Annual report pursuant to Section 13 and 15(d)

Stock-based Compensation

v3.22.1
Stock-based Compensation
12 Months Ended
Jan. 02, 2022
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-based Compensation

Note 10. Stock-based Compensation

 

Equity Incentive Plans

As of January 2, 2022, the Company's equity compensation plans include the 2021 Equity Incentive Plan (the “2021 Plan”) and 2021 Employee Stock Purchase Plan (the “2021 ESPP”).

2021 Equity Incentive Plan

The 2021 Plan was approved by the Company's stockholders in July 2021. The 2021 Plan is intended as the successor to and continuation of the 2016 Equity Incentive Plan (the “2016 Plan”). Under the 2021 Plan, employees, directors and consultants of the

Company (“Participants”), are eligible for grants of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, and performance awards, collectively referred to as “Stock Awards”. Incentive stock and non-statutory stock options are collectively referred to as “Option(s).”

Under the 2021 Plan, the maximum number of shares of common stock that may be issued is 16,850,000 shares. The number of shares reserved for issuance under the 2021 Plan will automatically increase on January 1st each year, starting on January 1, 2022 and continuing through January 1, 2031, by the lesser of (a) 4% of the total number of shares of the Company’s common stock outstanding on December 31st of the immediately preceding fiscal year or (b) a lesser number determined by the Company’s board of directors prior to the applicable January 1st.

2016 Equity Incentive Plan

The 2016 Plan was terminated when 2021 Plan became effective in July 2021. The 2016 Plan was originally adopted by its board of directors on April 6, 2016 and was most recently amended by its board of directors on December 17, 2020. The 2016 Plan is intended as the successor to and continuation of the Company’s 2006 Equity Incentive Plan.

2021 Employee Stock Purchase Plan

The 2021 ESPP was adopted by the Company's board of directors in June 2021 and approved by the Company's stockholders in July 2021. Under the 2021 ESPP, 5,625,000 shares of common stock was reserved for future issuance. The number of shares reserved for issuance under the 2021 ESPP will automatically increase on January 1st each year, starting on January 1, 2022 and continuing through January 1, 2031, by the lesser of (a) 1% of the total number of shares of the Company's common stock outstanding on December 31st of the preceding calendar year, (b) 2,000,000 shares of the Registrant’s common stock or (c) a lesser number determined by the Company’s board of directors.

The 2021 ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15% discount through periodic payroll deductions of up to 15% of base compensation, subject to individual purchase limits in any single purchase date or in one calendar year. The 2021 ESPP provides 18-month offering periods with three 6-month purchase periods with the purchase periods ending on May 7, 2022, November 4, 2022 and May 4, 2023. A new 18-month offering period will commence every six months thereafter. The purchase price for the Company’s common stock under the ESPP is 85% of the lower of the fair market value of the shares at (1) on the offering period or (2) on the purchase date. As of January 2, 2022, the Company did not issue any shares under the 2021 ESPP.

 

Common stock

The following shares of common stock had been reserved for future issuance as of January 2, 2022:

 

Exercise of outstanding common stock options

 

 

5,753,005

 

Options and RSUs available for future grants

 

 

15,846,770

 

Outstanding restricted stock units for future vesting

 

 

535,449

 

Common stock employee purchase plan

 

 

5,625,000

 

 

 

 

27,760,224

 

 

Early Exercise of Options

The terms of the 2016 Plan and the 2021 Plan permit the exercise of options granted prior to vesting, subject to required approvals. The unvested shares are subject to the Company’s repurchase right, upon termination of employment, at the lower of (i) the fair market value of the shares of common stock on the date of repurchase or (ii) their original exercise price. The repurchase right lapses 90 days after the termination of the employee’s employment. Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be issued until those shares vest according to their respective vesting schedules. Cash received for early exercised stock options is recorded as other current and non-current liabilities on the Consolidated Balance Sheets and is reclassified to common stock and additional paid in capital as such shares vest.

Unvested early exercised stock options which are subject to repurchase by the Company are not considered participating securities as those shares do not have non-forfeitable rights to dividends or dividend equivalents. Unvested early exercised stock options are not considered outstanding for purposes of the weighted average outstanding share calculation until they vest.

As of January 2, 2022 and December 31, 2020, 5,086,572 and 5,383,935 shares, respectively, remained subject to the Company’s right of repurchase as a result of early exercised stock options. The remaining liability related to early exercised shares as of both January 2, 2022 and December 31, 2020 were $0.3 million, which was recorded in other current and non-current liabilities in the Consolidated Balance Sheets.

 

Stock-Based Compensation

The Company issues stock-based compensation to employees and non-employees in the form of stock options and restricted stock units (“RSUs”). The Company uses Black-Scholes option pricing model to value its stock options granted and use its common stock price, which is the last reported sales price on the grant date to value its RSUs. Stock-based compensation expense is recognized using the straight-line attribution method. The Company records forfeitures as they occur. The following table summarizes the total stock-based compensation expense, by operating expense category, recognized in the Consolidated Statements of Operations for the periods presented below (in thousands).

 

 

 

Fiscal Years

 

 

 

2021

 

 

2020

 

Cost of revenue

 

$

274

 

 

$

102

 

Research and development

 

 

6,175

 

 

 

485

 

Selling, general and administrative

 

 

4,262

 

 

 

79

 

Total stock-based compensation expense

 

$

10,711

 

 

$

666

 

For the fiscal year 2021, the Company capitalized $0.7 million of stock-based compensation as deferred contract costs and property and equipment, net in the Consolidated Balance Sheet. For the fiscal year 2020, the Company capitalized immaterial amounts of stock-based compensation as deferred contract costs and property and equipment, net in the Consolidated Balance Sheet. As of January 2, 2022, there was approximately $48.2 million of total unrecognized stock-based compensation expense related to unvested equity awards, which are expected to be recognized over a weighted-average period of 3.6 years.

There was no recognized tax benefit related to stock-based compensation expense for the fiscal years 2021 and 2020.

 

Stock Option Activity

Options granted under the 2021 Plan and the 2016 Plan to employees generally have a service vesting condition over four or five years. Other vesting terms are permitted and are determined by the Company’s board of directors. Options have a term of no more than ten years from the date of grant and vested options are generally cancelled three months after termination of employment if unexercised.

The following table summarized stock option activities for the fiscal years 2021 and 2020 (in thousands, except share and per share amount).

 

 

 

Number of
Options
Outstanding

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Life (Years)

 

 

Aggregate
Intrinsic
Value
(1) (2)

 

Balances as of January 1, 2021

 

 

1,428,980

 

 

$

0.11

 

 

 

 

 

 

 

Granted

 

 

6,817,420

 

 

 

7.86

 

 

 

 

 

 

 

Exercised

 

 

(2,180,168

)

 

 

0.09

 

 

 

 

 

$

1,963

 

Forfeited

 

 

(313,227

)

 

 

7.77

 

 

 

 

 

 

 

Balances as of January 2, 2022

 

 

5,753,005

 

 

$

8.88

 

 

 

9.1

 

 

$

105,898

 

Vested and expected to vest at January 2, 2022

 

 

10,839,577

 

 

$

4.74

 

 

 

9.0

 

 

$

244,342

 

Vested and exercisable at January 2, 2022

 

 

716,777

 

 

$

5.23

 

 

 

7.9

 

 

$

15,806

 

Unvested and exercisable at January 2, 2022

 

 

4,630,961

 

 

$

8.75

 

 

 

9.3

 

 

$

85,790

 

 

 

 

Number of
Options
Outstanding

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Life (Years)

 

 

Aggregate
Intrinsic
Value
(1) (2)

 

Balances as of January 1, 2020

 

 

971,332

 

 

$

0.16

 

 

 

 

 

 

 

Granted

 

 

5,779,591

 

 

 

0.06

 

 

 

 

 

 

 

Exercised

 

 

(5,318,139

)

 

 

0.07

 

 

 

 

 

$

6,889

 

Forfeited/expired

 

 

(3,804

)

 

 

0.59

 

 

 

 

 

 

 

Balances as of December 31, 2020

 

 

1,428,980

 

 

$

0.11

 

 

 

8.8

 

 

$

4,042

 

Vested and expected to vest at December 31, 2020

 

 

6,812,915

 

 

$

0.07

 

 

 

9.5

 

 

$

11,190

 

Vested and exercisable at December 31, 2020

 

 

251,492

 

 

$

0.34

 

 

 

5.8

 

 

$

2,028

 

Unvested and exercisable at December 31, 2020

 

 

1,024,478

 

 

$

0.06

 

 

 

9.8

 

 

$

494

 

 

(1)

The aggregate intrinsic value of options exercised is based upon the value of the Company’s stock at exercise.

(2)

The aggregate intrinsic value of the stock options outstanding as of December 31, 2021 represents the value of the Company’s closing stock price at $27.28 on December 31, 2021 in excess of the exercise price multiplied by the number of options outstanding.

The Company uses the Black-Scholes option-pricing model to determine the grant date fair value of stock options with the following assumptions for the fiscal years 2021 and 2020.

 

 

Fiscal Years

 

 

 

2021

 

 

2020

 

Risk-free interest rate

 

0.5% - 1.3%

 

 

 

0.5

%

Expected term (years)

 

5.0 - 6.9

 

 

 

6.0

 

Dividend yield

 

 

%

 

 

%

Volatility

 

48.1% - 49.8%

 

 

 

37.8

%

The estimated weighted-average grant date fair value of stock options granted to employees during the fiscal years 2021 and 2020 were $4.43, and $0.59 per share, respectively. The fair value of stock options that vested during the fiscal years 2021 and 2020 were $6.6 million and $0.3 million, respectively.

 

Restricted Stock Unit Activity

Since September 2021, the Company primarily grants RSUs to its employees and non-employee directors. The Company generally grants RSUs with requisite service vesting condition over four or five years. Each RSU is not considered issued and outstanding and does not have voting rights until it is converted into one share of the Company's common stock upon vesting. The following table summarized RSUs activities for the fiscal year 2021 (in thousands, except share and per share amount).

 

 

Number of
Shares
Outstanding

 

 

Weighted Average
Grant Date Fair Value

 

Non-vested RSUs Balances as of January 1, 2021

 

 

 

 

$

 

Granted

 

 

608,168

 

 

 

23.12

 

Vested

 

 

(61,015

)

 

 

21.26

 

Forfeited

 

 

(11,704

)

 

 

20.56

 

Non-vested RSUs outstanding as of January 2, 2022

 

 

535,449

 

 

$

23.38

 

 

The total fair value of RSUs vested during the fiscal year 2021 was $1.8 million.

 

Employee Stock Purchase Plan Activity

2021 ESPP was approved by the stockholders on July 12, 2021. The first offering date of the 2021 ESPP was in November 2021 and the first purchase date will be in May 2022. The Company uses the Black-Scholes option-pricing model to determine the fair value of estimated shares under the 2021 ESPP with the following assumptions for the fiscal year 2021.

 

 

2021

 

Risk-free interest rate

 

 

0.1

%

Expected term (years)

 

 

0.5

 

Dividend yield

 

 

%

Volatility

 

 

71.5

%