STOCK PLANS AND SHARE BASED COMPENSATION

12 Months Ended

Dec. 31, 2024

STOCK PLANS AND SHARE BASED COMPENSATION

STOCK PLANS AND SHARE BASED COMPENSATION

7. STOCK PLANS AND SHARE BASED COMPENSATION:

Stock Plans

As of December 31, 2024, the Company had three stock-based compensation plans (the “Plans”) which are described below.

2007 Equity Incentive Plan

The 2007 Equity Incentive Plan (“2007 Plan”) was adopted by the board of directors on September 10, 2007, and approved by the stockholders on November 7, 2007, as an amendment and restatement of the 1997 Stock Option Plan (“1997 Plan”). The 2007 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit (“RSU”) awards, stock appreciation rights, performance-based (“PSU”) awards, long-term performance based (“PRSU”) awards and other stock awards to employees, directors and consultants. The 2007 Plan expired in September 2017 with no further grants to be made under this plan; however previous grants under this plan shall remain outstanding until they are exercised, vest, forfeited or expire.

2016 Incentive Award Plan

The 2016 Incentive Award Plan (“2016 Plan”) was adopted by the board of directors on March 17, 2016 and approved by the stockholders on May 13, 2016. The 2016 Plan provides for the grant of RSU awards, PSU awards and PRSU awards. No other forms of equity-based awards, including stock options and stock appreciation rights, may be granted under the 2016 Plan. As of December 31, 2024, 3.9 million awards have been issued, net of forfeitures or cancellations, and approximately 3.1 million shares of common stock remain available for future grant under the 2016 Plan.

1997 Employee Stock Purchase Plan

Under the 1997 Employee Stock Purchase Plan (“Purchase Plan”), eligible employees may apply accumulated payroll deductions, which may not exceed 15% of an employee’s compensation, to the purchase of shares of the Company’s common stock at periodic intervals. The purchase price of stock under the Purchase Plan is equal to 85% of the lower of (i) the fair market value of the Company’s common stock on the first day of each offering period, or (ii) the fair market value of the Company’s common stock on the purchase date (as defined in the Purchase Plan). Each offering period consists of one purchase period of approximately six months duration. An aggregate of 7.5 million shares of common stock were reserved for issuance to employees under the Purchase Plan. As of December 31, 2024, of the shares reserved for issuance, 6.9 million shares had been purchased and 0.6 million shares were reserved for future issuance under the Purchase Plan.

Shares Reserved

As of December 31, 2024, the Company had approximately 3.9 million shares of common stock reserved for future grant under all stock plans.

Stock-Based Compensation

The Company applies the provisions of ASC 718-10, Stock Compensation. Under the provisions of ASC 718-10, the Company recognizes the fair value of stock-based compensation in its financial statements over the requisite service period of the individual grants, which generally equals a four-year vesting period. The Company uses estimates of volatility, expected term, risk-free interest rate, dividend yield and forfeitures in determining the fair value of these awards and the amount of compensation expense to recognize. The Company uses the straight-line method to amortize all stock awards granted over the requisite service period of the award.

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the years ended December 31, 2024, 2023 and 2022:

	Year Ended December 31,
(In thousands)	2024		2023		2022
Cost of revenues	$	2,090	$	1,692	$	1,132
Research and development		12,587		10,939		10,428
Sales and marketing		8,064		6,888		6,035
General and administrative		12,335		9,009		4,769
Total stock-based compensation expense	$	35,076	$	28,528	$	22,364

The following table summarizes total compensation expense related to unvested awards not yet recognized, net of expected forfeitures, and the weighted average period over which it is expected to be recognized as of December 31, 2024:

	Unrecognized Compensation		Weighted Average
	Expense for Unvested		Remaining Recognition
	Awards		Period
	(In thousands)		(In years)
Long-term performance-based awards	$	8,179	1.56
Restricted stock units		47,410	2.61
Purchase plan		156	0.08
Total unrecognized compensation expense	$	55,745

Stock-based compensation expense in the year ended December 31, 2024, was approximately $35.1 million, comprising approximately $25.7 million related to restricted stock units, $7.7 million related to performance-based awards and long-term performance-based awards and $1.7 million related to the Company’s Purchase Plan.

Stock-based compensation expense in the year ended December 31, 2023, was approximately $28.5 million, comprising approximately $23.4 million related to restricted stock units, $3.2 million related to performance-based awards and long-term performance-based awards and $1.9 million related to the Company’s Purchase Plan.

Stock-based compensation expense in the year ended December 31, 2022, was approximately $22.4 million, comprising approximately $23.2 million related to restricted stock units, $1.9 million related to the Company’s Purchase Plan and a $2.7 million credit related to performance-based awards and long-term performance-based awards.

The fair value of employees’ stock purchase rights under the Purchase Plan was estimated using the Black-Scholes model with the following weighted-average assumptions used during the three years ended December 31, 2024, 2023 and 2022:

	Year Ended December 31,
	2024			2023			2022
Risk-free interest rates		5.15	%		5.15	%		1.71	%
Expected volatility rates		36	%		37	%		41	%
Expected dividend yield		1.15	%		0.90	%		0.89	%
Expected term of purchase rights (in years)		0.50			0.49			0.50
Weighted-average estimated fair value of purchase rights	$	18.27		$	23.75		$	21.63

No options were granted or remain outstanding as of December 31, 2024. There were no options exercised during the years ended December 31, 2024 and December 31, 2023, while total intrinsic value of options exercised during the year ended December 31, 2022 was $0.8 million.

PSU Awards

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The number of shares that are released at the end of the performance year can range from zero to 200% of the target number depending on the Company’s performance. The performance metrics of this program are annual targets consisting of a combination of net revenue, non-GAAP operating earnings and strategic goals.

As the net revenue, non-GAAP operating income and strategic goals are considered performance conditions, expense associated with these awards, net of estimated forfeitures, is recognized over the service period based on an assessment of the achievement of the performance targets. The fair value of these PSUs is determined using the fair value of the Company’s common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

A summary of PSU awards outstanding as of December 31, 2024, and activity during the three years then ended, is presented below:

				Weighted-
				Average
		Weighted-Average		Remaining	Aggregate
	Shares	Grant Date Fair		Contractual Term	Intrinsic Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2022	104	$	84.47
Granted	119	$	79.91
Vested	(104)	$	84.48
Forfeited or canceled	(85)	$	79.89
Outstanding at December 31, 2022	34	$	79.94
Granted	131	$	82.96
Vested	(34)	$	79.94
Forfeited or canceled	(93)	$	82.96
Outstanding at December 31, 2023	38	$	82.95
Granted	185	$	69.97
Vested	(38)	$	82.94
Forfeited or canceled	(119)	$	69.98
Outstanding at December 31, 2024	66	$	69.95	—	$	4,090
Outstanding and expected to vest at December 31, 2024	66			—	$	4,090

In February 2024, it was determined that approximately 38,000 shares subject to the PSUs granted in 2023 vested in aggregate; the shares were released to the Company’s employees and executives in the first quarter of 2024. The grant-date fair value of PSU awards released, which were fully vested, in the years ended December 31, 2024, 2023 and 2022, was approximately $3.2 million, $2.7 million and $8.8 million, respectively.

PRSU Awards (Long-term Performance Based)

The Company’s PRSU program provides for the issuance of PRSUs which will vest based on the Company’s performance measured against the PRSU program’s established performance targets. PRSUs are granted in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The actual number of shares the recipient receives is determined at the end of a three-year performance period based on results achieved versus the Company’s performance goals, and may range from zero to 200% of the target number. The performance goals for PRSUs granted in fiscal 2022, 2023 and 2024 were based on the Company’s compound annual growth rate (“CAGR”) of revenue as measured against the revenue CAGR of the analog semiconductor industry (“Relative Measure”), in each case over the respective three-year performance period. In addition, the PRSUs granted in 2023 (“2023 PRSUs”) and 2024 (“2024 PRSUs”) also include a performance goal related to the Company’s revenue growth over the respective three-year performance period as compared to defined targets (“Absolute Measure”) with the actual vesting of the 2023 PRSUs and 2024 PRSUs calculated based on higher achievement under the Relative Measure or the Absolute Measure.

Expense associated with these awards, net of estimated forfeitures, is recorded throughout the year based on an assessment of the expected achievement of the performance targets. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

A summary of PRSU awards outstanding as of December 31, 2024, and activity during the three years then ended, is presented below:

				Weighted-Average	Aggregate
		Weighted-Average		Remaining	Intrinsic
	Shares	Grant Date Fair		Contractual Term	Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2022	383	$	53.14
Granted	110	$	78.96
Vested	(135)	$	34.09
Forfeited or canceled	(122)	$	49.68
Outstanding at December 31, 2022	236	$	77.82
Granted	146	$	80.92
Vested	(23)	$	49.68
Forfeited or canceled	(103)	$	82.92
Outstanding at December 31, 2023	256	$	80.08
Granted	186	$	68.30
Vested	—		—
Forfeited or canceled	(125)	$	78.34
Outstanding at December 31, 2024	317	$	73.85	1.56	$	19,534
Outstanding and expected to vest at December 31, 2024	177			2.00	$	10,946

In February 2024 it was determined that no shares subject to the PRSUs granted in 2021 vested; thus no shares were released to the Company’s executives in the first quarter of 2024. The grant-date fair value of PRSU awards released, which were fully vested, in the years ended December 31, 2023 and 2022, was approximately $1.1 million and $4.6 million, respectively.

RSU Awards

RSUs granted to employees typically vest ratably over a four-year period and are converted into shares of the Company’s common stock upon vesting on a one-for-one basis subject to the employee’s continued service to the Company over that period. The fair value of RSUs is determined using the fair value of the Company’s common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest. Compensation expense is recognized on a straight-line basis over the requisite service period of each grant adjusted for estimated forfeitures.

A summary of RSU awards outstanding as of December 31, 2024, and activity during the three years then ended, is presented below:

				Weighted-Average	Aggregate
		Weighted-Average		Remaining	Intrinsic
	Shares	Grant Date Fair		Contractual Term	Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2022	1,144	$	46.81
Granted	519	$	76.01
Vested	(481)	$	44.70
Forfeited	(86)	$	60.02
Outstanding at December 31, 2022	1,096	$	60.52
Granted	335	$	80.97
Vested	(418)	$	53.08
Forfeited	(32)	$	73.29
Outstanding at December 31, 2023	981	$	70.27
Granted	440	$	67.09
Vested	(371)	$	64.28
Forfeited	(121)	$	72.87
Outstanding at December 31, 2024	929	$	70.82	1.45	$	57,300
Outstanding and expected to vest at December 31, 2024	870			1.38	$	53,649

The grant-date fair value of RSUs vested in the years ended December 31, 2024, 2023 and 2022, was approximately $23.9 million, $22.2 million and $21.5 million, respectively.