Equity-based Compensation Plan

12 Months Ended

Jun. 26, 2022

Share-Based Payment Arrangement [Abstract]

The Company has stock plans that provide for grants of equity-based awards to eligible participants, including stock options and restricted stock units, of the Company’s Common Stock. An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions.

The Lam Research Corporation 2015 Stock Incentive Plan (the “Plan”) was approved by the stockholders and provides for the grant of non-qualified equity-based awards to eligible employees, consultants, advisors, and non-employee directors of the Company and its subsidiaries. As of the date of stockholder approval 19,232,068 authorized shares were available for issuance under the Plan; as of June 26, 2022, 8,038,265 shares remain available for future issuance to satisfy stock option exercises and vesting of awards.

The Company recognized the following equity-based compensation expense and benefits in the Consolidated Statements of Operations:


	Year Ended
	June 26, 2022		June 27, 2021		June 28, 2020
	(in thousands)
Equity-based compensation expense	$	259,064	$	220,164	$	189,197
Income tax benefit recognized related to equity-based compensation	$	37,466	$	49,313	$	36,135
Income tax benefit realized from the exercise and vesting of options and RSUs	$	72,564	$	97,275	$	67,060

The estimated fair value of the Company’s equity-based awards, less expected forfeitures, is amortized over the awards’ vesting terms on a straight-line basis.

Restricted Stock Units

During the fiscal years 2022, 2021, and 2020, the Company issued both service-based RSUs and market-based performance RSUs (“PRSUs”). Service-based RSUs typically vest over a period of 3 years or less. Market-based PRSUs generally vest three years from the grant date if certain performance criteria are achieved and require continued employment. Based upon the terms of such awards, the number of shares that can be earned over the performance periods is based on the Company’s Common Stock price performance compared to the market price performance of a designated benchmark index, ranging from 0% to 150% of target. The designated benchmark index was the Philadelphia Semiconductor Total Return Index (“XSOX”). The stock price performance or market price performance is measured using the closing price for the 50-trading days prior to the dates the performance period begins and ends. The target number of shares represented by the market-based PRSUs is increased by 2% of target for each 1% that Common Stock price performance exceeds the market price performance of the designated benchmark index. Market-based PRSUs utilize the XSOX, which index gives effect to the reinvestment of dividends paid on its constituent holdings, as the benchmark; and accordingly, the Company's Common Stock price performance was adjusted for the reinvestment of dividends on Common Stock on the ex-dividend date. The result of the vesting formula is rounded down to the nearest whole number. Total stockholder return is a measure of stock price appreciation in this performance period.

The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs:


	Number of Shares (in thousands)	Weighted-Average Grant Date Fair Value
Outstanding, June 27, 2021	1,306	$	345.70
Granted	606	518.45
Vested	(747)	261.38
Forfeited or canceled	(64)	404.08
Outstanding, June 26, 2022	1,101	$	475.33

Of the 1.1 million shares outstanding at June 26, 2022, 904.0 thousand are service-based RSUs and 196.6 thousand are market-based PRSUs. The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant, discounted for dividends. The fair value of the Company’s market-based PRSUs granted during fiscal years 2022, 2021, and 2020 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $488.68, $640.69, and $320.69, respectively. The total fair value of service-based RSUs and market-based RSUs that vested during fiscal years 2022, 2021, and 2020 was $195.1 million, $177.4 million, and $166.9 million, respectively.

As of June 26, 2022, the Company had $418.8 million of total unrecognized compensation expense which is expected to be recognized over a weighted-average remaining period of approximately 2.2 years.

Stock Options

The Company granted stock options with a 7-year maximum contractual term to a limited group of executive officers during fiscal years 2022, 2021, and 2020. Stock options typically vest over a period of three years or less. The Company had 207.0 thousand options outstanding at June 26, 2022 with a weighted-average exercise price of $269.50 per share, of which 143.8 thousand were exercisable with a weighted-average exercise price of $189.59 per share. As of June 26, 2022, the Company had $7.8 million of total unrecognized compensation expense related to unvested stock options granted and outstanding which is expected to be recognized over a weighted-average remaining period of 2.3 years.

ESPP

The Company has an employee stock purchase plan (the “ESPP”) which allows employees to designate a portion of their base compensation to be deducted and used to purchase the Company’s Common Stock at a purchase price per share of the lower of 85% of the fair market value of the Company’s Common Stock on the first or last day of the applicable purchase period. Typically, each offering period lasts 12 months and contains one interim purchase date.

During fiscal year 2022, approximately 253 thousand shares of the Company’s Common Stock were sold to employees under the ESPP. At June 26, 2022, approximately 5.7 million shares were available for purchase, and the Company had $32.3 million of total unrecognized compensation cost, which is expected to be recognized over a remaining period of less than one year.