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STOCKHOLDERS' EQUITY | 12 Months Ended
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Dec. 29, 2024
Equity [Abstract] |
STOCKHOLDERS' EQUITY |
7. STOCKHOLDERS' EQUITY
The 2015 Stock and Incentive Compensation Plan (the 2015 Stock Plan) and the New Hire Stock and Incentive Plan allow for the issuance of stock options, performance stock options, restricted stock units and awards and performance stock units. In 2023, the Company’s stockholders approved an amended and restated version of the 2015 Stock Plan and increased the maximum number of shares authorized for issuance by 8.0 million shares. In connection with the GRAIL Spin-Off, all unvested RSU and PSU were equitably adjusted pursuant to the plan to preserve their intrinsic value and the number of shares reserved for issuance under the 2015 Stock Plan was increased by 160,000 shares. As of December 29, 2024, approximately 5.4 million shares remained available for future grants under the 2015 Stock Plan. There is no set number of shares reserved for issuance under the New Hire Stock and Incentive Plan. Restricted Stock We issue restricted stock units (RSU) and performance stock units (PSU), both of which are considered restricted stock. We grant restricted stock pursuant to the 2015 Stock Plan and satisfy such grants through the issuance of either new shares or shares from treasury stock. RSU are share awards that, upon vesting, will deliver to the holder shares of our common stock. RSU generally vest over a four-year period with equal vesting annually. We issue three different PSU awards. We issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified earnings per share targets (EPS PSU) and, during 2024, we began to issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified operating margin targets (OM PSU). During 2023, we began to issue PSU with a market condition that vest based on the Company’s relative total shareholder return as compared to a peer group of companies measured over a three-fiscal year performance period (rTSR PSU). Depending on the actual performance over the measurement period, an rTSR PSU award recipient could receive up to 175% of the granted award. Shares issuable under all PSU awards are subject to continued employment through the vesting period. Restricted stock activity was as follows:
|  | Restricted Stock Units (RSU) |  | Performance Stock Units (PSU) (1) |  | Weighted-Average Grant- Date Fair Value per Share
Units in thousands |  |  |  | RSU |  | PSU
Outstanding at January 2, 2022 |  | 1,130 |  |  | 328 |  |  | $ | 345.66 |  |  | $ | 466.42 |
Awarded |  | 1,370 |  |  | (108) |  |  | $ | 302.52 |  |  | $ | 479.85 |
Vested |  | (707) |  |  | (99) |  |  | $ | 341.56 |  |  | $ | 492.55 |
Cancelled |  | (182) |  |  | (47) |  |  | $ | 341.14 |  |  | $ | 411.78 |
Outstanding at January 1, 2023 |  | 1,611 |  |  | 74 |  |  | $ | 311.23 |  |  | $ | 446.74 |
Awarded |  | 2,032 |  |  | 39 |  |  | $ | 195.94 |  |  | $ | 239.98 |
Vested |  | (987) |  |  | — |  |  | $ | 268.08 |  |  | $ | — |
Cancelled |  | (458) |  |  | (113) |  |  | $ | 253.52 |  |  | $ | 299.98 |
Outstanding at December 31, 2023 |  | 2,198 |  |  | — |  |  | $ | 236.32 |  |  | $ | — |
Awarded |  | 2,788 |  |  | 729 |  |  | $ | 133.73 |  |  | $ | 164.38 |
Unvested adjustment for GRAIL Spin-Off |  | 107 |  |  | 12 |  |  | $ | — |  |  | $ | — |
Vested |  | (771) |  |  | — |  |  | $ | 249.70 |  |  | $ | — |
Cancelled |  | (443) |  |  | (41) |  |  | $ | 195.11 |  |  | $ | 167.68 |
Outstanding at December 29, 2024 |  | 3,879 |  |  | 700 |  |  | $ | 158.60 |  |  | $ | 164.87 |
_____________ (1)For EPS and OM PSU, the number of units reflect the estimated number of shares to be issued at the end of the performance period. For rTSR PSU, the number of units reflect the estimated number of shares to be issued based on performance as of the current reporting period. Awarded units are presented net of performance adjustments. Pre-tax intrinsic value and fair value of vested restricted stock was as follows:
In millions | 2024 |  | 2023 |  | 2022
Pre-tax intrinsic value of outstanding restricted stock: |  |  |  |  |
RSU | $ | 525 |  |  | $ | 306 |  |  | $ | 326 |
PSU | $ | 95 |  |  | $ | — |  |  | $ | 15 |
Fair value of restricted stock vested: |  |  |  |  |
RSU | $ | 116 |  |  | $ | 122 |  |  | $ | 162 |
PSU | $ | — |  |  | $ | — |  |  | $ | 49 |
Liability-Classified RSU In Q1 2023, we granted RSU that were to be settled in cash if stockholder approval to increase our share reserve under the amended and restated 2015 Stock Plan was not obtained. In Q2 2023, the Company’s stockholders approved an amended and restated version of the 2015 Stock Plan and increased the maximum number of shares authorized for issuance. Upon such approval, all RSU previously accounted for as liability-classified awards, approximately 557,000 RSU, were reclassified to stockholders equity and accounted for prospectively as equity awards. There were no RSU liability-classified awards outstanding as of December 29, 2024 or December 31, 2023. Stock Options Stock option activity was as follows:
Units in thousands | Options |  | Weighted-Average Exercise Price |  | Performance Stock Options(1) |  | Weighted-Average Exercise Price
Outstanding at January 2, 2022 | 8 |  |  | $ | 66.42 |  |  | 17 |  |  | $ | 85.54 |
Granted | 180 |  |  | $ | 330.25 |  |  | — |  |  | $ | — |
Exercised | (1) |  |  | $ | 6.55 |  |  | — |  |  | $ | — |
Outstanding at January 1, 2023 | 187 |  |  | $ | 319.72 |  |  | 17 |  |  | $ | 85.54 |
Exercised | (8) |  |  | $ | 71.09 |  |  | (1) |  |  | $ | 16.69 |
Cancelled | (144) |  |  | $ | 330.25 |  |  | — |  |  | $ | — |
Outstanding at December 31, 2023 | 35 |  |  | $ | 330.25 |  |  | 16 |  |  | $ | 87.74 |
Cancelled | (35) |  |  | $ | 330.25 |  |  | (16) |  |  | $ | 87.74 |
Outstanding at December 29, 2024 | — |  |  | $ | — |  |  | — |  |  | $ | — |
_____________ (1)In connection with the GRAIL acquisition, we issued replacement performance stock options to GRAIL employees in 2021. The number of units reflected awards that had been granted and for which it was assumed to be probable that the underlying performance goals would be achieved. In connection with the GRAIL Spin-Off, all outstanding performance stock options were assumed by GRAIL. The total intrinsic value of stock options exercised was immaterial in both 2023 and 2022. None exercised in 2024. Other Liability-Classified Awards Prior to the GRAIL Spin-Off, we granted cash-based equity incentive awards to GRAIL employees, which were accounted for as liability-classified awards. In connection with the Spin-Off, these awards were assumed by GRAIL. For purposes of valuation and performance measurement of the awards, GRAIL’s stand-alone value calculation, as estimated by GRAIL based on its analysis and on input from independent valuation advisors and analyses, was used. The awards generally had terms of four years and vested in four equal installments on each anniversary of the grant date, subject to continued employment through the vesting period. Cash-based equity incentive award activity was as follows:
In millions |
Outstanding at January 2, 2022 | $ | 184 |
Granted | 168 |
Vested and paid in cash | (41) |
Cancelled | (41) |
Change in fair value | 23 |
Outstanding at January 1, 2023 | 293 |
Granted | 116 |
Vested and paid in cash | (77) |
Cancelled | (32) |
Change in fair value | (8) |
Outstanding at December 31, 2023 | 292 |
Granted | 67 |
Vested and paid in cash | (54) |
Cancelled | (13) |
Change in fair value | (9) |
Derecognition for GRAIL Spin-Off(1) | (283) |
Outstanding at December 29, 2024 | $ | — |
_____________ (1)The estimated liability immediately prior to the Spin-Off, recorded in accrued liabilities, was $53 million, which was disposed of as part of GRAIL’s net assets. See note 2. GRAIL Spin-Off for additional details. We recognized share-based compensation expense on these cash-based equity incentive awards of $52 million in 2024, prior to the Spin-Off, and $95 million and $67 million in 2023 and 2022, respectively. In connection with the acquisition of GRAIL, we assumed a performance-based award for which vesting was based on GRAIL’s future revenues and had an aggregate potential value of up to $78 million. Prior to the Spin-Off of GRAIL, it was not probable that the performance conditions associated with the award would be achieved and, therefore, no share-based compensation expense was recognized in the consolidated statements of operations. In connection with the Spin-Off, this award was assumed by GRAIL. For a period of 2.5 years following the Spin-Off, we are obligated to indemnify GRAIL for cash payments that become earned and payable related to this award. The indemnification is accounted for in accordance with ASC 460. As of December 29, 2024, we recognized a non-contingent liability of $1 million for this indemnification, with a corresponding charge to additional paid-in capital. Employee Stock Purchase Plan The 2000 Employee Stock Purchase Plan, or ESPP, permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. The initial offering period commenced in July 2000. During 2024, 2023, and 2022, approximately 0.5 million, 0.4 million, and 0.3 million shares, respectively, were issued under the ESPP. As of December 29, 2024, approximately 12.4 million shares remained available for issuance under the ESPP, which includes an increase of 0.5 million shares pursuant to the terms of the ESPP to account for the GRAIL Spin-Off. The assumptions used for the specified reporting periods and the resulting estimates of weighted-average fair value per share for stock purchased under the ESPP were as follows:
| 2024 |  | 2023 |  | 2022
Risk-free interest rate | 4.35% - 5.54% |  | 0.78% - 5.54% |  | 0.06% - 2.98%
Expected volatility | 41% - 49% |  | 41% - 51% |  | 37% - 51%
Expected term | 0.5 - 1.1 year |  | 0.5 - 1.1 year |  | 0.5 - 1.0 year
Expected dividends | 0% |  | 0% |  | 0%
Weighted-average grant-date fair value per share | $ | 37.24 |  |  | $ | 49.87 |  |  | $ | 50.22 |
Share Repurchases In August 2024, our Board of Directors authorized a new share repurchase program, which cancels and supersedes all prior and available repurchase authorizations, to repurchase up to $1.5 billion of our outstanding common stock. The repurchases may be completed through open market purchases, pursuant to Rule 10b5-1 or Rule 10b-18, or through an accelerated share repurchase program. Authorizations to repurchase up to $1.4 billion of our outstanding common stock remained available as of December 29, 2024. We did not repurchase any shares during 2023 or 2022. Share repurchase activity during 2024 was as follows:
In millions, except shares in thousands |
Number of shares repurchased | 904 |
Total cost of shares repurchased(1) | $ | 116 |
_____________ (1)Total cost of shares repurchased includes the 1% excise tax imposed as part of the Inflation Reduction Act of 2022, which is calculated based on share repurchases, net of certain share issuances. Subsequent to December 29, 2024 and through February 11, 2025, we repurchased an additional 1.0 million shares of our common stock for $126 million. Share-Based Compensation Share-based compensation expense, which includes expense for both equity and liability-classified awards, reported in our consolidated statements of operations was as follows:
In millions | 2024 |  | 2023 |  | 2022
Cost of product revenue | $ | 25 |  |  | $ | 29 |  |  | $ | 26 |
Cost of service and other revenue | 6 |  |  | 7 |  |  | 6 |
Research and development | 146 |  |  | 155 |  |  | 153 |
Selling, general and administrative | 194 |  |  | 189 |  |  | 181 |
Share-based compensation expense, before taxes | 371 |  |  | 380 |  |  | 366 |
Related income tax benefits | (83) |  |  | (87) |  |  | (83) |
Share-based compensation expense, net of taxes | $ | 288 |  |  | $ | 293 |  |  | $ | 283 |
As of December 29, 2024, unrecognized compensation cost, related to restricted stock and ESPP shares issued to date, of $565 million was expected to be recognized over a weighted-average period of approximately 2.5 years.

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