Stock-Based Compensation |
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| Stock-Based Compensation | Stock-Based Compensation Common Stock
Each share of common stock is entitled to one vote per share and holders of the common stock vote as a single class of stock on any matter that is submitted to a vote of stockholders.
Employee Stock-Based Compensation Plans
At December 31, 2023, the Company had stock-based compensation awards outstanding under the following plans: the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP.
2010 Equity Incentive Plan
The 2010 Plan, as amended, provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards. The number of shares of common stock reserved for issuance will automatically increase on the first day of each fiscal year, equal to the lesser of: 2,583,311 shares of the Company’s common stock; four percent (4%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year; or such lesser amount as the Company’s board of directors may determine. Options granted will generally vest over a period of four years and the term can be from to ten years. The plan expires in August 2026, unless terminated earlier by action of the board of directors.
Awards granted under the 2010 Plan, as amended, are subject to a compensation recovery policy adopted by the Company on August 9, 2023, or the Policy, that applies to certain incentive-based compensation that is received on or after October 2, 2023. The Policy requires the Company to recover certain excess incentive-based compensation from current and former executive officers if the Company is required to prepare an accounting restatement due to a material noncompliance of the Company with any financial reporting requirement under the securities laws or as otherwise described in the Policy and paid during the three completed fiscal years immediately preceding the trigger date, as defined in the Policy. Recoverable compensation is defined in the Policy but generally includes any incentive-based compensation that was granted, earned or vested based wholly or in part upon attainment of any financial reporting measure, to the extent the amount actually received exceeds the amount that would have been received if the incentive-based compensation had been determined based on the restated financial statements. To date, there has been no recovery or repayment of compensation from executive officers pursuant to the Policy, or any prior compensation recovery policy of the Company which it replaced, including the executive compensation clawback policy adopted by the Company on December 13, 2018, which applies to compensation that was received prior to October 2, 2023.
As of December 31, 2023, the number of shares of common stock available for future issuance under the 2010 Plan was 15,081,087 shares.
2010 Employee Stock Purchase Plan
The ESPP authorizes the issuance of shares of the Company’s common stock pursuant to purchase rights granted to the Company’s employees. The number of shares of the Company’s common stock reserved for issuance will automatically increase on the first day of each fiscal year, equal to the least of: 968,741 shares of the Company’s common stock; one and a quarter percent (1.25%) of the outstanding shares of the Company’s common stock on the first day of the fiscal year; or such lesser amount as may be determined by the Company’s board of directors or a committee appointed by the Company’s board of directors to administer the ESPP. The ESPP is implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the Company may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of the Company’s common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances. Generally, all eligible employees, including executive officers, employed by the Company may participate in the ESPP and may contribute up to 15% of their earnings for the purchase of the Company’s common stock under the ESPP. Unless otherwise determined by the Company’s board of directors, common stock will be purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of the Company’s common stock on the first date of an offering or (b) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. As of December 31, 2023, the number of shares of common stock available for future issuance under the ESPP was 5,658,561 shares.
Employee Incentive Bonus
The Company’s Executive Incentive Bonus Plan permits the settlement of awards under the plan in any combination of cash or shares of its common stock. The Company settles a majority of bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company’s common stock as determined in trading on the applicable stock exchange on a date approved by the Board of Directors. In connection with the Company’s bonus programs, in February 2023 and February 2022, the Company issued 0.9 million and 0.5 million freely-tradable (subject to certain restrictions for affiliates) shares, respectively, of the Company’s common stock in settlement of bonus awards to employees, including executives, for the 2023 and 2022 performance periods. At December 31, 2023, the Company has an accrual of $11.5 million for bonus awards for employees for achievement in the 2023 performance period, which the Company intends to settle primarily in shares of its common stock, unless otherwise required to be settled in cash due to local laws or agreements. The Company’s compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
Stock-Based Compensation
The Company recognizes stock-based compensation in the consolidated statements of operations, based on the department to which the related employee reports, as follows:
The total unrecognized compensation cost related to unvested restricted stock units as of December 31, 2023 was $135.7 million, and the weighted average period over which these equity awards are expected to vest is 2.34 years.
The total unrecognized compensation cost related to unvested performance-based restricted stock units as of December 31, 2023 was $0 as a result of revised estimates of performance achievement levels as of that date, and the weighted average period over which these equity awards are expected to vest is 1.14 years. Actual levels of future performance for the unvested periods may differ from current estimates.
There was no unrecognized compensation cost related to unvested stock options as of December 31, 2023.
Restricted Stock Units
A summary of the Company’s restricted stock unit activity is as follows:
Performance-Based Restricted Stock Units
Performance-based restricted stock units are eligible to vest at the end of each year-long performance period, as defined in the underlying agreement, in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over baseline results relative to the growth rates for a peer group of companies for the same metrics and periods.
For the performance-based restricted stock units granted to date, 60% of each performance-based award is subject to the net sales metric for the performance period and 40% is subject to the non-GAAP diluted earnings per share metric for the performance period. The maximum percentage for a particular metric is 250% of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30% and 100%, respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period.
As of December 31, 2023, achievement to date under the performance metrics specified in the respective award agreements are based on its expected revenue and non-GAAP diluted EPS results over the performance periods and calculated growth rates relative to its peers’ expected results based on data available, as defined in the respective award agreements. To the extent any prior achievement levels are no longer probable, any compensation expense recorded is adjusted to the revised achievement levels.
A summary of the Company’s performance-based restricted stock unit activity is as follows:
(1) Number of shares granted is based on the maximum percentage achievable in the performance-based restricted stock unit award.
Employee Stock Purchase Rights and Stock Options
Employee Stock Purchase Rights
During the year ended December 31, 2023, there were 231,794 shares of common stock purchased under the ESPP at a weighted average price of $18.89. During the year ended December 31, 2022, there were 139,758 shares of common stock purchased under the ESPP at a weighted average price of $33.52.
The fair values of employee stock purchase rights were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions:
The risk-free interest rate assumption was based on rates for United States (U.S.) Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term is the duration of the offering period for each grant date. In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company’s daily closing stock prices.
Stock Options
A summary of the Company’s stock options activity is as follows:
No stock options were granted by the Company during the years ended December 31, 2023 and 2022.
The intrinsic value of stock options exercised during 2023, 2022, and 2021 was $0.2 million, $0.9 million, and $9.8 million, respectively. Cash received from exercise of stock options was $0.2 million, $0.3 million and $4.2 million during the years ended December 31, 2023, 2022, and 2021, respectively. The tax benefit from stock options exercised was $0.4 million, $1.2 million and $14.4 million during the years ended December 31, 2023, 2022, and 2021, respectively.
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