Stock-Based Compensation

12 Months Ended

Jun. 25, 2023

Share-Based Payment Arrangement [Abstract]

Overview of Employee Stock-Based Compensation Plans

The Company currently has one equity-based compensation plan, the 2013 Long-Term Incentive Compensation Plan (2013 LTIP), from which stock-based compensation awards can be granted to employees and directors. At June 25, 2023, there were 15.9 million shares authorized for issuance under the plan and 4.0 million shares remaining for future grants. The 2013 LTIP provides for awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards.

The Company also has an Employee Stock Purchase Plan (ESPP) that provides employees with the opportunity to purchase common stock at a discount. At June 25, 2023, there were 6.0 million shares authorized for issuance under the ESPP, as amended, with 5.1 million shares remaining for future issuance. The ESPP limits employee contributions to 15% of each employee’s compensation (as defined in the plan) and allows employees to purchase shares at a 15% discount, subject to IRS limitations. The ESPP provides for a twelve-month participation period, divided into two equal six-month purchase periods, and also provides for a look-back feature. At the end of each six-month period in April and October, participants may purchase the Company’s common stock through the ESPP at a 15% discount to the fair market value of the common stock on the first day of the twelve-month participation period or the purchase date, whichever is lower. The plan also provides for an automatic reset feature to start participants on a new twelve-month participation period if the fair market value of common stock declines during the first six-month purchase period.

Stock Option Awards

The following table summarizes option activity as of June 25, 2023 and changes during the fiscal year then ended (shares in thousands):


	Number of Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Total Intrinsic Value (in millions of U.S. Dollars)
Outstanding at June 26, 2022	69	$25.12
Granted	—	—
Exercised	(42)	25.38
Forfeited or expired	(2)	27.09
Outstanding at June 25, 2023	25	24.55	0.25	$0.6

Vested and expected to vest at June 25, 2023	25	24.55	0.25	$0.6
Exercisable at June 25, 2023	25	24.55	0.25	$0.6

The total intrinsic value in the table above represents the total pretax intrinsic value, which is the total difference between the closing price of the Company’s common stock on June 23, 2023 (the last trading day of fiscal 2023) of $49.45 and the exercise price for in-the-money options that would have been received by the holders if all instruments had been exercised on June 25, 2023. As of June 25, 2023, there was no unrecognized compensation cost related to nonvested stock options.

The following table summarizes information about stock options outstanding and exercisable at June 25, 2023 (shares in thousands):


	Options Outstanding			Options Exercisable
Range of Exercise Price	Number	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number	Weighted Average Exercise Price
$0.01 to $25.00	22	0.2	$24.26	22	$24.26
$25.01 to $35.00	3	0.5	26.71	3	26.71



Total	25			25

Total intrinsic value of options exercised for the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021 was $2.6 million, $5.6 million and $30.8 million, respectively.

Restricted Stock Units

A summary of nonvested restricted stock units (RSUs) outstanding as of June 25, 2023 and changes during the year then ended is as follows (shares in thousands):


	Number of RSUs	Weighted Average Grant-Date Fair Value
Nonvested at June 26, 2022	1,894	$75.67
Granted	1,411	86.62
Vested	(714)	64.45
Forfeited	(251)	78.82
Nonvested at June 25, 2023	2,340	$85.32

The aggregate fair value of awards vested in fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, based on the market price of the Company's common stock on the vesting date, was $61.6 million, $82.9 million and $110.6 million, respectively.

As of June 25, 2023, there was $119.1 million of unrecognized compensation cost related to nonvested awards, which is expected to be recognized over a weighted average period of 2.19 years.

Stock-Based Compensation Valuation and Expense

Total stock-based compensation expense was classified in the consolidated statements of operations as follows:


	Fiscal Years Ended
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021
Cost of revenue, net	$21.5	$16.0	$14.4
Research and development	15.8	9.9	8.7
Sales, general and administrative	44.6	35.0	30.1
Total stock-based compensation expense	$81.9	$60.9	$53.2

Stock-based compensation expense may differ from the impact of stock-based compensation to additional paid in capital due to manufacturing related stock-based compensation capitalized within inventory.

The Black-Scholes and Monte Carlo option pricing models require the input of highly subjective assumptions. The assumptions listed below represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if other assumptions had been used, recorded share-based compensation expense could have been materially different from that depicted above.

The range of assumptions used to value stock issued under the ESPP were as follows:


	Fiscal Years Ended
	June 25, 2023	June 26, 2022	June 27, 2021
Risk-free interest rate	4.57 - 5.06%	0.03 - 2.10%	0.03 - 0.17%
Expected life, in years	0.5 - 1.0	0.5 - 1.0	0.5 - 1.0
Volatility	66.8 - 86.2%	60.6 - 69.4%	52.4 - 82.6%
Dividend yield	—	—	—

The range of assumptions used for performance-based awards with market conditions were as follows:


	Fiscal Years Ended
	June 25, 2023	June 26, 2022	June 27, 2021
Risk-free interest rate	2.80%	0.35%	0.11 - 1.66%
Expected life, in years	3.0	3.0	3.0
Average volatility of peer companies	68.8%	65.0%	48.9 - 60.5%
Average correlation coefficient of peer companies	0.48	0.47	0.36 - 0.51
Dividend yield	—	—	—

Awards are valued using the Monte Carlo model. All performance-based awards with market conditions for the fiscal years ended June 25, 2023 and June 26, 2022 were issued on a single date each year and therefore no range is shown.

The following describes each of these assumptions and the Company’s methodology for determining each assumption:

Risk-Free Interest Rate

The Company estimates the risk-free interest rate using the U.S. Treasury bill rate with a remaining term equal to the expected life of the award.

Expected Life

The expected life represents the period the awards are expected to be outstanding. In determining the appropriate expected life of its stock options, the Company segregates its grantees into categories based upon employee levels that are expected to be indicative of similar option-related behavior. The expected useful lives for each of these categories are then estimated giving consideration to (1) the weighted average vesting periods, (2) the contractual lives of the stock options, (3) the relationship between the exercise price and the fair market value of the Company’s common stock, (4) expected employee turnover, (5) the expected future volatility of the Company’s common stock, and (6) past and expected exercise behavior, among other factors.

Expected Volatility

The Company estimates expected volatility for the options and ESPP awards giving consideration to the expected life of the respective award, the Company’s current expected growth rate, implied volatility in traded options for its common stock, and the historical volatility of its common stock. For purposes of estimating volatility for use in the Monte Carlo model for the market-based awards, the Company utilizes historical volatilities of the Company and the members of the defined peer group.

Expected Dividend Yield

The Company estimates the expected dividend yield by giving consideration to its current dividend policies as well as those anticipated in the future considering the Company’s current plans and projections. The Company has not historically issued dividends.

Correlation Coefficient

The correlation coefficients are calculated based upon the price data used to calculate the historical volatilities and are used to model the way in which each entity tends to move in relation to its peers.