Note 9 - Stock-based Compensation

6 Months Ended

Jul. 01, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 9 - Stock-Based Compensation

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:

	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
(In thousands)	2023		2022		2023		2022
Cost of revenue	$	1,414	$	890	$	2,367	$	1,825
Research and development		7,647		4,691		12,986		9,536
Selling, general, and administrative		12,428		7,543		20,391		15,888
Total stock-based compensation	$	21,489	$	13,124	$	35,744	$	27,249

Market-Based and Performance-Based Stock Compensation

In the first quarter of fiscal 2023, we granted awards of RSUs with a market condition to certain executives. Under the terms of these grants, the RSUs with a market condition vest over a three-year period based on the Company’s total shareholder return ("TSR") relative to the Russell 3000 index, which condition is measured for the grants on the third anniversary of the grant date. The awards may vest at 250% or 200%, depending upon the executive, if the 75th percentile of the market condition is achieved, with 100% of the units vesting at the 55th percentile, zero vesting if relative TSR is below the 25th percentile, and vesting scaling for achievement between the 25th and 75th percentile.

In the first six months of fiscal 2023, certain awards with a market condition or performance condition granted in prior fiscal years vested. During the first quarter of fiscal 2023, the market condition for awards granted to certain executives in the first quarter of fiscal 2020 exceeded the 75th percentile of their TSR condition, and the second tranche of these awards vested at 250% or 200%, as applicable for the respective executive. Also during the first quarter of fiscal 2023, the first tranche of awards granted in fiscal 2021 with a performance condition vested. Under the terms of these grants, the RSUs with a performance condition will vest based on the Company generating specified levels of year-over-year revenue growth, which will be measured annually for one-fourth of the grants after each fiscal year-end through the end of fiscal 2024, with vesting of each tranche occurring 13 months after the performance condition is met. Vesting of these awards scales for achievement of year-over-year revenue growth compared to certain targets, with maximum vesting up to 200%. The first tranche of these awards vested at the 200% level of achievement, as the Company met the maximum year-over-year revenue growth performance criteria as of January 1, 2022. For the second tranche of these awards, the Company met the year-over-year revenue growth performance criteria at the 200% level of achievement as of December 31, 2022.

For our awards with a market condition or a performance condition, we incurred stock compensation expense of approximately $11.0 million and $6.0 million in the second quarter of fiscal 2023 and 2022, respectively, and approximately $15.9 million and $12.9 million in the first six months of fiscal 2023 and 2022, respectively, which is recorded as a component of total stock-based compensation.

The following table summarizes the activity for our awards with a market condition or performance condition:

 

(Shares in thousands)	Total
Balance, December 31, 2022		985
Granted		144
Effect of vesting multiplier		331
Vested		(633	)
Balance, July 1, 2023		827