In May 2017, the Company adopted the 2017 Stock Option and Incentive Plan (the “2017 Plan”), which replaced its previous stock option and incentive plan (the “2007 Plan”). The 2017 Plan provides for a maximum of 5.2 million shares to be issued, in addition to the number of shares related to awards outstanding under the 2007 Plan that are terminated by expiration, forfeiture, or cancellation. The shares can be issued as stock options, restricted stock units, stock appreciation rights, deferred stock awards, restricted stock, unrestricted stock, cash-based awards, performance share awards, or dividend equivalent rights. As of December 31, 2023, 2.5 million shares remain available for future issuance under the 2017 Plan.


	Year Ended December 31,
(in millions)	2023		2022		2021
Cost of revenue	$	0.4	$	0.4	$	0.5
Research and development	11.5		8.9		7.6
Selling, general and administrative	36.4		31.6		26.3
Total	$	48.3	$	40.9	$	34.4

Options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted. Options generally vest in equal annual installments over a period of four years and expire 10 years after the date of grant. The grant-date fair value of options, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2022	695,588	$	109.73
Granted	72,209	$	276.36
Exercised	(250,192)	$	67.30		$	52.7
Forfeited and canceled	(81,511)	$	250.47
Outstanding at December 31, 2023	436,094	$	135.37	3.8	$	43.2
Vested, December 31, 2023	335,862	$	95.35	2.4	$	43.1
Vested or expected to vest, December 31, 2023	420,190	$	130.18	3.6	$	43.2

The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The assumptions used in the Black-Scholes pricing model are as follows:

•Risk-free Interest Rate—The risk-free interest rate is the implied yield available on U.S. treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.

•Expected Term—The expected term of options granted represents the period of time for which the options are expected to be outstanding. The Company estimates the expected term using both historical and hypothetical exercise data for outstanding options.

•Dividend Yield—The Company has never declared or paid any cash dividends on any of its capital stock and does not expect to do so in the foreseeable future. Accordingly, the Company uses an expected dividend yield of zero to calculate the grant-date fair value of a stock option.

•Expected Volatility—The expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate during the expected term of options granted. The Company determines the expected volatility based primarily upon the historical volatility of the Company’s common stock over a period commensurate with the option’s expected term.

The assumptions used in the Black-Scholes pricing model for options granted during each year, along with the weighted-average grant-date fair values, were as follows:


	Years Ended December 31,
	2023		2022		2021
Risk-free interest rate	4.3%		1.8%		0.5% - 0.6%
Expected life of options (in years)	4.2		4.2		4.2 - 4.4
Dividend yield	—%		—%		—%
Expected stock price volatility	45.7%		42.8%		41.4% - 41.6%
Fair value per option	$	115.32	$	93.26	$	95.92

As of December 31, 2023, there was $7.8 million of unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted average period of 2.7 years.

Restricted Stock Units (“RSUs”) generally vest in equal annual installments over a three-year period. The grant-date fair value of RSUs, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.


	Number of Shares	Weighted Average Fair Value
Outstanding at December 31, 2022	232,726	$	249.60
Granted	149,234	$	259.86
Vested	(98,373)	$	245.14
Forfeited	(34,393)	$	266.65
Outstanding at December 31, 2023	249,194	$	255.31

The weighted-average grant-date fair value per share of RSUs granted was $248.02 and $278.68 for the years ended December 31, 2022 and 2021, respectively. The total fair value of RSUs vested was $24.1 million, $20.3 million, and $17.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, there was $41.6 million of unrecognized compensation cost related to time-based RSUs, which is expected to be recognized over a weighted-average period of 1.9 years.

Performance stock units (“PSUs”) generally vest over a three-year period from the grant date and include both a service and performance component. Stock-based payments that contain performance conditions are recognized when such conditions are probable of being achieved. Certain of these PSUs could ultimately vest at up to 200% of the target award depending on the achievement of the performance criteria. The Company determines the fair value of PSUs based on the closing price of its common stock on the date of grant.


	Number of Shares	Weighted Average Fair Value
Outstanding at December 31, 2022	180,301	$	249.10
Granted(1)	60,587	$	276.36
Vested	(40,023)	$	217.34
Forfeited	(78,399)	$	272.53
Outstanding at December 31, 2023(2)	122,466	$	261.65

(1) Includes a 7,636 share adjustment to awards granted in 2020 for the three-year performance cycle award period ended 2022, based on the actual performance achievement of 84%.

(2) Based on 111% achievement of the performance metrics, approximately 18,000 shares of Insulet were earned for awards that were granted in 2021 for the performance period ended December 31, 2023. These shares vested in February 2024.

The weighted-average grant-date fair value per share of PSUs granted was $250.25 and $273.79 for the years ended December 31, 2022 and 2021, respectively. The total fair value of PSUs vested was $8.7 million, $7.8 million, and $10.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, there was $32.9 million of unrecognized compensation cost related to PSUs, which is expected to be recognized over a weighted-average period of 1.8 years.

The Employee Stock Purchase Plan (“ESPP”) authorizes the issuance of up to 880,000 shares of common stock to participating employees. Employees that participate in the Company’s ESPP may annually purchase up to a maximum of 800 shares per offering period or $25,000 worth of common stock by authorizing payroll deductions of up to 10% of their base salary. The purchase price for each share purchased is 85% of the lower of the fair market value of the common stock on the first or last day of the offering period. The Company issued 55,439, 52,724, and 36,103 shares of common stock for the years ended December 31, 2023, 2022, and 2021, respectively, to employees participating in the ESPP. As of December 31, 2023, 364,496 shares remain available for future issuance under the ESPP.

The Company uses the Black-Scholes pricing model to determine the fair value of shares purchased under the ESPP. The calculation of the fair value of shares purchased is affected by the stock price on the purchase date, the expected volatility of the Company’s stock over the expected term, the risk-free interest rate, and the dividend yield.


	Years Ended December 31,
	2023	2022	2021
Risk-free interest rate	5.3% - 5.4%	1.6% - 4.7%	0.04% - 0.1%
Expected term (in years)	0.5	0.5	0.5
Dividend yield	—%	—%	—%
Expected stock price volatility	29.1% - 47.0%	44.3% - 50.1%	19.4% - 31.7%

The weighted average grant date fair value of the six-month option inherent in the ESPP was $60.67, $74.50, and $60.65, for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, there was $1.8 million of unrecognized compensation cost related to the ESPP. This cost is expected to be recognized over a weighted average period of 0.4 years.