Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Stock-Based Compensation

Stock-Based Compensation

9.    Stock-Based Compensation

Equity Plans

2015 Equity Incentive Plan

General.   The Company’s board of directors adopted its 2015 Equity Incentive Plan (the “2015 Plan”), in June 2015. The Company’s 2015 Plan replaced all of its prior stock plans.

Share Reserve.   The initial number of shares of the Company’s common stock available for issuance under the 2015 Plan was 3,451,495 shares. The number of shares reserved for issuance under the 2015 Plan will be increased automatically on the first business day of each fiscal year, commencing in 2016, by a number equal to the least of:

● 3,500,000 shares;

● 4% of the shares of common stock outstanding on the last business day of the prior fiscal year; or

● the number of shares determined by the Company’s board of directors.

Stock options vest as determined by the compensation committee. In general, they will vest over a four-year period following the date of grant. Stock options expire at the time determined by the compensation committee but in no event more than ten years after they are granted. These awards generally expire earlier if the participant's service terminates earlier.

Restricted Shares and Stock Units.  Restricted shares and stock units (collectively “RSUs”) may be awarded under the 2015 Plan in return for any lawful consideration, and participants who receive RSUs generally are not required to pay cash for their awards. These awards may be subject to vesting. Vesting may be based on length of service, the attainment of performance-based milestones or a combination of both, as determined by the compensation committee. Further, RSUs may be granted and immediately vested in lieu of certain obligations.

The Company also periodically awards phantom stock units, under a separate incentive arrangement, to certain international personnel, which are settled in cash upon vesting and accounted for as liability-based awards with no impact to the shares available for grant.

Employee Stock Purchase Plan

General.    The Company’s 2015 Employee Stock Purchase Plan (the “ESPP”), was adopted by its board of directors in June 2015 and its stockholders approved it in June 2015. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code.

Share Reserve.     The Company has 3,772,225 shares available for issuance under the Plan as of December 31, 2023, a number that is automatically increased on the first business day of each fiscal year of the Company during the term of the ESPP by the least of (i) 1% of the total number of shares of common stock actually issued and outstanding on the last business day of the prior fiscal year, (ii) 880,000 shares of common stock (subject to the ESPP), or (iii) a number of shares of common stock determined by the Company’s board of directors. The number of shares reserved under the 2015 ESPP will automatically be adjusted in the event of a stock split, stock dividend or a reverse stock split (including an adjustment to the per-purchase period share limit).

Purchase Price.    Employees may purchase each share of common stock under the 2015 ESPP at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of the six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 15% of the compensation, and up to a maximum of 5,000 shares may be purchased during any offering period. A participant shall not be granted an option under the ESPP if such option would permit the participant’s rights to purchase stock to accrue at a rate exceeding $25,000 fair market value of stock for each calendar year in which such option is outstanding at any time.

Offering Periods.    Each offering period will last a number of months determined by the compensation committee, not to exceed 27 months. A new offering period will begin periodically, as determined by the compensation committee. Offering periods may overlap or may be consecutive. Unless otherwise determined by the compensation committee, two offering periods of six months' duration will begin in each year on May 1 and November 1.

Stock Options and Restricted Stock Units

The following table summarizes option and RSU activity during the year ended December 31, 2023:

	Outstanding Options
					Weighted-
			Weighted-		Average
	Shares		Average		Remaining	Aggregate
	Available for	Number of	Exercise		Contractual	Intrinsic
	Grant	Shares	Price		Life	Value
(in thousands, except for contractual life and exercise price)					(in years)
Balance at December 31, 2022	3,263	5,300	$	21.11	4.84	$	131,385
Additional shares authorized	3,500	—	$	—
Options granted	(499)	499	$	44.27
Options exercised	—	(298)	$	13.09
RSUs granted	(6,096)
RSUs forfeited/cancelled	934
Balance at December 31, 2023	1,102	5,501	$	23.65	4.36	$	231,133
Exercisable at December 31, 2023		4,509	$	13.97	3.49	$	221,758
Vested and expected to vest at December 31, 2023		5,435	$	23.12	4.31	$	230,521

The total intrinsic value of stock options exercised during the years ended December 31, 2023, 2022, and 2021 were $14.7 million, $26.9 million, and $97.0 million, respectively.

The weighted-average grant date fair value of options granted during the years ended December 31, 2023, 2022, and 2021 were $27.31, $34.00, and $48.97 per share, respectively.

The total fair value of stock options vested during the years ended December 31, 2023, 2022, and 2021 were $57.5 million, $49.0 million, and $46.0 million, respectively.

Performance-based Awards

The Company grants certain senior-level executives performance stock options and units which vest based on either market and time-based service conditions or performance and time-based service conditions, which are referred to herein as performance-based awards. The Company assessed the performance-based awards with the appropriate valuation method and has recognized the applicable stock-based compensation expense.

The Company has recognized $54.2 million in stock-based compensation for performance-based awards for the year ended December 31, 2023 compared to $48.2 million for the year ended December 31, 2022. Performance-based awards with market conditions and a fair value estimated using a Monte Carlo simulation model were granted in the year ended December 31, 2021, with no such awards granted in the years ended December 31, 2023 and 2022. The following inputs were used to estimate the fair value of performance-based awards granted with market conditions using a Monte Carlo simulation model:

	December 31,			December 31,			December 31,
	2023			2022			2021
Risk-free interest rate		—	%		—	%		0.80	%	—	1.52	%
Expected dividend yield		—	%		—	%					—	%
Expected volatility		—	%		—	%					60	%
Expected term (years)		—			—			7.25		—	10.00

Restricted Stock Units

The following table summarizes unvested RSU for the year ended December 31, 2023:

		Weighted-
		Average
	Number of	Grant Date
	Shares	Fair Value
	(in thousands)
Balance at December 31, 2022	6,836	$	57.12
Granted	6,096	$	44.90
Vested	(2,750)	$	57.74
Cancelled/Forfeited	(934)	$	49.54
Balance at December 31, 2023	9,248	$	49.50

Stock-Based Compensation Expense

The following table presents stock-based compensation expense recorded for equity classified awards in the statement of operations and comprehensive loss:

	Year ended December 31,
	2023						2022						2021
	Employee		Non-Employee		Total		Employee		Non-Employee		Total		Employee		Non-Employee		Total
	(in thousands)
Cost of revenues	$	11,665	$	87	$	11,752	$	7,905	$	—	$	7,905	$	4,811	$	—	$	4,811
Research and development		63,445		2,881		66,326		44,655		1,890		46,545		24,507		1,361		25,868
Selling, general and administrative		112,236		1,494		113,730		97,379		555		97,934		84,368		172		84,540
Total	$	187,346	$	4,462	$	191,808	$	149,939	$	2,445	$	152,384	$	113,686	$	1,533	$	115,219

Additionally, the stock-based compensation expense for liability classified awards for the years ended December 31, 2023, 2022, and 2021 was $0.8 million, $0.6 million, and $0.4 million, respectively. As of December 31, 2023, approximately $331.5 million of unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested option awards and RSUs will be recognized over a weighted-average period of approximately 2.4 years.

Valuation of Stock Option Grants

The Company utilizes Black-Scholes option pricing model when estimating the fair value of stock options. The following valuation assumptions were applied to options.

	Year ended December 31,
	2023					2022					2021
Expected term (years)	5.20		—	6.11		5.12		—	10.00		5.11		—	10.00
Expected volatility	67.75	%	—	70.07	%	55.91	%	—	62.30	%	55.33	%	—	63.30	%
Expected dividend rate				—	%				—	%				—	%
Risk-free interest rate	3.41	%	—	4.80	%	1.62	%	—	4.16	%	0.81	%	—	1.67	%

As of December 31, 2023, there were no options outstanding held by non-employees. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock option is earned and the services are rendered. The Company believes that the estimated fair value of the stock options is more readily measurable than the fair value of the services rendered.