	—	$	—

(1)The number of units reflect awards that have been granted and for which it is assumed to be probable that the underlying performance goals will be achieved.

We grant cash-based equity incentive awards to GRAIL employees. On October 1, 2022, upon recommendation from GRAIL’s management, it was determined at a meeting of the Compensation Committee of Illumina’s Board of Directors that, for purposes of valuation and performance measurement of the awards, GRAIL’s stand-alone valuation, as determined by GRAIL using a reasonable calculation and based on advice from independent valuation experts and analyses, would be used for valuation and performance measurement purposes.


In millions
Outstanding at January 2, 2022	$	184
Granted	107
Vested and paid in cash	(32)
Cancelled	(33)

Outstanding at October 2, 2022	$	226
Estimated liability as of October 2, 2022 (included in accrued liabilities)	$	24

We recognized share-based compensation expense of $17 million and $46 million in Q3 2022 and YTD 2022, respectively. No share-based compensation expense was recognized in Q3 2021 and YTD 2021. As of October 2, 2022, approximately $202 million of total unrecognized compensation cost related to awards issued to date was expected to be recognized over a weighted-average period of approximately 3.2 years.

In connection with the acquisition of GRAIL, we assumed a performance-based award for which vesting is based on GRAIL’s future revenues. The award has an aggregate potential value of up to $78 million and expires, to the extent unvested, in August 2030. As of October 2, 2022, it was not probable that the performance conditions associated with the award will be achieved and, therefore, no share-based compensation expense, or corresponding liability, has been recognized in the condensed consolidated financial statements to-date.

The price at which common stock is purchased under the Employee Stock Purchase Plan (ESPP) is equal to 85% of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. During YTD 2022, approximately 0.3 million shares were issued under the ESPP. As of October 2, 2022, there were approximately 12.8 million shares available for issuance under the ESPP.

We did not repurchase any shares during YTD 2022. As of October 2, 2022, authorizations to repurchase approximately $15 million of our common stock remained available under the $750 million share repurchase program authorized by our Board of Directors on February 5, 2020. The repurchases may be completed under a 10b5-1 plan or at management’s discretion.

Share-based compensation expense, which includes expense for both equity and liability-classified awards, reported in our condensed consolidated statements of operations was as follows:



In millions	Q3 2022		Q3 2021		YTD 2022		YTD 2021
Cost of product revenue	$	7	$	7	$	20	$	22
Cost of service and other revenue	2		1		4		3
Research and development	37		193		112		243
Selling, general and administrative	37		496		130		576
Share-based compensation expense before taxes	83		697		266		844
Related income tax benefits	(18)		(29)		(60)		(57)
Share-based compensation expense, net of taxes	$	65	$	668	$	206	$	787

In connection with the acquisition of GRAIL, we recognized, in Q3 2021, share-based compensation expense of $615 million related to the fair value of accelerated equity awards attributable to the post-combination period, of which $167 million was recorded in research and development expense and $448 million in selling, general and administrative expense.

In February 2021, we modified the metrics and reduced the maximum potential payouts for our performance stock units granted in 2019 and 2020. The PSU granted in 2019 vested on January 2, 2022 and the PSU granted in 2020 vests at the end of the three-year period ending on January 1, 2023. The modifications affected 52 employees with units granted in 2019, which resulted in total incremental share-based compensation expense of approximately $41 million, and 72 employees with units granted in 2020, which resulted in total incremental share-based compensation expense of approximately $65 million.

The assumptions used and the resulting estimate of weighted-average fair value per share for stock purchased under the ESPP during YTD 2022 were as follows:


	Employee Stock Purchase Rights
Risk-free interest rate	0.06% - 2.98%
Expected volatility	37% - 51%
Expected term	0.5 - 1.0 year
Expected dividends	0		%
Weighted-average grant-date fair value per share	$	50.22

As of October 2, 2022, approximately $538 million of total unrecognized compensation cost related to restricted stock, stock options and ESPP shares issued to date was expected to be recognized over a weighted-average period of approximately 2.4 years.