STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

6 Months Ended

Mar. 29, 2024

Share-Based Payment Arrangement [Abstract]

STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

We have authorized 10 million shares of $0.001 par value preferred stock and 300 million shares of $0.001 par value common stock as of March 29, 2024.

Stock Plans

As of March 29, 2024, we had 3.9 million shares available for issuance under our 2021 Omnibus Incentive Plan (the “2021 Plan”), which replaced our 2012 Omnibus Incentive Plan (as amended and restated) (the “2012 Plan”), and 1.2 million shares available for issuance under our 2021 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), which replaced our 2012 Employee Stock Purchase Plan. We have outstanding awards under the 2021 Plan and the 2012 Plan. Following the adoption of the 2021 Plan, no additional awards have been or will be made under the 2012 Plan. Under the 2021 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), unrestricted stock awards, stock units (including restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”)), performance awards, cash awards, and other share-based awards to employees, directors, consultants and advisors. The ISOs and NSOs must be granted at an exercise price, and the SARs must be granted at a base value, per share of not less than 100% of the closing price of a share of our common stock on the date of grant (or, if no closing price is reported on that date, the closing price on the immediately preceding date on which a closing price was reported) (110% in the case of certain ISOs). Options granted under the 2012 Plan primarily vested based on certain market-based and performance-based criteria and generally have a term of four years to seven years. Certain of the share-based awards granted and outstanding as of March 29, 2024 are subject to accelerated vesting upon a change in control of the Company.

Incentive Stock Units

Aside from the equity plans described above, we also grant incentive stock units (“ISUs”) to certain of our international employees which typically vest over three or four years and for which the fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting.

As of March 29, 2024 and September 29, 2023, the fair value of outstanding ISUs was $6.1 million and $5.0 million, respectively, and the associated accrued compensation liability was $3.0 million and $3.3 million, respectively. During the three and six months ended March 29, 2024, we recorded an expense for ISU awards of $0.9 million and $1.4 million, respectively.

During the three and six months ended March 31, 2023, we recorded an expense for ISU awards of $0.5 million and $1.8 million, respectively. These expenses are not included in the share-based compensation expense totals below.

Share-Based Compensation

The following table shows a summary of share-based compensation expense included in the condensed consolidated statements of operations (in thousands):


	Three Months Ended				Six Months Ended
	March 29, 2024		March 31, 2023		March 29, 2024		March 31, 2023
Cost of revenue	$	1,600	$	1,011	$	2,870	$	2,161
Research and development	4,962		3,742		7,727		7,974
Selling, general and administrative	5,528		4,707		10,150		10,372
Total share-based compensation expense	$	12,090	$	9,460	$	20,747	$	20,507

As of March 29, 2024, the total unrecognized compensation costs related to RSUs and PRSUs was $80.9 million, which we expect to recognize over a weighted-average period of 2.1 years. As of March 29, 2024, total unrecognized compensation cost related to our Employee Stock Purchase Plan was $0.3 million.

Restricted Stock Units and Performance-Based Restricted Stock Units

A summary of stock award activity for the six months ended March 29, 2024 is as follows:


	Number of shares (in thousands)	Weighted- Average Grant Date Fair Value
Balance as of September 29, 2023	1,501	$	60.90
Granted	715	78.62
Performance-based adjustment (1)	62	35.43
Vested and released	(502)	50.11
Forfeited, canceled or expired	(100)	65.07
Balance as of March 29, 2024	1,676	$	70.51

(1) The amount shown represents performance adjustments for performance-based awards. These were granted in prior fiscal years and vested during the six months ended March 29, 2024 based on the Company’s achievement of adjusted earnings per share performance conditions.

Stock awards that vested during the six months ended March 29, 2024 and March 31, 2023 had combined fair values of $37.2 million and $81.3 million, respectively, as of the vesting date. RSUs granted generally vest over a period of three or four years.

Market-based PRSUs

We granted 132,247 market-based PRSUs during the six months ended March 29, 2024, at a weighted average grant date fair value of $88.88 per share. Recipients may earn between 0% and 200% of the target number of shares based on the Company’s achievement of total stockholder return in comparison to a peer group of companies in the PHLX Semiconductor Sector Index (^SOX) over a period of approximately three years. The fair value of the awards was estimated using a Monte Carlo simulation and compensation expense is recognized ratably over the service period based on the grant date fair value of the awards subject to the market condition. The expected volatility of the Company’s common stock was estimated based on the historical average volatility rate over the three-year period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free rate assumption was based on observed interest rates consistent with the three-year measurement period. The assumptions used to value the awards are as follows:


	Six Months Ended
	March 29, 2024
Grant date stock price	$	73.01
Average stock price at the start of the performance period	$	79.43
Risk free interest rate	4.6%
Years to maturity	2.9
Expected volatility rate	41.7%
Expected dividend yield	—

Stock Options

As of March 29, 2024 and September 29, 2023 there were 10,000 and 15,000 stock options outstanding, respectively, with a weighted-average exercise price per share of $16.06. As of March 29, 2024, the weighted-average remaining contractual term was 1.61 years and the aggregate intrinsic value was $0.8 million. Aggregate intrinsic value is calculated using the difference between our closing stock price on March 29, 2024 and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised during the six months ended March 29, 2024 was $0.3 million. There were no options exercised during the three and six months ended March 31, 2023