Stock-Based Compensation

12 Months Ended

Dec. 30, 2023

Stock-Based Compensation

Stock-Based Compensation

15. Stock-Based Compensation

The Company has two active stock plans, the 2009 Stock Incentive Plan (the “2009 Plan”) and the 2009 Employee Stock Purchase Plan (the “2009 ESPP”) that have been amended and approved by shareholders from time to time.

● The 2009 Plan allows for grants of stock options, stock appreciation rights, performance shares, performance stock units, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), performance-based stock units (“PSUs”) and other awards (collectively, “awards”). All awards deduct one share from the 2009 Plan shares available for issuance for each share granted. Awards granted under the 2009 Plan contain vesting provisions mostly ranging from three to four years. To the extent awards granted under the 2009 Plan terminate, expire, or lapse for any reason, or are settled in cash, shares subject to such awards will again be available for grant.

● The 2009 ESPP allows eligible employees to purchase a limited number of shares of the Company’s common stock at no less than 85% of the fair market value of a share of common stock at prescribed purchase intervals during an offering period. Each offering period is comprised of a series of one or more successive and/or overlapping purchase intervals and has a maximum term of 27 months.

2009 Plan

The Company granted to its employees 0.5 million, 0.5 million and 0.6 million shares of full value awards from the 2009 Plan during fiscal 2023, 2022 and 2021, respectively. Full value awards include RSUs, MSUs, and PSUs.

MSUs provide the rights to acquire a number of shares of common stock for no cash consideration based upon achievement of specified levels of market conditions. The requisite measurement period for these MSUs is also the vesting period, which is generally three years. MSUs granted in 2020 measured the relative performance of the total stockholders’ return of the Company against that of a selected benchmarked group of companies. The Company granted no MSUs in fiscal 2023, 2022 and 2021.

15. Stock-Based Compensation (Continued)

PSUs provide for the rights to acquire a number of shares of common stock for no cash consideration based upon the achievement of specified revenue or profitability objectives during the year. The requisite performance period of these PSUs is approximately three years from the date of grant. The Company granted 85,554, 52,078, and 116,809 PSUs in fiscal 2023, 2022, and 2021, respectively.

2009 ESPP

The rights to purchase common stock granted under the 2009 ESPP are intended to be treated as either (i) purchase rights granted under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Internal Revenue Code (the “423(b) Plan”), or (ii) purchase rights granted under an employee stock purchase plan that is not subject to the terms and conditions of Section 423(b) of the Internal Revenue Code (the “Non-423(b) Plan”). The Company will retain the discretion to grant purchase rights under either the 423(b) Plan or the Non-423(b) Plan. During fiscal 2023, 2022 and 2021, the Company issued 154,000, 109,000, and 146,000 shares, respectively, under the 2009 ESPP to its employees. The weighted-average fair value for purchase rights granted in fiscal 2023 under the 2009 ESPP was $27.81 per share.

Accounting for Stock-Based Compensation

Stock-based compensation costs are based on the fair values on the date of grant for awards under the 2009 Plan, and on the date of enrollment for grants under the 2009 ESPP. The fair values of stock awards (such as RSUs, PSUs and RSAs) are estimated based on their intrinsic values. The fair values of MSUs are estimated using a Monte Carlo simulation. The fair values of stock options and grants under the 2009 ESPP are estimated using the Black-Scholes option-pricing model. The fair values of all such stock-based grants are generally amortized on a straight-line basis over the vesting period of the grants.

The Company estimates potential forfeitures of stock grants and adjusts compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to be recognized in future periods.

The following table presents details of stock-based compensation costs recognized in the Consolidated Statements of Operations (in thousands):

	Year Ended
	December 30,		December 31,		January 1,
	2023		2022		2022
Cost of revenues	$	906	$	1,152	$	964
Research and development		35,491		32,860		24,986
Selling, general and administrative		11,812		26,498		30,892
		48,208		60,510		56,842
Income tax benefit		(6,230)		(5,980)		(954)
Share-based compensation – continuing operations		41,978		54,530		55,888
Share-based compensation – discontinued operations, net		—		—		(2,007)
Total	$	41,978	$	54,530	$	53,881

The Company recorded $0.6 million and $7.8 million of stock-based compensation charges included in selling, general and administrative expense during fiscal 2023 and fiscal 2021, respectively, in connection with the modification of certain equity awards. The modifications were pursuant to employee terminations. There were no other significant modifications made to any stock grants during fiscal 2023, 2022 or 2021.

The Company had approximately $88.7 million of total unrecognized compensation cost related to equity grants as of December 30, 2023 that is expected to be recognized over a weighted-average period of approximately 2.0 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented.

15. Stock-Based Compensation (Continued)

Fair value assumptions and stock awards activity

The fair values estimated from the Black-Scholes option-pricing model for ESPP shares granted were calculated using the following assumptions:

	Year Ended
	December 30,		December 31,		January 1,
Employee Stock Purchase Plan	2023		2022		2022
Expected volatility	40	%	44	%	42	%
Risk-free interest rate %	5.47	%	3.18	%	0.05	%
Expected term (in months)	9		9		9
Dividend yield	—		—		—

A summary of stock-based compensation activity with respect to fiscal 2023 follows:

		Weighted-		Weighted-Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Exercise		Contractual Term	Value
Stock Options	(000s)	Price		(In Years)	(000s)
Outstanding at December 31, 2022	118	$	38.80	3.12	$	11,457
Exercised	24	$	37.88		$	2,162
Outstanding at December 30, 2023	94	$	39.03	2.12	$	8,790
Vested at December 30, 2023 and expected to vest	94	$	39.03	2.12	$	8,790
Exercisable at December 30, 2023	94	$	39.03	2.12	$	8,790

		Weighted-		Weighted-Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Grant Date		Vesting Term	Value
RSAs and RSUs	(000s)	Fair Value		(In Years)	(000s)
Outstanding at December 31, 2022	897	$	134.74
Granted	420	$	137.11
Vested or issued	(416)	$	127.51
Cancelled or forfeited	(77)	$	142.05
Outstanding at December 30, 2023	824	$	139.34	1.14	$	109,044
Outstanding at December 30, 2023 and expected to vest	759	$	139.36	1.14	$	100,329

		Weighted-		Weighted-Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Grant Date		Vesting Term	Value
PSUs and MSUs	(000s)	Fair Value		(In Years)	(000s)
Outstanding at December 31, 2022	225	$	134.93
Granted	86	$	188.45
Vested or issued	(33)	$	92.31
Cancelled or forfeited	(33)	$	95.47
Outstanding at December 30, 2023	245	$	164.62	1.22	$	32,438
Outstanding at December 30, 2023 and expected to vest	85	$	132.99	1.22	$	11,205

15. Stock-Based Compensation (Continued)

The following summarizes the Company’s weighted average fair value at the date of grant:

	Year Ended
	December 30,		December 31,		January 1,
	2023		2022		2022
Per grant of RSAs and RSUs	$	137.11	$	144.40	$	135.28
Per grant of PSUs and MSUs	$	188.45	$	160.97	$	145.11

The following summarizes the Company’s stock-based payment and stock option values (in thousands):

	Year Ended
	December 30,		December 31,		January 1,
	2023		2022		2022
Intrinsic value of stock options exercised	$	2,162	$	—	$	986
Intrinsic value of RSUs that vested	$	61,371	$	57,621	$	76,654
Grant date fair value of RSUs that vested	$	53,088	$	41,610	$	47,726
Intrinsic value of PSUs and MSUs that vested	$	5,163	$	—	$	5,231
Grant date fair value of PSUs and MSUs that vested	$	3,037	$	—	$	3,562

As of December 30, 2023, the Company had reserved shares of common stock for future issuance as follows (in thousands):

2009 Plan	2,096
2009 ESPP	991
Total shares reserved	3,087