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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation In 2019, the Company’s 2011 Equity Incentive Plan (“2011 Plan”) was amended, restated and re-named the 2018 Equity Incentive Plan (“2018 Plan”), and the remaining shares available for issuance under the 2011 Plan were added to the shares reserved for issuance under the 2018 Plan. As of January 1, 2023, the maximum aggregate number of shares that may be issued under the 2018 Plan increased to 23,060,440 shares, which includes an increase of 2,144,521 shares effective January 1, 2023 under the terms of the 2018 Plan. The following table summarizes the shares available for grant under the 2018 Plan:
| Shares Available for Grant
Balance - December 31, 2022 | 7,848,832 |
Authorized | 2,144,521 |
Granted | (2,172,448) |
Shares withheld to cover taxes | 26,016 |
Forfeited | 665,294 |
Balance - September 30, 2023 | 8,512,215 |
As of September 30, 2023 and December 31, 2022, there were 4,383,626 and 3,999,933 shares, respectively, issuable under stock options outstanding, 1,399,909 and 993,313 shares, respectively, issuable under unvested RSUs outstanding, 8,862,470 and 8,145,769 shares, respectively, issued for stock option exercises, RSU settlement, and restricted stock grants, and 8,512,215 and 7,848,832 shares, respectively, available for grant under the 2018 Plan. Stock Options Following are the assumptions used in the Black-Scholes valuation model for options granted during the periods shown below:
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, 2023 |  | October 1, 2022 |  | September 30, 2023 |  | October 1, 2022
Risk-free interest rate |  | N/A |  | N/A |  | 4.1% |  | 1.9%
Average expected term (years) |  | N/A |  | N/A |  | 7.0 |  | 7.0
Expected volatility |  | N/A |  | N/A |  | 55.3% |  | 55.0%
Dividend yield |  | N/A |  | N/A |  | — |  | —
There were no option grants in the three months ended September 30, 2023. Option grants in the nine months ended September 30, 2023 and in the three and nine months ended October 1, 2022 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter ratably vesting monthly over the remaining three-year period, subject to continued employment through the vesting date. The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2023:
| Number of Stock Options |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value (in thousands)(1)
Outstanding at December 31, 2022 | 3,999,933 |  |  | $ | 25.58 |  |  | 5.3 |  | $ | 20,712 |
Granted | 1,014,718 |  |  | $ | 17.84 |  |  | — |  | $ | — |
Exercised | (215,943) |  |  | $ | 0.79 |  |  | — |  | $ | 3,646 |
Canceled/Forfeited | (415,082) |  |  | $ | 36.76 |  |  | — |  | $ | — |
Outstanding at September 30, 2023 | 4,383,626 |  |  | $ | 23.95 |  |  | 5.6 |  | $ | 13,670 |
Vested and exercisable at September 30, 2023 | 3,056,564 |  |  | $ | 22.82 |  |  | 4.0 |  | $ | 13,670 |
Vested and expected to vest at September 30, 2023 | 4,214,949 |  |  | $ | 23.69 |  |  | 5.4 |  | $ | 13,670 |
__________ (1) Aggregate intrinsic value is calculated as the difference between the value of common stock on the transaction date and the exercise price multiplied by the number of shares issuable under the stock option. Aggregate intrinsic value of shares outstanding at the beginning and end of the reporting period is calculated as the difference between the value of common stock on the beginning and end dates, respectively, and the exercise price multiplied by the number of shares outstanding. In the three months ended September 30, 2023 and October 1, 2022, the Company recorded $2.1 million and $4.1 million, respectively, of share-based compensation expense related to options. In the nine months ended September 30, 2023 and October 1, 2022, the Company recorded $9.0 million and $12.5 million, respectively, of share-based compensation expense related to options. The share-based compensation expense is included in cost of goods sold, research and development expenses and SG&A expenses in the Company’s condensed consolidated statements of operations. As of September 30, 2023, there was $16.1 million in unrecognized compensation expense related to nonvested stock option awards which is expected to be recognized over a weighted average period of 1.4 years. Restricted Stock Units RSU grants to employees in the nine months ended September 30, 2023 and October 1, 2022 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining three years of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the nine months ended September 30, 2023 and October 1, 2022 vest 50% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining four quarters of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the nine months ended September 30, 2023 vest quarterly over four quarters, subject to continued employment through the vesting date. Annual RSU grants to directors on the Company’s Board of Directors (the “Board”) in the nine months ended September 30, 2023 and October 1, 2022 vest monthly over a one-year period subject to continued service through the vesting date. RSU grants to a new director on the Board in the nine months ended September 30, 2023 and October 1, 2022 vest monthly over a three-year period subject to continued service through the vesting date. RSU grants to nonemployee brand ambassadors and consultants in the nine months ended September 30, 2023 and October 1, 2022 vest on varying dates, subject to continued service through the vesting date. The following table summarizes the Company’s RSU activity during the nine months ended September 30, 2023:
|  | Number of Units |  | Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2022 |  | 993,313 |  |  | $ | 35.98 |
Granted |  | 1,157,730 |  |  | $ | 16.52 |
Vested(1) |  | (500,922) |  |  | $ | 30.74 |
Canceled/Forfeited |  | (250,212) |  |  | $ | 28.99 |
Unvested at September 30, 2023 |  | 1,399,909 |  |  | $ | 23.01 |
________ (1) Includes 26,016 shares of common stock that were withheld to cover taxes on the release of vested RSUs and became available for future grants pursuant to the 2018 Plan. During the three months ended September 30, 2023 and October 1, 2022, the Company recorded $4.4 million and $5.2 million, respectively, of share-based compensation expense related to RSUs. During the nine months ended September 30, 2023 and October 1, 2022, the Company recorded $14.8 million and $16.4 million, respectively, of share-based compensation expense related to RSUs. The share-based compensation expense is included in cost of goods sold, research and development expenses and SG&A expenses in the Company’s condensed consolidated statements of operations. As of September 30, 2023, there was $19.3 million in unrecognized compensation expense related to unvested RSUs which is expected to be recognized over a weighted average period of 1.3 years. Employee Stock Purchase Plan As of September 30, 2023, the maximum aggregate number of shares that may be issued under the 2018 Employee Stock Purchase Plan (“ESPP”) was 2,948,715 shares of common stock, including an increase of 536,130 shares effective January 1, 2023 under the terms of the ESPP. The ESPP is expected to be implemented through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s common stock on specified dates during such offerings. The administrator has not yet approved an offering under the ESPP.

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