Annual report pursuant to Section 13 and 15(d)

Stock-based Compensation

v3.22.4
Stock-based Compensation
12 Months Ended
Jan. 01, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-based Compensation Stock-based Compensation
Equity Incentive Plans
As of January 1, 2023, 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 (“RSUs”), and performance restricted stock units (“PRSUs”), collectively referred to as “Stock Awards”. Incentive stock and non-statutory stock options are collectively referred to as “Option(s).”
Under the 2021 Plan, 16,850,000 shares of common stock were reserved for future issuance. 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 were 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. 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.
Common stock
The following table shows the shares of common stock that had been reserved for future issuance as of January 1, 2023.
Exercise of outstanding common stock options 5,034,282 
Options, RSUs and PRSUs available for future grants 22,972,236 
Outstanding RSUs and PRSUs for future vesting 7,371,158 
Common stock employee purchase plan available for future offerings 8,493,050 
43,870,726 
Stock-Based Compensation
The Company generally issues equity awards to employees and non-employees in the form of stock options and RSUs. Additionally, the Company also offers the 2021 ESPP to its eligible employees. In the second quarter of 2022, the Company began to grant PRSUs subject to performance and service vesting conditions. The Company uses Black-Scholes option pricing model to value its stock options granted and the estimated shares to be purchased under the ESPP. For both RSUs and PRSUs, the Company uses its common stock price, which is the last reported sales price on the grant date to value those securities.
In general, the Company recognizes its stock-based compensation expense on a straight-line basis over the requisite service period and records forfeitures as they occur. For PRSUs, the Company uses the graded vesting method to calculate the stock-based compensation expense. At each reporting period, the Company would recognize and adjust the stock-based compensation expense based on its probability assessment in meeting its PRSUs' performance conditions.
The following table summarizes the total stock-based compensation expense, by operating expense category, recognized in the Consolidated Statements of Operations and Comprehensive Loss for the periods presented below (in thousands).
Fiscal Years
2022 2021 2020
Cost of revenue $ 2,071  $ 274  $ 102 
Research and development 12,720  6,175  485 
Selling, general and administrative 15,576  4,262  79 
Total stock-based compensation expense $ 30,367  $ 10,711  $ 666 
For the fiscal year 2022, the Company capitalized $1.8 million of stock-based compensation as property and equipment, net in the Consolidated Balance Sheet. For the fiscal year 2021, the Company capitalized an immaterial amount of stock-based compensation as deferred contract costs, inventory and property and equipment, net in the Consolidated Balance Sheet. There was no recognized tax benefit related to stock-based compensation for the periods presented. In addition, the Company accrued $1.5 million of bonus to be settled in equity awards as accrued compensation on the Consolidated Balance Sheet as of January 1, 2023.
As of January 1, 2023, there was approximately $104.1 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 3.8 years. As of January 1, 2023, there was approximately $1.1 million of total unrecognized stock-based compensation related to the 2021 ESPP, which is expected to be recognized over the remaining period of 1.4 years.
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 summarizes stock option activities for the fiscal year January 1, 2023 (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 2, 2022 5,753,005 $ 8.88 
Granted 56,190 14.56 
Exercised (381,497) 6.24  $ 4,258 
Forfeited (393,416) 9.79 
Balances as of January 1, 2023 5,034,282 $ 9.07  8.2 $ 18,486 
Vested and expected to vest at January 1, 2023 7,959,820 $ 5.76  8.1 $ 54,695 
Vested and exercisable at January 1, 2023 1,616,203 $ 8.32  8.0 $ 7,206 
Unvested and exercisable at January 1, 2023 3,197,163 $ 8.92  8.3 $ 11,249 
(1) The 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 January 1, 2023 represents the value of the Company’s closing stock price at $12.44 on January 1, 2023 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 2022, 2021 and 2020.
Fiscal Years
2022 2021 2020
Risk-free interest rate
2.1% - 4.2%
0.5% - 1.3%
0.5  %
Expected term (years)
5.0 - 6.0
5.0 - 6.9
6.0
Dividend yield —  % —  % —  %
Expected volatility
67.6% - 70.1%
48.1% - 49.8%
37.8  %
The estimated weighted-average grant date fair value of stock options granted to employees during the fiscal years 2022, 2021 and 2020 were $8.84, $4.43 and $0.59 per share, respectively. The fair value of stock options that vested during the fiscal years 2022, 2021 and 2020 were $12.4 million, $6.6 million and $0.3 million, respectively.
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 1, 2023 and January 2, 2022, 2,925,538 and 5,086,572 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 January 1, 2023 and January 2, 2022 were $0.2 million and $0.3 million, respectively. The early exercised stock options liability was recorded in other current and non-current liabilities in the Consolidated Balance Sheets.
Restricted Stock Unit and Performance Restricted Stock Unit Activities
Since September 2021, the Company primarily grants RSUs to its employees and non-employee directors. The Company generally grants RSUs with service vesting condition over four or five years. In addition, in the fiscal year 2022, the Company began to grant PRSUs to certain employees with both performance and service vesting conditions over two years. Each RSU or PRSU 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 summarizes RSUs and PRSUs activities for the fiscal year January 1, 2023 (in thousands, except share and per share amount).
RSUs PRSUs
Number of
Shares
Outstanding
Weighted Average
Grant Date Fair Value
Number of
Shares
Outstanding
Weighted Average
Grant Date Fair Value
Issued and unvested shares balances as of January 2, 2022 535,449  $ 23.38  —  $ — 
Granted 6,497,482  13.65  1,500,845  13.41 
Vested (669,918) 15.40  —  — 
Forfeited (452,916) 16.64  (39,784) 13.41 
Issued and unvested shares outstanding as of January 1, 2023 5,910,097  $ 14.11  1,461,061  $ 13.41 
The total fair value of RSUs vested during the fiscal years 2022 and 2021 were $10.3 million and $1.8 million, respectively.
During fiscal year 2022, the Company began to withhold shares with value equivalent to the employees' obligation for the applicable income and other employment taxes and remitted the cash to the appropriate taxing authorities. The number of shares withheld was determined by the Company's closing share price on the vesting of its common stock. For fiscal year 2022, the total number of shares withheld were 48,739 and total amounts paid for the employees' tax obligation to taxing authorities were $0.6 million related to the shares withheld upon vesting of the RSUs. These transactions were reflected as financing activities within the Consolidated Statements of Cash Flows.
Employee Stock Purchase Plan Activity
The 2021 ESPP was approved by the stockholders on July 12, 2021. The first offering of the 2021 ESPP was in November 2021 and the first purchase was in May 2022. During the fiscal year 2022, 229,249 common stock shares were purchased under the 2021 ESPP with the weighted-average purchase price per share of $8.29 and the weighted average grant-date fair value per share of $11.22.
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 years 2022 and 2021.
Fiscal Years
2022 2021
Risk-free interest rate
0.1% - 4.8%
0.1  %
Expected term (years)
0.5 - 1.5
0.5
Dividend yield
—%
—  %
Expected volatility
62.3% - 123.2%
71.5  %