Adeia Inc. Stock Compensation Disclosure
NOTE 13 – STOCK-BASED COMPENSATION EXPENSE
The effect of recording stock-based compensation expense for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands):
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Research and development |
|
$ |
5,688 |
|
|
$ |
4,207 |
|
|
$ |
2,911 |
|
Selling, general and administrative |
|
|
28,986 |
|
|
|
22,434 |
|
|
|
15,146 |
|
Total stock-based compensation expense |
|
$ |
34,674 |
|
|
$ |
26,641 |
|
|
$ |
18,057 |
|
The total fair value of restricted stock awards vested during the years ended December 31, 2025, 2024 and 2023 was $40.2 million, $28.1 million and $30.3 million, respectively.
The total intrinsic value of options exercised was immaterial during the years ended December 31, 2025, 2024 and 2023. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares.
As of December 31, 2025, there was $51.5 million related to restricted stock awards, including performance-based awards, to be recognized over an estimated weighted average period of 1.8 years. There are no stock options outstanding and exercisable under the Company’s plans as of December 31, 2025.
The Company uses the Black-Scholes option pricing model to determine the estimated fair value of options and ESPP shares. The fair value of each option grant is determined on the date of grant and the expense is recorded on a straight-line basis over the offering period of two years. The assumptions used in the model include expected life, volatility, risk-free interest rate, and dividend yield. The Company’s determinations of these assumptions are outlined below.
Expected life – The expected life assumption is based on analysis of the Company’s historical employee exercise patterns. The expected life of options granted under the ESPP represents the offering period of two years. The expected life of performance stock awards subject to market conditions represents the vesting periods.
Volatility – Volatility was calculated using the historical volatility of the Company’s common stock for a term consistent with the expected life. When there is limited historical trading data after the Separation, volatility is calculated based on a peer group over the most recent period that represents the remaining term of the vesting period as of the valuation date.
Risk-free interest rate – The risk-free interest rate assumption is based on the U.S. Treasury rate for issues with remaining terms similar to the expected life of the options.
Dividend yield – Expected dividend yield is calculated based on cash dividends declared by the Board of Directors for the previous four quarters and dividing that result by the average closing price of the Company’s common stock for the quarter. Cash dividends are not paid on options, restricted stock awards or unvested restricted stock awards.
In addition, the Company estimates forfeiture rates. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Historical data is used to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest.
There were no stock options granted during the years ended December 31, 2025, 2024 and 2023.
The following assumptions were used to value the ESPP shares:
|
|
Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Expected life (years) |
|
|
2.0 |
|
|
|
2.0 |
|
|
|
2.0 |
|
Risk-free interest rate |
|
3.5% − 3.9% |
|
|
4.2% − 4.8% |
|
|
4.3% − 4.6% |
|
|||
Dividend yield |
|
1.4% |
|
|
1.7% |
|
|
2.0% |
|
|||
Expected volatility |
|
46.0% − 46.2% |
|
|
43.3% − 57.0% |
|
|
61.3% − 63.5% |
|
|||
For the years ended December 31, 2025, 2024 and 2023, an aggregate of 0.3 million, 0.2 million and 0.2 million common shares, respectively, were purchased pursuant to the ESPP.
The Company uses a Monte Carlo simulation to determine the grant date fair value of performance stock awards subject to market conditions, or market-based PSUs. The following assumptions were used to value the performance stock awards subject to market conditions granted in the years ended December 31, 2025, 2024 and 2023:
|
|
Years Ended December 31, |
||||
|
|
2025 |
|
2024 |
|
2023 |
Expected life (in years) |
|
3.0 |
|
3.0 |
|
2.4 − 3.0 |
Risk-free interest rate |
|
3.9% |
|
4.5% |
|
3.64% − 4.85% |
Dividend yield |
|
1.5% |
|
1.8% |
|
1.91% − 2.32% |
Expected volatility |
|
46.4% |
|
57.0% |
|
61.3% − 68.5% |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.