Stock-Based Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

4. STOCK-BASED COMPENSATION

For the three months ended March 31, 2024 and 2023, stock-based compensation expense was $4.0 million and $2.6 million, respectively.

PSUs, RSUs and Restricted Stock - ADTRAN Holdings, Inc.

The following table summarizes the PSUs, RSUs and restricted stock outstanding as of December 31, 2023 and March 31, 2024 and the changes that occurred during the three months ended March 31, 2024:


	Number of Shares (in thousands)			Weighted Avg. Grant Date Fair Value (per share)
Unvested PSUs, RSUs and restricted stock outstanding, December 31, 2023		1,942		$	17.46
PSUs, RSUs and restricted stock granted		966		$	7.22
PSUs, RSUs and restricted stock vested		(102	)	$	18.47
PSUs, RSUs and restricted stock forfeited		(32	)	$	17.36
Unvested PSUs RSUs and restricted stock outstanding, March 31, 2024		2,774		$	13.79

The fair value of PSUs with performance conditions, RSUs and restricted stock is equal to the closing price of the Company's stock on the date of grant. The fair value of PSUs with market conditions is calculated using a Monte Carlo simulation valuation method.

As of March 31, 2024, total unrecognized compensation expense related to non-vested portion of performance-based PSUs (considered probable), market-based PSUs, RSUs and restricted stock was approximately $19.4 million, which will be recognized over the remaining weighted-average period of 1.8 years. As of March 31, 2024, there was $10.2 million of unrecognized compensation expense related to unvested performance-based PSUs (not-considered probable), which will be recognized over the remaining requisite service period of 1.8 years if achievement of the performance obligation becomes probable. Unrecognized compensation expense will be adjusted for actual forfeitures.

As of March 31, 2024, 0.5 million shares were available for issuance under stockholder-approved equity plans.

Stock Options - ADTRAN Holdings, Inc.

The following table summarizes the ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2023 and March 31, 2024 and the changes that occurred during the three months ended March 31, 2024:


	Number of Stock Options (in thousands)			Weighted Avg. Exercise Price (per share)		Weighted Avg. Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Stock options outstanding, December 31, 2023		3,894		$	10.32		5.25	$	3,087
Stock options exercised		(36	)	$	6.06
Stock options forfeited		(58	)	$	6.68
Stock options expired		(178	)	$	7.89
Stock options outstanding, March 31, 2024		3,622		$	10.54		5.18	$	268
Stock options exercisable, March 31, 2024		1,264		$	13.30		1.43	$	—

As of March 31, 2024, there was $6.6 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 1.6 years.

The determination of the fair value of stock options assumed or granted by ADTRAN Holdings was estimated using the Monte Carlo method and is affected by its stock price, as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate. The stock option pricing model requires the use of several assumptions that impact the fair value estimate. These variables include, but are not limited to, the volatility of the Company's stock price and employee exercise behaviors.

All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2024. The amount of aggregate intrinsic value was $0.3 million as of March 31, 2024, which will change based on the fair market value of the Company's stock. The total pre-tax intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was $34 thousand and $43 thousand, respectively. No stock options vested during the three months ended March 31, 2024 and 2023.