Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

In May 2023, the Company’s stockholders approved the amendment and restatement of the Company’s 2015 Equity Incentive Plan (as so amended and restated, the “Amended 2015 Plan”). As of June 30, 2023, the remaining aggregate number of shares available for future grants under the Amended 2015 Plan was 13,088,697. The Amended 2015 Plan provides for the grant of stock-based awards, including nonqualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights and other equity securities to employees, consultants and non-employee directors of the Company and its affiliated entities. The number of shares of common stock available for issuance under the Amended 2015 Plan is reduced by (i) one share for each share of common stock issued pursuant to an appreciation award, such as a stock option or stock appreciation right with an exercise or strike price of at least 100% of the fair market value of the underlying common stock on the date of grant, and (ii) 1.8 shares for each share of common stock issued pursuant to any stock award that is not an appreciation award, also known as a “full value award.” The Amended 2015 Plan allows the Company to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of its employees, directors and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests of the Company’s stockholders. The Company accounts for stock-based compensation at fair value.

Restricted Stock Units

The RSUs granted to employees for service generally vest over four years, with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter, subject to continued employment. Some RSUs granted to employees for performance vest upon the completion of defined performance goals, subject to continued employment. The RSUs granted to non-employee members of the Board of Directors generally vest in full on the first anniversary of the grant date. The RSUs granted to non-employee consultants generally vest 50% on the first anniversary of the grant date, with the remaining 50% vesting quarterly thereafter through the second anniversary of the grant date. The Company’s RSUs are classified as equity awards because the RSUs will be settled in the Company’s common stock upon vesting. The fair value of the RSUs is determined at the grant date based on the closing price of the Company’s common stock on the date of grant. The related compensation expense is recognized over the service period, or shorter periods based on the retirement eligibility of certain grantees, and is based on the grant date fair value of the Company’s common stock and the number of shares expected to vest. The fair value of the awards is not remeasured at the end of each reporting period. The RSUs do not carry voting rights until they are vested, but certain unvested RSUs are entitled to accrue dividends, and shares are issued upon settlement in accordance with the terms of the award.

RSU Summary

The following tables summarize the Company’s RSU activity:


	Shares Underlying RSUs	Weighted- Average Grant Date Fair Value Per RSU
	(In thousands)
Outstanding at December 31, 2022	2,970	$	31.60
Granted	1,055	59.57
Forfeited	(32)	42.89
Released	(793)	36.88
Outstanding at June 30, 2023	3,200	$	39.38
Vested and unreleased at June 30, 2023 (1)	793


	Shares Underlying RSUs	Weighted- Average Grant Date Fair Value Per RSU
	(In thousands)
Outstanding at December 31, 2021	2,550	$	25.80
Granted	1,219	38.97
Forfeited	(113)	31.12
Released	(665)	33.27
Outstanding at June 30, 2022	2,991	$	29.30
Vested and unreleased at June 30, 2022 (1)	882

(1) These RSUs were granted to the Company’s Board of Directors as a part of their compensation for board and committee service, as detailed below, and had vested but had not yet settled, meaning that the underlying shares of common stock had not been issued and released pursuant to the terms of the applicable compensation program.

Service-Based RSUs

The majority of the annual compensation the Company provides to non-employee members of its Board of Directors is paid in the form of RSUs. In addition, some members of the Company’s Board of Directors may elect to receive the remainder of their annual compensation, or a portion thereof, in the form of RSUs. An aggregate amount of approximately 47,000 and 54,000 service-based RSUs were granted to the non-employee members of the Company’s Board of Directors as a result of these payments and elections during the six months ended June 30, 2023 and 2022, respectively, with an estimated grant date fair value of $2.4 million and $2.1 million, respectively.

During the six months ended June 30, 2023 and 2022, the Company granted approximately 626,000 and 743,000 service-based RSUs, respectively, to its employees, with an estimated aggregate grant date fair value of $37.9 million and $29.0 million, respectively.

Performance-Based RSUs

In March 2023 and 2022, the Company granted approximately 193,000 and 248,000 annual incentive, performance-based RSUs, respectively, to the Company’s executives and employees (the “Bonus RSUs”), with an estimated grant date fair value of $11.9 million and $9.7 million, respectively. Vesting of the Bonus RSUs is and was dependent upon the Company’s achievement of defined performance goals over the respective fiscal year. The Company records stock-based compensation expense related to performance-based RSUs when it is considered probable that the performance conditions will be met. Management believes it is probable that substantially all of the 2023 Bonus RSUs will vest. The level of achievement, if any, of performance goals will be determined by the compensation committee of the Company’s Board of Directors and, if such goals are achieved, the 2023 Bonus RSUs will vest, subject to continued employment, in March 2024. Substantially all of the 2022 Bonus RSUs vested in March 2023 upon the determination of the level of achievement of the performance goals.

Additionally, in March 2023 and 2022, the Company granted approximately 134,000 and 167,000 long-term, performance-based RSUs, respectively, to the Company’s executives (the “Executive RSUs”). The estimated aggregate grant date fair value of the Executive RSUs for the 2023 and 2022 grants was $8.2 million and $6.5 million, respectively. Vesting of the Executive RSUs is dependent upon the Company’s achievement of defined performance goals over a two-year period. The vesting of Executive RSUs will ultimately range from 0% to 150% of the number of shares underlying the Executive RSUs granted based

on the level of achievement of the performance goals. If the Company achieves the performance goals, 50% of the number of Executive RSUs earned based on performance will vest on the second anniversary of the grant date, and the remaining 50% will vest on the third anniversary of the grant date, in each case subject to the executive’s continued service as of the vesting date, which may be accelerated based on the retirement eligibility of certain grantees. During March 2023, the Company awarded approximately 55,000 additional shares related to performance-based RSUs granted to the Company’s executives in 2021 for over-achievement of performance targets for the performance period ended December 31, 2022. During March 2022, approximately 50,000 shares underlying performance-based RSUs granted to the Company’s executives in 2020 were forfeited for performance targets not fully achieved through the performance period ended December 31, 2021.

Stock Option Awards

The stock option awards granted to employees generally (i) have a term of ten years, (ii) vest over four years with 25% vesting after the first year of service and the remainder vesting ratably on a quarterly basis thereafter, (iii) are contingent upon employment on the vesting date, and (iv) have an exercise price equal to the fair market value of the underlying shares at the date of grant. The fair value of stock options was determined at the grant date using the Black-Scholes option pricing model. The Company historically granted stock options to newly hired and promoted employees but now exclusively utilizes RSUs. The Company did not grant any stock options during the three and six months ended June 30, 2023 or 2022.

Option Summary

A summary of the activity of the Company’s stock options is as follows:


	Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(In thousands, except years and per share data)
Options outstanding at December 31, 2022	1,185	$	9.97	2.64	$	49,094
Cancelled or expired	(4)	10.25
Exercised	(479)	7.67			$	26,151

Options outstanding and exercisable at June 30, 2023	702	$	11.53	2.91	$	35,534


	Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(In thousands, except years and per share data)
Options outstanding at December 31, 2021	1,681	$	9.35	3.28	$	53,698

Exercised	(71)	9.34			$	2,056
Forfeited	(2)	14.24
Options outstanding at June 30, 2022	1,608	$	9.34	2.78	$	45,361
Options exercisable at June 30, 2022	1,575	$	9.09	2.70	$	44,851
Options exercisable and expected to vest at June 30, 2022	1,607	$	9.34	2.78	$	45,358