Stock-based compensation

9 Months Ended

Jun. 30, 2022

Share-based Payment Arrangement [Abstract]

2018 Equity Incentive Plan

Any shares subject to outstanding awards under the 2013 Plan that are canceled or repurchased subsequent to the 2018 Plan’s effective date are returned to the pool of shares reserved for issuance under the 2018 Plan. Awards granted under the 2018 Plan may be non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance units.

Restricted Stock Units

Restricted stock primarily consists of restricted stock unit awards (RSUs) which have been granted to employees. The value of an RSU award is based on the Company’s stock price on the date of grant. Forfeitures of RSUs are recognized as they occur. The shares underlying the RSU awards are not issued until the RSUs vest. Upon vesting, each RSU converts into one share of the Company’s common stock.

Activity with respect to the Company’s restricted stock units during the nine months ended June 30, 2022 was as follows:


(in thousands, except per share data)	Number of Shares	Weighted average grant date fair value per share		Weighted average remaining contractual term (years)	Aggregate Intrinsic Value
Outstanding at September 30, 2021	698	$	73.27	2.7	$	74,613
Restricted stock units granted	946	72.37
Restricted stock units vested	(263)	72.53
Restricted stock units forfeited	(125)	75.37
Outstanding at June 30, 2022	1,256	$	72.54	2.9	$	43,883
Expected to vest at June 30, 2022	1,256	$	72.54	2.9	$	43,883

As of June 30, 2022, there was $83.4 million of total unrecognized compensation cost related to these issuances that is expected to be recognized over a weighted average period of 2.9 years.

Performance Stock Units

Performance stock unit awards (“PSUs”) were granted to certain employees that will vest upon achievement of operational milestones related to the Wilsonville facility, to Company executives that will vest upon achievement of revenue and gross profit metrics as determined by the board, and to certain consultants that will vest upon achievement of operational milestones. Stock compensation expense for PSUs is recorded over the vesting period based on the grant date fair value of the awards and probability of the achievement of specified performance targets. The grant date fair value is equal to the closing share price of the Company’s common stock on the date of grant. PSUs generally vest over a one to three-year service period following the grant date, provided that the recipient is a Company employee at the time of vesting and the achievement of performance targets applicable to each award. The percentage of PSUs that vest will depend on the achievement of specified performance targets at the end of the performance period and can range from 0% to 150% of the number of units granted. Forfeitures of PSUs are recognized as they occur. As of June 30, 2022, the unrecognized compensation costs related to these awards was $29.4 million. The Company expects to recognize those costs over a weighted average period of 1.7.

Activity under the PSUs during the nine months ended June 30, 2022 is summarized below:


(in thousands, except per share data)	Number of shares	Weighted average grant date fair value		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding at September 30, 2021	10	$	3.59	2.3	$	1,016
Performance stock units granted	631	78.83
Performance stock units vested	(13)	31.29
Performance stock units forfeited	(53)	85.32
Outstanding at June 30, 2022	575	$	84.93	1.7	$	20,099
Vested or expected to vest and exercisable at June 30, 2022	575	$	84.93	1.7	$	20,099

Options

Stock options entitle the holder to purchase, at the end of the vesting term, a specified number of shares of Company common stock at an exercise price per share equal to the closing market price of the common stock on the date of grant. Stock options typically have a contractual life from the date of the grant and a vesting schedule as established by the board of directors. The fair value of each services based stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically had been a private company and lacked company-specific historical and implied volatility information for its stock. Therefore, it estimated its expected stock price volatility based on the historical volatility of publicly traded peer companies through the period ended June 30, 2022 and utilized the “simplified” method for awards that qualify as “plain-vanilla” options. As determined under the simplified method, the expected term of stock options granted to non-employee consultants is equal to the contractual term of the option award, the risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award, the expected dividend yield is zero based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. Forfeitures of options are recognized as they occur.


(in thousands, except per share data)	Number of shares	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding at September 30, 2021	2,875	$	22.83	7.1	$	242,012
Options granted	223	26.36
Options vested	(416)	11.50			9,845
Options forfeited	(135)	32.02
Outstanding at June 30, 2022	2,547	$	24.80	6.6	$	34,111
Vested or expected to vest and exercisable at June 30, 2022	2,547	$	24.80	6.6	$	34,111

As of June 30, 2022, the unrecognized compensation costs related to these awards was $15.4 million. The Company expects to recognize those costs over a weighted average period of 1.3.

Performance Stock Options

On September 1, 2020, the board of directors approved the implementation of a revised annual equity award program for executive officers, senior level employees and consultants to be granted as performance-based stock options ("PSOs") under the 2018 Plan. The number of PSOs ultimately earned under the awards to executive officers and senior level employees is calculated based on the achievement of a certain total revenue threshold during the fiscal year ending September 30, 2022. The percentage of performance stock options that vest will depend on the board of directors’ determination of total revenue at the end of the performance period and can range from 0% to 150% of the number of options granted. The number of PSOs ultimately earned under the awards to a consultant is calculated based on the achievement of certain operational milestones.

The provisions of the PSO are considered a performance condition, and the effects of that performance condition are not reflected in the grant date fair value of the awards. The Company used the Black-Scholes method to calculate the fair value at the grant date without regard to the vesting condition and will recognize compensation cost for the options that are expected to vest. Forfeitures of PSOs are recognized as they occur. The Company reassesses the probability of the performance condition at each reporting period and adjusts the compensation cost based on the probability assessment. As of June 30, 2022, the Company determined that 293,730 shares are expected to vest based on the probability of the performance condition that will be achieved under this equity award program.

Activity under the equity incentive plans during the nine months ended June 30, 2022 is summarized below:


(in thousands, except per share data)	Number of shares	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding at September 30, 2021	257	$	70.62	8.9	$	9,331
Performance stock options granted	75	20.02
Performance stock options vested	(19)	19.16			296
Performance stock options forfeited	(19)	67.85
Outstanding at June 30, 2022	294	$	63.27	8.5	$	206
Vested or expected to vest and exercisable at June 30, 2022	294	$	63.27	8.5	$	206

As of June 30, 2022, the unrecognized compensation costs related to these awards was $2.3 million. The Company expects to recognize those costs over a weighted average period of 0.7 years.

Total stock-based compensation expense recognized was as follows:


	Three months ended June 30,				Nine months ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of revenues	$	1,228	$	773	$	3,347	$	1,990
Research and development	5,642		2,753		14,506		7,180
Selling, general and administrative	12,989		5,650		42,410		18,581
Total stock-based compensation	$	19,859	$	9,176	$	60,263	$	27,751

2018 Employee Stock Purchase Plan

On September 26, 2018, the board of directors adopted the 2018 Employee Stock Purchase Plan (the "2018 ESPP"). The number of shares reserved for issuance under the 2018 ESPP upon approval was 275,225 shares of the Company’s common stock, and it increases automatically on the first day of each fiscal year, following the fiscal year in which the 2018 ESPP becomes effective, by a number equal to the least of 249,470 shares, 1% of the shares of common stock outstanding at that time, or such number of shares determined by the Company’s board of directors. The number of shares reserved for issuance at June 30, 2022 was as follows:


(In thousands)						Shares available
Outstanding at September 30, 2021						355
Additional shares authorized						249
Shares issued during the period						(50)
Outstanding at June 30, 2022						554

Subject to any plan limitations, the 2018 ESPP allows eligible service providers (through qualified and non-qualified offerings) to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods begin in February and August of each year, except for the initial offering period which commenced with the initial public offering in October 2018 and ended on August 20, 2019. The common shares issuable under the 2018 ESPP were registered pursuant to a registration statement on Form S-8 on November 26, 2018.

Unless otherwise determined by the board of directors, the Company’s common stock will be purchased for the accounts of employees participating in the 2018 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first and last trading day of the offering period. During the three and nine months ended June 30, 2022 and 2021, activity under the 2018 ESPP was immaterial.

Abveris Acquisition

As discussed further in Note 13 “Business acquisition”, on December 1, 2021, the Company completed the acquisition of AbX Biologics, Inc. and granted certain equity awards to new employees. These equity awards included up to 231,876 restricted shares of the Company’s common stock which are issuable based on achievement of the 2022 calendar revenue target, which had an aggregate grant date fair value of $20.1 million. In addition, all employees must remain employed through the payout date, and certain employees have an additional vesting period of up to two years from the acquisition date. The vesting upon achievement of the 2022 calendar revenue target is considered a performance condition, and the effects of that performance condition are not reflected in the grant date fair value of the awards. The Company used the stock price as of December 1, 2021 for the fair value of restricted shares. As of June 30, 2022, the Company determined that 200,673 shares are expected to vest based on the probability of the performance condition that will be achieved under this equity award program. The Company reassesses the probability of the performance condition at each reporting period and adjusts the compensation cost based on the probability assessment. The Company recorded approximately $7.8 million in stock-based compensation expense for the nine months ended June 30, 2022 related to these awards. The grant date fair value was determined to be $87.06 per share for restricted shares. As of June 30, 2022, the unrecognized compensation costs related to these awards were $9.7 million. The Company expects to recognize those costs over a weighted average period of 0.8 years.