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Equity
 9 Months Ended
Apr. 01, 2023
Equity [Abstract]  
Equity
Note 13. Equity
Description of Lumentum Stock-Based Benefit Plans
Equity Incentive Plan
On November 16, 2022, our stockholders approved amendments to the Amended and Restated Equity Incentive Plan (the “2015 Plan”) to (i) increase the number of shares of common stock reserved for issuance by an additional 0.9 million shares and (ii) to make certain other changes to reflect good corporate governance practices.
As of April 1, 2023, we had 3.4 million shares subject to restricted stock units, restricted stock awards, and performance stock units issued and outstanding under the 2015 Plan. These grants are performance-based, time-based or a combination of both and are expected to vest over within four years. The fair value of these grants is based on the closing market price of our common stock on the date of grant. As of April 1, 2023, 2.7 million shares of common stock under the 2015 Plan were available for grant.
Replacement Awards
In connection with the merger with NeoPhotonics, we issued equity awards to certain NeoPhotonics employees, consisting of restricted stock units (the “Replacement Awards”) in exchange for their NeoPhotonics equity awards. The terms of these Replacement Awards are substantially similar to the original NeoPhotonics equity awards. The Replacement Awards consisted of 0.4 million restricted stock units with a grant date fair value of $93.4 per share, which represents our closing stock price on the Closing date. The total fair value of these Replacement Awards is $40.2 million, $3.5 million of which is attributable to employee services rendered through August 3, 2022, the merger Closing date, and was recognized as a component of the merger consideration and stock-based compensation in the consolidated statements of stockholders’ equity. The remaining fair value of the Replacement Awards is recorded as stock-based compensation over the remaining vesting period. Refer to “Note 4. Business Combinations.”
Restricted Stock Units
Restricted stock units (“RSUs”) under the 2015 Plan are grants of shares of our common stock, the vesting of which is based on the requisite service requirement. Generally, our RSUs are subject to forfeiture and are expected to vest over one to four years. For annual refresh grants, RSUs generally vest ratably on an annual basis, or combination of annual and quarterly basis, over three years.
During the nine months ended April 1, 2023, our board of directors approved grants of 1.8 million RSUs, which primarily vest over three years. In addition, we issued 0.4 million RSUs that were issued as part of the Replacement Awards in connection with the merger with NeoPhotonics as described above.
Performance Stock Units
Performance stock units (“PSUs”) under the 2015 Plan are grants of shares of our common stock that vest upon the achievement of certain performance and service conditions. We begin recognizing compensation expense when we conclude that it is probable that the performance conditions will be achieved. We reassess the probability of vesting at each reporting period and adjust our compensation cost based on this probability assessment. Our PSUs are subject to risk of forfeiture until performance and service conditions are satisfied and generally vest between one and three years.
During the nine months ended April 1, 2023, 0.3 million PSUs were issued to executive and certain non-executive employees as part of our revised Annual Incentive Plan. These PSUs have an aggregate grant date fair value of $26.0 million and are subject to performance targets and service conditions, with a vesting period of one year. The board of directors also approved a grant of 0.3 million PSUs with an aggregate grant date fair value of $23.0 million to certain executive officers and senior management. These PSUs will vest subject to the achievement of revenue targets and certain non-financial performance measurements, as well as service conditions, over three years.
Employee Stock Purchase Plan
Our 2015 Employee Stock Purchase Plan (the “2015 Purchase Plan”) provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a 15% purchase price discount as well as a 6-month look-back period. The 2015 Purchase Plan is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. The 2015 Purchase Plan will terminate upon the date on which all shares available for issuance have been sold. Of the 3.0 million shares authorized under the 2015 Purchase Plan, 1.3 million shares remained available for issuance as of April 1, 2023.
Stock-Based Compensation
The impact on our results of operations of recording stock-based compensation by function for the periods presented was as follows (in millions):
Three Months EndedNine Months Ended
April 1, 2023April 2, 2022April 1, 2023April 2, 2022
Cost of sales$6.9 $5.4 $19.1 $15.2 
Research and development11.0 5.4 31.2 15.8 
Selling, general and administrative15.2 12.5 66.0 44.4 
Total stock-based compensation$33.1 $23.3 $116.3 $75.4 
In connection with the NeoPhotonics merger, we issued replacement equity awards (the “Replacement Awards”) in settlement of certain NeoPhotonics equity awards at the merger Closing date, with the total fair value of $40.2 million based on our closing stock price on the Closing date. The portion of Replacement Awards attributed to pre-merger service is $3.5 million, which was accounted for as part of the consideration transferred and was recorded under stock-based compensation in our consolidated statements of stockholders’ equity as of April 1, 2023. Additionally, certain equity awards for NeoPhotonics employees were accelerated. The total stock-based compensation associated with the acceleration was $11.9 million, of which $9.0 million was settled in cash. We recorded the $11.9 million for the accelerated awards in our consolidated statements of operations during the first quarter of fiscal year 2023. Refer to “Note 4. Business Combinations.”

Included in stock-based compensation for the three and nine months ended April 1, 2023, is $3.5 million and $17.0 million of stock-based compensation costs related to PSUs, respectively. Included in stock-based compensation for the three and nine months ended April 2, 2022, is $2.2 million and $11.5 million, respectively, of stock-based compensation costs related to PSUs. The amount of stock-based compensation expense recognized in any one period related to PSUs can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected to be met, no compensation cost would be recognized on the underlying PSUs, and any previously recognized compensation expense related to those PSUs would be reversed.
Total income tax benefit associated with stock-based compensation recognized in our condensed consolidated statements of operations during the periods presented was as follows (in millions):
Three Months EndedNine Months Ended
April 1, 2023April 2, 2022April 1, 2023April 2, 2022
Income tax benefit associated with stock-based compensation$3.3 $2.7 $9.7 $10.9 
Approximately $16.8 million and $6.4 million of stock-based compensation was capitalized to inventory as of April 1, 2023 and July 2, 2022, respectively.
As of April 1, 2023, $192.3 million of stock-based compensation cost related to RSU awards remains to be amortized, which is expected to be recognized over an estimated amortization period of 2.0 years.
Stock Award Activity
The following table summarizes our award activities for the nine months ended April 1, 2023 (in millions, except per share amounts):
Restricted Stock UnitsPerformance Stock Units
Number of SharesWeighted-Average Grant Date Fair Value per ShareNumber of SharesWeighted-Average Grant Date Fair Value per Share
Balance as of July 2, 20222.0 $85.9 0.3 $81.9 
Replacement Awards issued0.4 93.4 — — 
Granted1.8 85.9 0.6 87.9 
Vested(1.1)85.2 (0.2)72.4 
Canceled(0.3)88.0 (0.1)89.0 
Balance as of April 1, 20232.8 $86.0 0.6 $89.1 
A summary of awards available for grant is as follows (in millions):
Awards Available for Grant
Balance as of July 2, 20223.8 
   Assumed in connection with NeoPhotonics merger0.4 
   Replacement Awards(0.4)
Authorized0.9 
Granted(2.4)
Canceled0.4 
Balance as of April 1, 20232.7 
Employee Stock Purchase Plan Activity
The 2015 Purchase Plan expense for the three and nine months ended April 1, 2023 was $1.7 million and $3.7 million, respectively. The 2015 Purchase Plan expense for the three and nine months ended April 2, 2022 was $1.0 million and $3.1 million, respectively. The expense related to the 2015 Purchase Plan is recorded on a straight-line basis over the relevant subscription period.
During the nine months ended April 1, 2023, there were 0.1 million shares issued to employees through the 2015 Purchase Plan. During the nine months ended April 2, 2022, there were 0.1 million shares issued to employees through the 2015 Purchase Plan.
Repurchase and Retirement of Common Stock
On May 7, 2021, our board of directors approved the 2021 share buyback program, which authorizes us to utilize up to $700.0 million to purchase our own shares of common stock. On March 3, 2022, our board of directors approved an increase in our share buyback program to authorize us to utilize up to an aggregate amount of $1.0 billion (an increase from $700.0 million) to purchase our own shares of common stock through May 2024. On April 5, 2023, our board of directors approved a further increase in our share buyback program to authorize us to utilize up to an aggregate amount of $1.2 billion (an increase from $1.0 billion) to purchase our own shares of common stock through May 2025.
During the nine months ended April 1, 2023, we repurchased 0.3 million shares of our common stock at an average price of $89.80 per share for an aggregate purchase price of $25.7 million.
Since the board of directors initially approved the share buyback program, we have repurchased 7.4 million shares in aggregate at an average price of $83.38 per share for a total purchase price of $615.5 million. We recorded the $615.5 million aggregate purchase price as a reduction of retained earnings within our condensed consolidated balance sheet. All repurchased shares were retired immediately.
The price, timing, amount, and method of future repurchases will be determined based on the valuation of market conditions and other factors, at prices determined to be attractive and in the best interests of both the Company and our stockholders. The stock repurchase program may be suspended or terminated at any time.