STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

6. STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2023		2022		2023		2022
Cost of revenues	$	446	$	172	$	1,193	$	727
Research and development		2,895		2,334		7,992		7,712
Sales and marketing		1,787		1,267		5,061		4,392
General and administrative		1,777		(755)		6,779		2,879
Total stock-based compensation expense	$	6,905	$	3,018	$	21,025	$	15,710

Stock-based compensation expense in the three months ended September 30, 2023, was approximately $6.9 million, comprising approximately $6.1 million related to restricted stock unit (“RSU”) awards, $0.5 million related to the Company’s employee stock purchase plan and $0.3 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards. Stock-based compensation expense in the nine months ended September 30, 2023, was approximately $21.0 million, comprising approximately $17.3 million related to RSUs, $1.4 million related to the Company’s employee stock purchase plan and $2.3 million related to PSUs and PRSUs.

Stock-based compensation expense in the three months ended September 30, 2022, was approximately $3.0 million, comprising approximately $6.4 million related to RSUs, $0.5 million related to the Company’s employee stock purchase plan and $3.9 million credit related to PSUs and PRSUs. Stock-based compensation expense in the nine months ended September 30, 2022, was approximately $15.7 million, comprising approximately $17.3 million related to RSUs, $1.3 million related to the Company’s employee stock purchase plan and $2.9 million credit related to PSUs and PRSUs.

PSU Awards

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The number of shares that are released at the end of the performance year can range from zero to 200% of the target number depending on the Company’s performance. The performance metrics of this program are annual targets consisting of a combination of net revenue, non-GAAP operating income and strategic goals.

As the net revenue, non-GAAP operating income and strategic goals are considered performance conditions, expense associated with these awards, net of estimated forfeitures, is recognized over the service period based on an

assessment of the expected achievement of the performance targets. The fair value of these PSUs is determined using the fair value of the Company’s common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

In February 2023, it was determined that approximately 34,000 shares subject to the PSUs granted in 2022 vested in aggregate; the shares were released to the Company’s employees and executives in the first quarter of 2023.

A summary of PSUs outstanding as of September 30, 2023 and activity during the nine months ended, is presented below:

				Weighted-Average
		Weighted-Average		Remaining	Aggregate
	Shares	Grant Date Fair		Contractual Term	Intrinsic Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2023	34	$	79.94
Granted	130	$	82.96
Vested	(34)	$	79.94
Forfeited	—		—
Outstanding at September 30, 2023	130	$	82.96	0.25	$	9,964
Outstanding and expected to vest at September 30, 2023	39			0.25	$	2,989

PRSU Awards

The Company’s PRSU program provides for the issuance of PRSUs which will vest based on the Company’s performance measured against the PRSU program’s established performance targets. PRSUs are granted in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The actual number of shares the recipient receives is determined at the end of a three-year performance period based on results achieved versus the Company’s performance goals, and may range from zero to 200% of the target number. The performance goals for PRSUs granted in fiscal 2021, 2022 and 2023 were based on the Company’s compound annual growth rate (“CAGR”) of revenue as measured against the revenue CAGR of the analog semiconductor industry (“Relative Measure”), in each case over the respective three-year performance period. In addition, the PRSUs granted in 2023 (“2023 PRSUs”) also include a performance goal related to the Company’s revenue growth over the respective three-year performance period as compared to defined targets (“Absolute Measure”) with the actual vesting of the 2023 PRSUs calculated based on higher achievement under the Relative Measure or the Absolute Measure. Expense associated with these awards, net of estimated forfeitures, is recorded throughout the year based on an assessment of the expected achievement of the performance targets. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

In February 2023, it was determined that approximately 23,000 shares subject to the PRSUs granted in 2020 vested in aggregate; the shares were released to the Company’s executives in the first quarter of 2023.

A summary of PRSUs outstanding as of September 30, 2023 and activity during the nine months ended, is presented below:

				Weighted-Average	Aggregate
		Weighted-Average		Remaining	Intrinsic
	Shares	Grant Date Fair		Contractual Term	Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2023	236	$	77.82
Granted	145	$	80.92
Vested	(23)	$	49.68
Forfeited	—		—
Outstanding at September 30, 2023	358	$	80.89	1.37	$	27,344
Outstanding and expected to vest at September 30, 2023	6			2.25	$	445

RSU Awards

A summary of RSUs outstanding as of September 30, 2023 and activity during the nine months ended, is presented below:

				Weighted-Average	Aggregate
		Weighted-Average		Remaining	Intrinsic
	Shares	Grant Date Fair		Contractual Term	Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2023	1,096	$	60.52
Granted	333	$	81.06
Vested	(386)	$	51.49
Forfeited	(22)	$	71.71
Outstanding at September 30, 2023	1,021	$	70.39	1.68	$	77,875
Outstanding and expected to vest at September 30, 2023	946			1.59	$	72,163