Share-Based Compensation

12 Months Ended

Jan. 28, 2024

Share-Based Payment Arrangement, Noncash Expense [Abstract]

Share-Based Compensation

Financial Statement Effects and Presentation

Pre-tax share-based compensation, excluding the acceleration of Sierra Wireless equity awards, was included in the Statements of Operations for fiscal years 2024, 2023 and 2022 as follows:


	Fiscal Year Ended
(in thousands)	January 28, 2024		January 29, 2023		January 30, 2022
Cost of sales	$	1,995	$	2,645	$	2,901
Selling, general and administrative	25,331		21,493		32,578
Product development and engineering	12,844		15,110		15,710
Share-based compensation	$	40,170	$	39,248	$	51,189

Restricted Stock Units, Employees

The Company grants restricted stock units to certain employees of which a portion are expected to be settled with shares of the Company's common stock and a portion are expected to be settled in cash. The restricted stock units that are to be settled with shares are accounted for as equity. The grant date for these awards is equal to the measurement date and they are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically 3 or 4 years). The restricted stock units that are to be settled in cash are accounted for as liabilities and the value of the awards is re-measured at the end of each reporting period until settlement at the end of the requisite vesting period (typically 3 years).

In fiscal year 2024, the Company granted to certain employees 2,173,582 restricted stock units that settle in shares, including 123,652 restricted stock units granted to the current Chief Executive Officer ("CEO") that vest quarterly over a 3-year period and 232,635 restricted stock units granted to the former CEO ("Former CEO") prior to his retirement that vest quarterly over an 18-month period. In fiscal year 2024, the Company granted to certain employees 9,432 restricted stock units that settle in cash.

The following table summarizes the activity for restricted stock units awarded to employees for fiscal year 2024:


(in thousands, except per share data)	Total Units	Units Subject to Share Settlement	Units Subject to Cash Settlement	Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 29, 2023	1,639	1,639	—	$	52.91
Granted	2,183	2,174	9	21.41
Vested	(763)	(763)	—	49.67
Forfeited	(460)	(459)	(1)	40.32
Nonvested at January 28, 2024	2,599	2,591	8	$	29.64

The aggregate unrecognized compensation for the non-vested restricted stock units that settle in shares as of January 28, 2024 was $58.1 million, which will be recognized over a weighted-average period of 2.2 years. The aggregate unrecognized compensation for the non-vested restricted stock units that settle in cash as of January 28, 2024 was $0.1 million, which will be recognized over a weighted-average period of 2.1 years.

Restricted Stock Units, Non-Employee Directors

The Company maintains a compensation program pursuant to which restricted stock units are granted to the Company’s directors that are not employed by the Company or any of its subsidiaries. Under the Company's director compensation program, a portion of the stock units granted under the program would be settled in cash and a portion would be settled in shares of the Company's common stock. Restricted stock units awarded under the program are scheduled to vest on the earlier of (i) one year after the grant date or (ii) the day immediately preceding the first annual meeting of the Company's stockholders following the grant. The portion of a restricted stock unit award under the program that is to be settled in cash will, subject to vesting, be settled when the director who received the award separates from service. The portion of a restricted stock unit award under the program that is to be settled in shares of stock will, subject to vesting, be settled promptly following vesting.

The restricted stock units that are to be settled in cash are accounted for as liabilities. These awards are not typically settled until a non-employee director’s separation from service. The value of both the unvested and vested but unsettled awards are re-measured at the end of each reporting period until settlement. As of January 28, 2024, the total number of vested, but unsettled awards was 230,231 units and the liability associated with these awards was $4.4 million, of which $1.8 million was included in "Accrued liabilities" in the Balance Sheets related to two previous non-employee directors currently serving short-term non-employee consultancies for the Company. The remaining $2.6 million was included in "Other long-term liabilities" in the Balance Sheets.

The restricted stock units that are to be settled in shares are accounted for as equity. The grant date for these awards is equal to the measurement date. These awards are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically one year).

The following table summarizes the activity for restricted stock units awarded to non-employee directors for fiscal year 2024:


(in thousands, except per share data)	Total Units	Units Subject to Share Settlement	Units Subject to Cash Settlement	Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 29, 2023	32	16	16	$	51.97
Granted	80	40	40	24.21
Vested	(36)	(18)	(18)	22.09

Nonvested at January 28, 2024	76	38	38	$	24.76

Total Stockholder Return ("TSR") Market-Condition Restricted Stock Units

The Company grants TSR market-condition restricted stock units (the "TSR Awards") to certain executives of the Company, which are settled in shares and accounted for as equity awards. The TSR Awards have a pre-defined market condition, which determines the number of shares that ultimately vest, as well as a service condition. The market condition is determined based upon the Company’s TSR benchmarked against the TSR of an index over one, two and three-year periods-year performance periods (one-third of the awards vesting each performance period). For fiscal year 2024 grants, the benchmark was against the Russell 3000 Index. For prior year grants, the benchmark was against the S&P SPDR Semiconductor ETF (NYSE: XSD). Generally, the TSR Awards recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards. The TSR Awards are valued as of the grant date using a Monte Carlo simulation which takes into consideration the possible outcomes pertaining to the TSR market condition and expense is recognized on a straight-line basis over the requisite service periods and is adjusted for any actual forfeitures.

In fiscal years 2024, 2023 and 2022, the Company granted, 202,951, 125,399 and 81,688, respectively, of TSR Awards. The 202,951 TSR Awards granted in fiscal year 2024 included 109,107 TSR Awards granted in the first quarter of fiscal year 2024, which have grant-date fair values per unit for each one, two and three-year performance periods of $39.47, $45.36 and $49.79, respectively, 61,827 TSR Awards granted in the second quarter of fiscal year 2024, which have grant-date fair values per unit for each one, two and three-year performance periods of $23.65, $32.78 and $38.65, respectively, and 32,017 TSR Awards granted in the third quarter of fiscal year 2024, which have grant-date fair values per unit for each one, two and three-year performance periods of $24.05, $32.09 and $37.51, respectively. Under the terms of the TSR Awards granted in fiscal year 2024, assuming the highest performance level of 200% with no cancellations due to forfeitures, the maximum potential number of shares that can be earned in aggregate for the cumulative fiscal years 2024, 2025 and 2026 performance periods would be 405,902 shares.

The following table summarizes the activity for the TSR Awards for fiscal year 2024:


(in thousands, except per share data)	Total Units	Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 29, 2023	88	$	75.18
Granted	203	38.70
Vested	—	—
Cancelled/Forfeited (1)	(186)	52.10
Nonvested at January 28, 2024	105	$	45.66

(1) Primarily represents cancellations due to awards not meeting the performance target, as well as forfeitures due to the terminations of certain officers.

Amounts in the table above include the stated number of awards granted and outstanding. However, the number of awards that ultimately vest may be higher or lower than the originally granted amounts depending upon the actual TSR achievement level over the performance period. For example, of the 71,696 awards scheduled to vest on January 28, 2024, none actually vested due to lower than target TSR achievement levels.

The aggregate unrecognized compensation expense for TSR Awards as of January 28, 2024 was $3.2 million, which will be recognized over a weighted-average period of 1.4 years.

Financial Metric-Based Restricted Stock Units

The Company grants financial metric-based restricted stock units (the "Metric-based Awards") to certain executives of the Company, which are settled in shares and accounted for as equity awards. The Metric-based Awards have a performance

condition in addition to a service condition. The number of vested shares for each performance period is determined based on the Company’s attainment of pre-established revenue and non-GAAP operating income targets for the respective performance period. The vesting for tranches after the initial performance period is dependent on revenue and non-GAAP operating income for the preceding performance period. The Metric-based Awards are valued as of the measurement date and compensation cost is recognized using the accelerated attribution method over the requisite service period based on the number of shares that are probable of attainment for each fiscal year.

In fiscal year 2024, the Company granted 189,918 Metric-based Awards that vest over one, two and three-year performance periods (one-third of the awards vesting each performance period). There were no Metric-based Awards granted in fiscal years 2023 or 2022. Generally, the Metric-based Awards recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards. Under the terms of these awards, assuming the highest performance level of 200% with no cancellations due to forfeitures, the maximum potential number of shares that can be earned in aggregate for the cumulative fiscal years 2024, 2025 and 2026 performance periods would be 379,836 shares.

The following table summarizes the activity for the Metric-based Awards for fiscal year 2024:


(in thousands, except per share data)	Total Units	Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 29, 2023	—	$	—
Granted	190	26.12
Vested	—	—
Cancelled/Forfeited (1)	(74)	30.21
Nonvested at January 28, 2024	116	$	23.53

(1) Primarily represents cancellations due to awards not meeting the performance targets, as well as forfeitures due to the terminations of certain officers.

Amounts in the table above include the stated number of Metric-based Awards granted and outstanding. However, the number of Metric-based Awards that ultimately vest may be higher or lower than the originally granted amounts depending upon the actual achievement level over the performance period.

The aggregate unrecognized compensation expense for Metric-based Awards as of January 28, 2024 was $1.5 million, which will be recognized over a weighted-average period of 1.3 years.

Market-Condition Restricted Stock Units, Employees

In fiscal year 2022, the Company granted 54,928 restricted stock units to certain executives of the Company, which had a pre-defined market condition that determined the number of shares that would ultimately vest. These market-condition restricted stock unit awards ("Market-Condition Awards") were eligible to vest during the period that commenced on March 9, 2021 and ended on March 5, 2024 (the "Performance Period") as follows: the restricted stock units covered by the Market-Condition Awards would vest if, during any consecutive 30 trading day period that commenced and ended during the Performance Period, the average per-share closing price of the Company’s common stock equaled or exceeded $95.00. The Market-Condition Awards would also vest at a pro-rata percentage of the unvested portion of the total restricted units if a majority change in control of the Company occurred during the Performance Period and, in connection with such event, the Company’s stockholders became entitled to receive per-share consideration having a value equal to or greater than $71.00 but less than $95.00. If the change in control per-share consideration was equal to or greater than $95.00, the awards would fully vest. The Market-Condition Awards were valued as of the grant date using a Monte Carlo simulation model and expense was recognized on a straight-line basis over the requisite service period, adjusted for any actual forfeitures. The grant-date fair value per unit of the awards granted in fiscal year 2022 was $49.55. In fiscal years 2024 and 2023, 18,309 and 14,084, respectively, of the Market-Condition Awards were forfeited due to the terminations of certain officers. As of January 28, 2024, 22,535 of the Market-Condition Awards were outstanding and the aggregate compensation expense for the Market-Condition Awards had been fully recognized. Subsequent to January 28, 2024, in the first quarter of fiscal year 2025, the Performance Period ended and the remaining Market-Condition Awards were cancelled due to lower than target achievement levels.

Market-Condition Restricted Stock Units, Former CEO

In fiscal year 2020, the Company granted the Former CEO 320,000 restricted stock units subject to a market condition. The award was eligible to vest during the period commencing March 5, 2019, and ending March 5, 2024 (the "Performance Period") as follows: 30% of the restricted stock units covered by the award would vest if, during any consecutive 30 day trading period that commenced and ended during the Performance Period, the average per-share closing price of the Company’s common stock equaled or exceeded $71.00 ("Tranche 1") and the award would vest in full if, during any consecutive 30 day trading period that commenced and ended during the Performance Period, the average per-share closing price of the Company’s common stock equaled or exceeded $95.00 ("Tranche 2"). The fair values of Tranche 1 and Tranche 2 at the grant date were

determined to be $44.32 and $33.19, respectively, by application of the Monte Carlo simulation model. Expense was recognized on a straight-line basis over the requisite service periods and was adjusted for actual forfeiture.

On January 8, 2021, the Company's 30 day average-per-share closing price met the threshold for Tranche 1 resulting in the vesting of 30%, or 96,000 restricted stock units, of the original award. On June 29, 2023, the remaining 224,000 restricted stock units under the award were forfeited due to the Former CEO's retirement. No restricted stock units were outstanding for the award as of January 28, 2024.

Non-Qualified Stock Options

From time to time, the Company grants non-qualified stock options to employees and/or non-employee directors. The fair values of these grants are measured on the grant date and recognized as expense over the requisite vesting period (typically 3-4 years). The Company uses the Black-Scholes pricing model to value stock options. The maximum contractual term of stock options is generally 6 to 10 years. In fiscal year 2023, the Company granted 541,530 stock options to employees with a 3-year vesting period and a 4-year expected term. There were no stock options granted in fiscal years 2024 or 2022.

The following table summarizes the activity for stock options for fiscal year 2024:


(in thousands, except per share data)	Number of Shares	Weighted- Average Exercise Price (per share)		Aggregate Intrinsic Value (1)		Number of Shares Exercisable	Weighted-Average Contractual Term (years)
Vested and expected to vest at January 29, 2023	608	$	30.96	$	2,151	68	5.4

Exercised	—	—		—
Forfeited	(107)	31.14
Vested and expected to vest at January 28, 2024	501	$	30.92	$	8	201	4.5
Vested and exercisable at January 28, 2024	201	$	33.35	$	8		4.0

(1) The aggregate intrinsic value of stock options vested and exercisable and vested and expected to vest as of January 28, 2024 is calculated based on the difference between the exercise price and the $20.59 closing price of the Company's common stock as of January 28, 2024.

The aggregate unrecognized compensation expense for the outstanding stock options as of January 28, 2024 was $3.4 million, which will be recognized over a weighted-average period of 1.8 years.

The following table summarizes information regarding nonvested stock option awards at January 28, 2024:


(in thousands, except per share data)	Number of Shares	Weighted-Average Exercise Price (per share)		Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 29, 2023	540	$	29.30	$	12.77

Vested	(155)	29.30		12.77
Forfeited	(85)	29.30		12.77
Nonvested at January 28, 2024	300	$	29.30	$	12.77