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Stockholders' Equity And Stock-Based Compensation | 6 Months Ended
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Jun. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stockholders' Equity And Stock-Based Compensation | NOTE 11 – STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Equity Incentive Plans In connection with the Separation and on October 1, 2022, the Company adopted the Xperi Inc. 2022 Equity Incentive Plan (the “2022 EIP”). Under the 2022 EIP, the Company may grant equity-based awards to employees, non-employee directors, and consultants for services rendered to the Company (or any parent or subsidiary) in the form of stock options, stock awards, restricted stock awards (“RSA”), restricted stock units (“RSU”), stock appreciation rights, dividend equivalents and performance awards, or any combination thereof. A total of 12.2 million shares were reserved for issuance under the 2022 EIP as of June 30, 2023. The 2022 EIP provides for option grants designated as either incentive stock options or non-statutory options. Options have been granted with an exercise price not less than the value of the common stock on the grant date and generally have a term of ten years from the date of grant and vest over a four-year period. The vesting criteria for RSUs has historically been the passage of time or meeting certain performance-based objectives, and continued service through the vesting period over three or four years for time-based awards or three years for performance-based awards. As of June 30, 2023, there were approximatel y 4.2 millio n shares reserved for future grants under the 2022 EIP. Employee Stock Purchase Plans In connection with the Separation and on October 1, 2022, the Company adopted the Xperi Inc. 2022 Employee Stock Purchase Plan (the “2022 ESPP”). The 2022 ESPP is implemented through consecutive overlapping 24-month offering periods, each of which is comprised of four purchase periods that are generally six months in length. The first offering period commenced on December 1, 2022 and will end on November 30, 2024. Each subsequent offering period under the 2022 ESPP will be 24 months long and will commence on each December 1 and June 1 during the term of the plan. Participants may contribute up to 100% of their after tax base earnings and commissions through payroll deductions up to the limit imposed by the Internal Revenue Service (”IRS”), and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share will equal 85% of the fair market value per share on the start date of the offering period or, if lower, 85% of the fair market value per share on the semi-annual purchase date. An eligible employee’s right to buy the Company’s common stock under the 2022 ESPP may not accrue at a rate in excess of the $25,000 limit imposed by the IRS on the fair market value of such shares per calendar year. If the fair market value per share of the Company’s common stock on any purchase date during an offering period is less than the fair market value per share on the start date of the 24-month offering period, then that offering period will automatically terminate and a new 24-month offering period will begin on the next business day. All participants in the terminated offering will be transferred to the new offering period. On May 31, 2023, the Company issued 644,342 shares under the 2022 ESPP, net of shares withheld to satisfy withholding tax requirements for certain employees, for an aggregate net proceeds of $5.9 million. The following table summarizes the valuation assumptions used in estimating the fair value of the 2022 ESPP for the offering period in effect using Black-Scholes option pricing model:
|  | Six Months Ended June 30,
|  | 2023
Expected life (years) |  | 0.5 — 2.0
Risk-free interest rate |  | 4.33% — 5.44%
Dividend yield |  | —%
Expected volatility |  | 44.11% — 51.19%
Stock Options Stock option activity for the six months ended June 30, 2023 is as follows (in thousands, except per share amounts):
|  | Options Outstanding |
|  | Number of Shares Subject to Options |  |  | Weighted Average Exercise Price Per Share |
Balance at December 31, 2022 |  |  | 146 |  |  | $ | 25.48 |
Options exercised |  |  | — |  |  | $ | — |
Options canceled / forfeited / expired |  |  | (26 | ) |  | $ | 21.43 |
Balance at June 30, 2023 |  |  | 120 |  |  | $ | 26.35 |
There were no stock options granted during the six months ended June 30, 2023 and 2022. Restricted Stock Awards and Units Information with respect to outstanding restricted stock awards and units (including both time-based vesting and performance-based vesting) as of June 30, 2023 is as follows (in thousands, except per share amounts):
|  | Restricted Stock and Restricted Stock Units |
|  | Number of Shares Subject to Time- based Vesting |  |  | Number of Shares Subject to Performance- based Vesting |  |  | Total Number of Shares |  |  | Weighted Average Grant Date Fair Value Per Share |
Balance at December 31, 2022 |  |  | 3,713 |  |  |  | 891 |  |  |  | 4,604 |  |  | $ | 20.35 |
Awards and units granted |  |  | 2,960 |  |  |  | 718 |  |  |  | 3,678 |  |  | $ | 11.47 |
Awards and units vested / earned |  |  | (790 | ) |  |  | — |  |  |  | (790 | ) |  | $ | 20.33 |
Awards and units canceled / forfeited |  |  | (147 | ) |  |  | — |  |  |  | (147 | ) |  | $ | 16.59 |
Balance at June 30, 2023 |  |  | 5,736 |  |  |  | 1,609 |  |  |  | 7,345 |  |  | $ | 15.98 |
Performance-Based Awards From time to time, the Company may grant performance-based restricted stock units (“PSU”) to senior executives, certain employees and consultants. The value and the vesting of such PSUs are generally linked to one or more performance goals or certain market conditions determined by th e Company, in each case on a specified date or dates or over any period or periods determined by the Company, and may range from zero to 200% of the grant. For PSUs subject to a market condition, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition. During the second quarter of 2023, in accordance with the Employee Matters Agreement executed by the Company and the Former Parent in connection with the Separation, the Company modified certain vesting conditions related to market-based PSUs granted in 2022, resulting in a total incremental compensation expense of $2.9 million, which will be recognized over the remaining requisite service period through 2025. For the three months ended June 30, 2023, the incremental compensation expense of this modification was $0.3 million. The following assumptions were used to value the market-based PSUs granted during the period:
|  | Six Months Ended June 30, |
|  | 2023 |
Expected life (years) |  |  | 2.8 |
Risk-free interest rate |  |  | 4.54 | %
Dividend yield |  |  | — | %
Expected volatility |  |  | 49.02 | %
Stock-Based Compensation Prior to the Separation, the stock-based compensation expense was only based on the expense for employees specifically identifiable to Xperi. Consequently, the amounts presented are not necessarily indicative of future awards and do not necessarily reflect the costs that the Company would have incurred as an independent company. The effect of recording stock-based compensation expense for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Cost of revenue, excluding depreciation and amortization of intangible assets |  | $ | 927 |  |  | $ | 773 |  |  | $ | 1,719 |  |  | $ | 1,398 |
Research and development |  |  | 6,405 |  |  |  | 5,681 |  |  |  | 11,956 |  |  |  | 10,780 |
Selling, general and administrative |  |  | 10,759 |  |  |  | 4,085 |  |  |  | 20,384 |  |  |  | 6,998 |
Total stock-based compensation expense |  | $ | 18,091 |  |  | $ | 10,539 |  |  | $ | 34,059 |  |  | $ | 19,176 |
Stock-based compensation expense categorized by award type for the three and six months ended June 30, 2023 and 2022 is summarized in the table below (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Restricted stock awards and units |  | $ | 16,706 |  |  | $ | 9,548 |  |  | $ | 31,686 |  |  | $ | 17,371 |
Employee stock purchase plan |  |  | 1,385 |  |  |  | 991 |  |  |  | 2,373 |  |  |  | 1,805 |
Total stock-based compensation expense |  | $ | 18,091 |  |  | $ | 10,539 |  |  | $ | 34,059 |  |  | $ | 19,176 |
In connection with the conversion of the Former Parent’s PSUs into PSUs with respect to Xperi common stock and Adeia common stock, the Company continued recognizing an incremental compensation expense of $1.4 million and $2.7 million for the three and six months ended June 30, 2023, respectively. In addition, for the three and six months ended June 30, 2022, the Company recognized $2.0 million and $4.5 million of stock-based compensation expense in operating results, respectively, as part of the corporate and shared functional employees expenses allocation.

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