In May 2021, the Company’s shareholders approved a special resolution to amend the Company’s articles to authorize up to 7.0 million preferred shares for future issuance. The Company’s Board of Directors is authorized to designate and issue one or more series of preferred shares, fix the rights, preferences and designation, as deemed necessary or advisable, relating to the preferred shares, provided that no shares of any series may be entitled to more than one vote per share. As of March 31, 2023, no preferred shares had been issued and outstanding.

In February 2020, the Company’s Board of Directors approved a new share repurchase plan (the “2020 Repurchase Plan”), authorizing the repurchase of $50.0 million worth of the Company’s common shares. During the three months ended July 1, 2022, the Company repurchased 4 thousand shares under the 2020 Repurchase Plan for an aggregate purchase price of $0.5 million and an average price of $116.95 per share. During the three months ended March 31, 2023, the Company did not repurchase any shares. As of March 31, 2023, the Company had $49.5 million available for future share repurchases under the 2020 Repurchase Plan.

The table below summarizes share-based compensation expense recorded in the consolidated statements of operations (in thousands):


	Three Months Ended
	March 31,		April 1,
	2023		2022
Selling, general and administrative	$	5,531	$	5,201
Research and development and engineering		443		700
Cost of revenue		492		873
Restructuring, acquisition, and related costs		—		—
Total share-based compensation expense	$	6,466	$	6,774

Share-based compensation expense reported in selling, general and administrative expenses included expenses related to restricted stock units and deferred stock units granted to the members of the Company’s Board of Directors of $0.9 million and $1.0 million during the three months ended March 31, 2023 and April 1, 2022, respectively.

The Company’s restricted stock units (“RSUs”) have generally been issued with vesting periods ranging from zero to five years and vest based solely on service conditions. Accordingly, the Company recognizes compensation expense on a straight-line basis

over the requisite service period. The Company reduces the compensation expense by an estimated forfeiture rate which is based on anticipated forfeitures and historical forfeiture experience.

Deferred stock units (“DSUs”) are granted to the members of the Company’s Board of Directors (the “Board”). Compensation expense associated with the DSUs is recognized in full on the date of grant, as the DSUs are fully vested and non-forfeitable upon grant. Outstanding DSUs are converted into common shares upon Board members' resignation or retirement from the Board. There were 41 thousand and 38 thousand DSUs outstanding as of March 31, 2023 and December 31, 2022, respectively. Outstanding DSUs are included in the calculation of weighted average basic shares outstanding for the respective periods.

The table below summarizes activities relating to RSUs and DSUs issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the three months ended March 31, 2023:


	Shares (In thousands)			Weighted Average Grant Date Fair Value
Unvested at December 31, 2022		238		$	128.26
Granted		81		$	155.12
Vested		(89	)	$	121.47
Forfeited		(9	)	$	132.87
Unvested at March 31, 2023		221		$	140.82
Expected to vest as of March 31, 2023		196

The total fair value of RSUs and DSUs that vested during the three months ended March 31, 2023 was $13.8 million based on the market price of the underlying shares on the date of vesting.

The Company typically grants performance-based restricted stock unit awards (“PSUs”) that are based on the Company's financial metrics, market conditions, or a hybrid of financial metrics and market conditions. These performance stock unit awards generally cliff vest on the first day following the end of the specified performance period.

The number of common shares to be issued upon settlement following vesting of the Company's financial metrics attainment-based PSUs (“attainment-based PSUs”) is determined based on the Company’s financial metrics over the specified performance period against the targets established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200% of the target number of shares. The Company recognizes compensation expense ratably over the performance period based on the number of shares that are deemed probable of vesting at the end of the specified performance period. This probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made.

The number of common shares to be issued upon settlement following vesting of the market condition-based PSUs (“market-based PSUs”) is determined based on the relative market performance of the Company’s common stock compared to the Russell 2000 Index over the specified performance period using a payout formula established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200% of the target number of shares. The Company recognizes the related compensation expense based on the fair value of the market-based PSUs, determined using the Monte-Carlo valuation model as of the grant date, on a straight-line basis from the grant date to the end of the specified performance period. Compensation expense on market-based PSUs will not be affected by the number of shares that will ultimately vest at the end of the specified performance period.

The number of common shares to be issued upon settlement following vesting of the PSU awards that are based on achievement of a hybrid of financial metrics and market conditions (“Hybrid PSUs”) is determined based on the Company's financial metrics achieved over the specified performance period against the targets established by the Company's Board of Directors at the time of grant with a market condition multiplier and will be in the range of zero to 260% of the target number of shares. The Company determines the fair value of the market condition multiplier using the Monte-Carlo valuation model as of the grant date. The Company recognizes compensation expense associated with the Hybrid PSUs ratably over the specified performance period based on the fair value of the PSUs as of the grant date and the number of shares expected to be earned. The probability assessment is

performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made.

The table below summarizes the activities relating to the performance-based awards issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the three months ended March 31, 2023:


	Shares (In thousands)			Weighted Average Grant Date Fair Value
Unvested at December 31, 2022		216		$	144.16
Granted		57		$	179.15
Performance adjustments(1)		20		$	122.24
Vested		(70	)	$	116.56
Forfeited		(7	)	$	167.06
Unvested at March 31, 2023		216		$	160.81
Expected to vest as of March 31, 2023		241

(1) The amount shown represents performance adjustments related to the performance-based awards granted on February 20, 2020. These units vested at a blended payout of 142% during the three months ended March 31, 2023 based on the achievement of cumulative Non-GAAP EPS and applicable relative TSR performance conditions, respectively, over the performance period of fiscal years 2020 through 2022.

The unvested PSUs are shown at target payout levels in the table above. As of March 31, 2023, the maximum number of common shares that could be earned under these PSU grants was approximately 381 thousand shares.

The total fair value of PSUs that vested during the three months ended March 31, 2023 was $9.9 million based on the market price of the underlying common shares on the date of vesting.

The grant-date fair value of the Hybrid PSUs granted during the three months ended March 31, 2023 was estimated using the Monte Carlo valuation method with the following assumptions:


	Three Months Ended March 31, 2023
Grant-date stock price	$	156.72
Expected volatility		35.89	%
Risk-free interest rate		4.44	%
Expected annual dividend yield		—
Fair value	$	181.45

In February 2023, the Company granted 48 thousand nonqualified stock options to certain members of the executive management team to purchase common shares of the Company at a strike price equal to the closing market price on the date of grant. The stock options vest ratably over three years on the anniversary of the date of grant and expire on the seventh anniversary of the date of grant. The Company estimates the fair value of stock options using the Black-Scholes valuation model. The Company recognizes compensation expense related to the stock options on a straight-line basis over the vesting period in the consolidated statement of operations.

The table below summarizes the activities relating to stock options issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the three months ended March 31, 2023:




	Shares (In thousands)		Weighted Average Exercise Price
Outstanding as of December 31, 2022		84	$	72.18
Granted		48	$	135.86
Exercised		—	$	—
Forfeited or expired		—	$	—
Outstanding as of March 31, 2023		132	$	102.86
Exercisable as of March 31, 2023		57
Expected to vest as of March 31, 2023		75

The aggregate Black-Scholes fair value of $3.0 million for the stock options granted during the three months ended March 31, 2023 was estimated using the following assumptions as of the grant date:


	Three Months Ended March 31, 2023
Expected option term in years		4.5
Expected volatility		40.7	%
Risk-free interest rate		4.00	%
Expected annual dividend yield		—

The expected option term was calculated using the simplified method permitted under Codification of Staff Accounting Bulletins Topic 14, “Share-Based Payment”. The expected volatility was determined based on the historical volatility of the Company’s common shares over the expected option term. The risk-free interest rate was based on treasury instrument whose term was six months longer than the expected option term. The expected annual dividend yield is zero as the Company does not have plans to issue dividends.