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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2025
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock-based compensation expense, which includes expense for both equity and liability-classified awards, reported in the condensed consolidated statements of operations, was as follows:
| Three Months Ended |  | Nine Months Ended
(in thousands) | September 30, 2025 |  | September 30, 2024 |  | September 30, 2025 |  | September 30, 2024
Cost of screening revenue (exclusive of amortization of intangible assets) | $ | 271 |  |  | $ | 400 |  |  | $ | 1,433 |  |  | $ | 1,321 |
Cost of development services revenue | — |  |  | 178 |  |  | 17 |  |  | 201 |
Research and development | 4,330 |  |  | 6,838 |  |  | 12,089 |  |  | 27,906 |
Sales and marketing | 2,499 |  |  | 2,434 |  |  | 8,300 |  |  | 12,786 |
General and administrative | 7,039 |  |  | 7,599 |  |  | 22,679 |  |  | 30,288 |
Stock-based compensation expense, before taxes | 14,139 |  |  | 17,449 |  |  | 44,518 |  |  | 72,502 |
Related income tax benefits | (637) |  |  | (4,230) |  |  | (5,931) |  |  | (17,598) |
Stock-based compensation expense, net of taxes | $ | 13,502 |  |  | $ | 13,219 |  |  | $ | 38,587 |  |  | $ | 54,904 |
2024 Incentive Award Plan The GRAIL, Inc. 2024 Incentive Award Plan (the “2024 Plan”) was adopted by GRAIL and approved by Illumina, in its capacity as GRAIL’s sole stockholder, in May 2024. The 2024 Plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance-based awards, and other stock or cash based awards. The maximum number of shares authorized for issuance under the 2024 Plan increased by 1,694,670 shares to 10,351,487 shares on January 1, 2025 pursuant to the annual automatic evergreen increase provision of the 2024 Plan. As of September 30, 2025, approximately 481,705 shares remained available for future grants under the 2024 Plan. 2024 Inducement Award Plan The GRAIL, Inc. 2024 Inducement Award Plan (the “2024 Inducement Plan”) was adopted by GRAIL’s board of directors on August 9, 2024. The 2024 Inducement Plan is used exclusively for the grant of equity awards to prospective employees who (i) were not previously employees of GRAIL, or (ii) are returning to GRAIL following a bona fide period of non-employment, in any case, in connection with and as an inducement material to such prospective employee’s entering into employment with GRAIL pursuant to Nasdaq Listing Rule 5635(c)(4). This plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance-based awards, and other stock or cash based awards. On May 14, 2025, GRAIL registered an additional 500,000 shares of common stock that may be offered under the 2024 Inducement Plan. The 2024 Inducement Plan does not have a specified limit on the number of shares authorized for issuance. A summary of the Company’s restricted stock unit activity, issued under the 2024 Plan and 2024 Inducement Plan, is as follows:
| Restricted Stock Units |  | Weighted-Average Grant-Date Fair Value Per Share
(Units in thousands) |  |  |
Outstanding at January 1, 2025 | 5,523 |  | $14.22
Awarded | 2,370 |  | $38.60
Released | (2,268) |  | $15.36
Forfeited | (518) |  | $21.85
Outstanding at September 30, 2025 | 5,107 |  | $24.56
Cash-Based Equity Awards and 2024 Transition Incentive Awards In connection with the Spin-Off in June 2024, outstanding cash-based equity incentive awards (the “Cash-Based Equity Awards”) and certain Cash-Based Equity Awards granted to GRAIL employees, including executives, for retention purposes in the second quarter of 2024 (the “2024 Transition Incentive Awards”), were converted into Company restricted stock units in accordance with the Employee Matters Agreement by dividing the aggregate award value by the volume-weighted average share price over the first four trading days following the Spin-Off. As a result of the modification, the Cash-Based Equity Awards and 2024 Transition Awards, which were liability-classified awards prior to the Spin-Off, were reclassified as equity-classified awards. The Cash-Based Equity Awards and the 2024 Transition Incentive Awards in the amount of $50.3 million and $4.4 million, respectively, were reclassified to Additional Paid-In Capital and converted into 4.0 million and 2.5 million RSUs, respectively. See Note 7 - Stock-based compensation in the 2024 Form 10-K for the year ended December 31, 2024 for further details. 2024 Employee Stock Purchase Plan The ESPP was adopted by GRAIL and approved by Illumina’s Board of Directors, in its capacity as GRAIL’s sole stockholder, in May 2024. The maximum number of shares authorized for issuance under the ESPP increased by 338,934 shares to 752,955 shares on January 1, 2025 pursuant to the annual automatic evergreen increase provision of the ESPP. As of September 30, 2025, 752,955 shares were available for issuance under the ESPP. Under the ESPP as currently implemented, eligible employees are offered shares through a six-month offering period commencing in May and November of each year. Employees who participate in the ESPP may elect to have up to 15% of their eligible compensation withheld to purchase shares of the Company’s common stock. The purchase price of the Company’s common stock will be equal to 85% of the lower of the fair market value of the Company’s common stock at the beginning of each offering period or the fair market value of the Company’s common stock at the end of the six-month offering period. The Company’s first offering period began in May 2025 with the first purchase date expected to take place in November 2025. No shares were offered under the ESPP during the three and nine month periods ended September 30, 2024. No shares were issued under the ESPP during the three and nine month periods ended September 30, 2025 or the three and nine month periods ended September 30, 2024. The fair value of employee stock purchase rights under the ESPP have been estimated with the following assumptions using the Black-Scholes-Merton option-pricing model:
| Three and Nine Months Ended |
| September 30, 2025 |
Weighted-average assumptions: |  |
Expected life (in years) | 0.5 |
Risk-free interest rate | 4.2% |
Expected volatility | 108.7% |
Expected dividend | 0% |
Weighted-average estimated grant date fair value per share | $17.68 |
The expected term represents the term from the first day of the offering period to the purchase date. The risk-free interest rate assumption was based upon observed interest rates of Treasury bills appropriate for the expected term. The expected stock price volatility assumption was estimated using the average of the Company’s historical volatility and average volatility of the Company’s peer companies. The average of the Company’s peer companies and its own volatility is more representative of future stock price trends than the Company’s historical volatility due to its limited history as a public company. Expected dividend yield was 0% as the Company has not paid and does not anticipate paying dividends on its common stock. As of September 30, 2025, unrecognized compensation costs related to the ESPP was $0.6 million and is expected to be recognized over a weighted average period of 0.1 years. Performance-Based Awards During the nine months ended September 30, 2025, the Company granted performance-based restricted stock unit (“PSU”) awards under the 2024 Plan with vesting conditions tied to achievement of Company-specific performance and continued service. One-third of the PSUs subject to the awards vest upon the achievement of a Company-specific performance condition and the remaining two-thirds of the PSUs subject to the awards vest in substantially equal installments upon each of the first and second anniversaries of the initial vesting date, in each case, subject to the holder’s continued service with the Company through the applicable vesting date. The PSU awards had an aggregate grant date fair value of $1.0 million and expire, to the extent unvested, in May 2035. As of September 30, 2025, it was not probable that the performance conditions associated with the PSU awards will be achieved and, therefore, no stock-based compensation expense has been recognized in the unaudited condensed consolidated financial statements. The Company also has one performance-based award outstanding for a former employee for which vesting is based on future revenues. The award has an aggregate potential value of up to $78.0 million and expires, to the extent unvested, on August 27, 2030. One-fourth of the total potential value of the award vests immediately upon the achievement of cumulative net revenues in any period of four consecutive fiscal quarters of $500.0 million, $750.0 million, $1.5 billion, and $2.0 billion. The Company assesses the probability of achieving the performance conditions associated with the award on a quarterly basis at each reporting period. If and to the extent that the liability becomes due and payable prior to 12:01 a.m. Eastern Time December 24, 2026 (the “Disposal Funding Period”) and paid by GRAIL, in cash, during the Disposal Funding Period, Illumina shall reimburse GRAIL all or such portion of the liability paid by GRAIL in accordance of the terms of the Separation and Distribution Agreement. As of September 30, 2025, it was not probable that the performance conditions associated with the award will be achieved and, therefore, no stock-based compensation expense, or corresponding loss recovery asset or liability, has been recognized in the unaudited condensed consolidated financial statements.

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