Shareholders' Equity and Convertible Preferred Stock

9 Months Ended

Mar. 29, 2024

Share-Based Payment Arrangement [Abstract]

Shareholders' Equity and Convertible Preferred Stock

Shareholders’ Equity and Convertible Preferred Stock

Stock-based Compensation Expense

The following tables present the Company’s stock-based compensation for equity-settled awards by type (i.e. restricted stock units (“RSUs”), restricted stock unit awards with performance conditions or market conditions (“PSUs”), and rights to purchase shares of common stock under the Company’s Employee Stock Purchase Plan (“ESPP”)) and financial statement line as well as the related tax benefit included in the Company’s Condensed Consolidated Statements of Operations:

	Three Months Ended				Nine Months Ended
	March 29, 2024		March 31, 2023		March 29, 2024		March 31, 2023
	(in millions)
RSUs and PSUs	$	65	$	63	$	198	$	217
ESPP	12		11		28		29
Total	$	77	$	74	$	226	$	246

	Three Months Ended				Nine Months Ended
	March 29, 2024		March 31, 2023		March 29, 2024		March 31, 2023
	(in millions)
Cost of revenue	$	11	$	12	$	37	$	38
Research and development	36		37		102		116
Selling, general and administrative	30		25		87		92
Subtotal	77		74		226		246
Tax benefit	(10)		(11)		(30)		(35)
Total	$	67	$	63	$	196	$	211

Any shortfalls or excess windfall tax benefits and tax deficiencies for shortfalls related to the vesting and exercise of stock-based awards, which are recognized as a component of the Company’s Income tax expense, were not material for the periods presented.

Compensation cost related to unvested RSUs, PSUs, and rights to purchase shares of common stock under the ESPP are generally amortized on a straight-line basis over the remaining average service period. The following table presents the unamortized compensation cost and weighted average service period of all unvested outstanding awards as of March 29, 2024:

	Unamortized Compensation Costs		Weighted Average Service Period
	(in millions)		(years)
RSUs and PSUs (1)	$	454	2.4
ESPP	33		0.7
Total unamortized compensation cost	$	487

(1)    Weighted average service period assumes the performance conditions are met for the PSUs.

Plan Activities

Stock Options

The following table summarizes stock option activity under the Company’s incentive plans. As of March 29, 2024, there were no remaining outstanding options.

	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life
	(in millions)			(in years)
Options outstanding at June 30, 2023	0.3	$	44.95	0.10
Canceled or expired	(0.3)	44.95
Options outstanding at March 29, 2024	—	$	—

RSUs and PSUs

The following table summarizes RSU and PSU activity under the Company’s incentive plans:

	Number of Shares	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value at Vest Date
	(in millions)			(in millions)
RSUs and PSUs outstanding at June 30, 2023	13.8	$	46.56
Granted	5.7	38.31
Vested	(4.9)	47.62		$	228
Forfeited	(1.4)	45.76
RSUs and PSUs outstanding at March 29, 2024	13.2	$	43.36

RSUs and PSUs are generally settled in an equal number of shares of the Company’s common stock at the time of vesting of the units.

Convertible Preferred Stock

On January 31, 2023, the Board of Directors of the Company authorized the designation of 900,000 shares of Series A Convertible Perpetual Preferred Stock, par value $0.01 per share (the “Preferred Shares”), from the Company’s existing five million authorized but unissued shares of preferred stock and issued the Preferred Shares through a private placement for an aggregate purchase price of $900 million, less issuance costs of $24 million. The Preferred Shares accrue a cumulative preferred dividend at an annual rate of 6.25% per annum (increasing to 7.25% per annum on January 31, 2030 and to 8.25% per annum on January 31, 2033) compounded on a quarterly basis. The Preferred Shares also participate in any dividends declared for common shareholders on an as-converted equivalent basis. No dividends have been declared or paid since the issuance of the Preferred Shares. As of March 29, 2024 and June 30, 2023, unpaid and cumulative dividends payable with respect to the Preferred Shares were $68 million and $24 million, respectively.

As of March 29, 2024 and June 30, 2023, the Preferred Shares outstanding had an aggregate liquidation preference of $968 million and $924 million, respectively, and would have been convertible, if otherwise permitted, into approximately 20 million shares of common stock on each such date.