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Equity
 6 Months Ended
Dec. 28, 2024
Equity [Abstract]  
Equity
Note 13. Equity
Description of Lumentum Stock-Based Compensation Plans
Equity Incentive Plan
On November 17, 2023, our stockholders approved amendments to the Amended and Restated Equity Incentive Plan (the “2015 Plan”) to increase the number of shares of common stock reserved for issuance by an additional 3.0 million shares. On November 20, 2024, our stockholders approved an amendment to the 2015 Plan to extend the expiration date of the 2015 Plan by one year until June 23, 2026.
As of December 28, 2024, we had 5.2 million shares subject to stock options, restricted stock units, restricted stock awards, and performance stock units issued and outstanding under the 2015 Plan. Restricted stock units, restricted stock awards, and performance stock units are performance-based, time-based or a combination of both and are expected to vest 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. The exercise price for stock options is equal to the fair value of the underlying stock at the date of grant. We issue new shares of common stock upon exercise of stock options. Options generally have vesting period of three years. As of December 28, 2024, 2.3 million shares of common stock under the 2015 Plan were available for grant.
Stock Options
In connection with the acquisition of Cloud Light, each of Cloud Light’s outstanding options was exchanged for a combination of cash and options to acquire Lumentum common stock having equivalent value (the “replacement options”) using an exchange ratio of 0.04375 according to the terms in the Merger Agreement. At the Cloud Light Closing Date, the replacement options consisted of 1.1 million options with a weighted average grant date fair value of $34.63. These replacement options have a total fair value of $38.9 million as of the Closing date, of which $23.5 million attributed to pre-acquisition service was recorded as part of purchase price consideration and the remaining $15.4 million will be recorded as post-acquisition stock-based compensation expense over the vesting period of three years from the Cloud Light Closing Date. Refer to “Note 4. Business Combinations.”
We estimate the fair value of the replacement options on the date of grant using the Black-Scholes option-pricing model. The assumptions used to estimate the fair value of the replacement options are as follows:
At the Acquisition Date
Expected terms (years)3.0
Expected volatility45.0 %
Risk-free interest rate5.0 %
Dividend yield— %
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 within four years. For annual grants to existing employees, RSUs generally vest ratably on an annual basis, or combination of annual and quarterly basis, over three years.
During the six months ended December 28, 2024, our board of directors approved grants of 1.5 million RSUs, which primarily vest over three years.
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. For PSUs with performance-based 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. For PSUs with market-based conditions, the compensation expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied, provided the requisite service is rendered. Our PSUs are subject to risk of forfeiture until performance and service conditions are satisfied and generally vest within three years.
During the six months ended December 28, 2024, we granted 0.7 million PSUs with an aggregate grant date fair value of $39.8 million to executive and non-executive employees as part of our revised Annual Incentive Plan. These PSUs are subject to performance targets and service conditions, with a vesting period of one year. We also granted 0.4 million PSUs with an aggregate grant date fair value of $21.2 million to certain executive officers and senior management. These PSUs will vest subject to the achievement of revenue targets, certain non-financial performance measurements and the Company’s total shareholder return (or “TSR”) relative to a specified peer group, as well as service conditions, over three years. The number of shares may be increased or decreased based on the results of these measurement targets ranging between 0% and 300% in accordance with the terms established at the date of grant. Approximately 25% of the 0.4 million PSUs granted during the six months ended December 28, 2024 will vest based on the Company’s relative TSR. The Company estimated the grant date fair value of TSR awards using a Monte-Carlo simulation model, which was calculated at $70.57 per share.
Employee Stock Purchase Plan
Our 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, 0.5 million shares remained available for issuance as of December 28, 2024.
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 EndedSix Months Ended
December 28, 2024December 30, 2023December 28, 2024December 30, 2023
Cost of sales$9.2 $9.0 $18.9 $15.0 
Research and development11.4 10.0 20.7 20.3 
Selling, general and administrative18.2 15.6 34.8 31.4 
Total stock-based compensation$38.8 $34.6 $74.4 $66.7 
During the three and six months ended December 28, 2024, we recorded $12.2 million and $19.5 million of stock-based compensation related to PSUs, respectively. During the three months ended December 30, 2023, we recorded $0.2 million of net reversal of stock-based compensation related to PSUs due to decline in anticipated achievement of performance conditions. During the six months ended December 30, 2023, we recorded $4.5 million of stock-based compensation related to PSUs. For PSUs with performance-based conditions, 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 EndedSix Months Ended
December 28, 2024December 30, 2023December 28, 2024December 30, 2023
Income tax benefit associated with stock-based compensation$4.7 $0.6 $6.1 $2.5 
Approximately $13.1 million and $14.4 million of stock-based compensation was capitalized to inventory as of December 28, 2024 and June 29, 2024, respectively.
As of December 28, 2024, $149.1 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 2.1 years.
Stock Award Activity
The following table summarizes our award activities for the six months ended December 28, 2024 (in millions):
Stock OptionsRestricted Stock UnitsPerformance Stock Units
Number of SharesWeighted-Average Exercise Price per ShareNumber of SharesWeighted-Average Grant Date Fair Value per ShareNumber of SharesWeighted-Average Grant Date Fair Value per Share
Balance as of June 29, 20241.1 $8.0 2.7 $62.5 0.9 $65.5 
Granted— — 1.5 57.3 1.1 56.5 
Vested/Exercised(0.3)7.8 (1.1)64.8 (0.1)79.8 
Canceled— — (0.2)61.2 (0.4)62.0 
Balance as of December 28, 20240.8 $8.0 2.9 $58.9 1.5 $59.2 
A summary of awards available for grant is as follows (in millions):
Awards Available for Grant
Balance as of June 29, 20244.3 
Granted(2.6)
Canceled0.6 
Balance as of December 28, 20242.3 
Employee Stock Purchase Plan Activity
The 2015 Purchase Plan expense for the three and six months ended December 28, 2024 was $1.0 million and $2.2 million, respectively. The 2015 Purchase Plan expense for the three and six months ended December 30, 2023 was $1.0 million and $2.2 million, respectively. The expense related to the 2015 Purchase Plan is recorded on a straight-line basis over the relevant subscription period.
During the six months ended December 28, 2024 and December 30, 2023, there were 0.2 million and 0.2 million shares issued to employees through the 2015 Purchase Plan, respectively.
Repurchase and Retirement of Common Stock
Share Buyback Program
We have a share buyback program that authorizes us to utilize up to an aggregate amount of $1.2 billion to purchase our own shares of common stock through May 2025. During the six months ended December 28, 2024 and December 30, 2023, we did not repurchase any shares of our common stock. Since the board of directors initially approved the share buyback program, we have repurchased 7.7 million shares in aggregate at an average price of $81.66 per share for a total purchase price of $630.4 million. We recorded the $630.4 million aggregate purchase price as a reduction of retained earnings within our condensed consolidated balance sheet and immediately retired all repurchased shares. As of December 28, 2024, we have $569.6 million remaining under the share buyback program.
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.