Arteris, Inc.AIP
Arteris, Inc. Stock Compensation Disclosure
STOCK-BASED COMPENSATION PLANS AND STOCK-BASED COMPENSATION
2016 Stock Plan
On October 10, 2016, the Company amended and restated the 2013 Equity Incentive Plan and changed the name of the plan to Arteris, Inc. 2016 Incentive Plan (the 2016 Plan). Adoption of the 2016 Plan provides for participation by foreign nationals or those employed outside of the United States.
The 2016 Plan provides for the granting of the following types of stock awards: incentive stock options, non-statutory stock options, stock appreciation rights (SARs), restricted stock awards, RSU awards and other stock awards. The number of shares authorized for award was 20,803,838. The Company granted awards of common stock in the form of 14,142,208 shares as of December 31, 2021. Following the Company’s IPO in October 2021, all future grants will be made under the 2021 Plan (as defined below), with none remaining available for future grants under the 2016 Plan.
2021 Stock Plan
The Company adopted the 2021 Incentive Award Plan (the 2021 Plan) effective October 26, 2021. The 2021 Plan provides for a variety of stock-based compensation awards, including stock options, SARs, restricted stock awards, RSUs, performance bonus awards, performance stock unit awards, dividend equivalents, or other stock or cash-based awards.
Following the effectiveness of the 2021 Plan, the Company will not make any further grants under the 2016 Plan. However, the 2016 Plan will continue to govern the terms and conditions of the outstanding awards granted under this plan. Shares of common stock subject to awards granted under the 2016 Plan that are forfeited or lapse unexercised and withheld to cover taxes which following the effective date of the 2021 Plan are not issued under the 2016 Plan will be available for issuance under the 2021 Plan.
On November 13, 2025, the Company approved a Performance Stock Units (PSU) agreement for use in connection with the granting of PSUs under the 2021 Incentive Award Plan. No PSUs have been granted as of December 31, 2025.
2022 Employment Inducement Incentive Plan
The Company adopted the 2022 Employment Inducement Incentive Plan (the 2022 Inducement Plan) effective November 3, 2022, pursuant to which it reserved 2,000,000 shares of its common stock. The 2022 Inducement Plan provides for a variety of stock-based compensation awards, including stock options, SARs, restricted stock awards, restricted stock unit awards, performance bonus awards, performance stock unit awards, dividend equivalents, or other stock and cash-based awards. Awards under the 2022 Inducement Plan can only be made to newly hired employees.
Shares Available for Future Grant
Shares available for future grant consisted of the following:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Shares available for future grant under the 2021 Plan | 3,279,850 | 3,139,086 | |||||||||
| Shares available for future grant under the 2021 ESPP | 1,809,715 | 1,564,147 | |||||||||
Shares available for future grant under the 2022 Inducement Plan | 873,805 | 995,117 | |||||||||
The Company issues new shares upon a share option exercise or release of restricted stock units.
Stock Options
The following table summarizes the stock option activities under the Company’s 2016 and 2021 Plan:
| Options Outstanding | |||||||||||||||||||||||
| Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Values ($‘000s) | ||||||||||||||||||||
Balance—December 31, 2024 | 2,197,604 | $ | 2.27 | 5.48 | $ | 17,404 | |||||||||||||||||
Granted | 280,000 | 9.28 | |||||||||||||||||||||
Exercised | (774,458) | 2.41 | |||||||||||||||||||||
Canceled | — | — | |||||||||||||||||||||
Balance—December 31, 2025 | 1,703,146 | $ | 3.36 | 5.30 | $ | 20,676 | |||||||||||||||||
Options vested and exercisable—December 31, 2025 | 1,291,771 | $ | 1.84 | 4.25 | $ | 17,644 | |||||||||||||||||
Options vested and exercisable—December 31, 2024 | 1,903,854 | $ | 1.59 | 4.95 | $ | 16,373 | |||||||||||||||||
The aggregate intrinsic value of the options exercised for the years ended December 31, 2025, and 2024 was $4.7 million and $4.2 million, respectively. The total grant-date fair value of options vested was $0.7 million and $0.4 million for the years ended December 31, 2025, and 2024.
As of December 31, 2025, there was $1.8 million of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.7 years.
Stock options granted generally have a maximum term of ten years from the grant date and generally vest over a period of four years.
The fair value of each stock option granted is estimated using the Black-Scholes option-pricing model. The Company determines valuation assumptions for Black-Scholes as follows:
Risk-Free Interest Rate—The Company bases the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S. Treasury zero coupon issues with an equivalent expected term of the options for each option group.
Expected Term—The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. The expected term assumption is based on the simplified method. The Company expects to continue using the simplified method until sufficient information about the Company’s historical behavior is available.
Volatility—The Company determines the price volatility factor based on the historical volatilities of the Company’s common stock and that of several peer companies, as the Company does not have sufficient trading history for its common stock.
Dividend Yield—The Company has never declared or paid any cash dividend and does not currently plan to pay a cash dividend in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.
Stock Options Valuation Assumptions
The following table summarizes the weighted-average valuation assumptions:
Year Ended December 31, | ||||||||||||||
2025 | 2024 | |||||||||||||
| Fair value of common stock | $5.58 | $6.85 | ||||||||||||
| Expected volatility | 60.9% | 50.2% | ||||||||||||
| Expected term (in years) | 6.0 | 6.1 | ||||||||||||
| Risk-free interest rate | 4.3% | 3.8% | ||||||||||||
| Expected dividend yield | 0% | 0% | ||||||||||||
Restricted Stock Units and Awards
The following table summarizes the restricted stock unit activities under the Company’s 2016 and 2021 Plan and the 2022 Inducement Plan:
| Restricted Stock Units | |||||||||||
| Number of Shares | Weighted-Average Grant Date Fair Value Per Share | ||||||||||
Unvested—December 31, 2024 | 5,225,948 | $ | 7.00 | ||||||||
Granted | 2,029,508 | $ | 8.75 | ||||||||
Vested | (2,607,741) | $ | 7.12 | ||||||||
Canceled | (292,714) | $ | 7.77 | ||||||||
Unvested—December 31, 2025 | 4,355,001 | $ | 7.68 | ||||||||
The total grant-date fair value of restricted stock units vested was $18.5 million and $16.3 million during the years ended December 31, 2025, and 2024, respectively.
As of December 31, 2025, there was $29.3 million of unamortized stock-based compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.5 years.
For RSUs granted under the 2016 Stock Plan, they contain both a service-based vesting condition and a performance-based vesting condition. The service-based vesting condition for these awards is generally satisfied by rendering continuous service for approximately four years, during which time the grants will vest periodically. The performance-based vesting condition of certain awards was satisfied in connection with the Company becoming a publicly listed company or a change in control.
For RSUs granted under the 2021 Stock Plan and 2022 Inducement Plan, they contain the service-based vesting condition for these awards, and it is generally satisfied by rendering continuous service typically satisfied over four years.
Restricted Common Stock
In connection with the acquisition of Semifore, Inc. (the Acquisition) in December 2022, the Company issued 331,574 shares of common stock, out of which 96,715 and 234,859 shares of common stock vested on the first and third anniversary of the closing of the Acquisition, respectively. These shares had a grant date fair value of $1.3 million based on the closing stock price on the acquisition date that was recognized as compensation cost amortized on a straight-line basis over the total vesting period of three years. These shares were fully vested, and accordingly, there was no remaining unamortized compensation cost as of December 31, 2025.
2021 Employee Stock Purchase Plan
The Company adopted the 2021 ESPP effective on October 26, 2021. The 2021 ESPP enables eligible employees of the Company to purchase shares of common stock at a discount to fair market value. The 2021 ESPP provides for six-month offering periods beginning May 22 and November 22 of each year, and each offering period consists of a six-month purchase period. The first offering period began on May 22, 2024, and ended on November 21, 2024. During the year ended December 31, 2025, 161,681 shares were purchased under the 2021 ESPP.
On each purchase date, eligible employees purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date or (2) the fair market value of the Company’s common stock on the purchase date, subject to a cap of 3,000 shares on any purchase date, 6,000 shares in any calendar year, or $25,000 in any calendar year (as determined under applicable tax rules).
As of December 31, 2025, there was $0.3 million of unamortized stock-based compensation cost related to the 2021 ESPP, which is expected to be recognized over a weighted average period of 0.4 years.
The fair value of shares of common stock to be issued under the 2021 ESPP is estimated using the Black-Scholes option pricing model on the first day of the offering period. The Company determines valuation assumptions for Black-Scholes as follows:
Risk-Free Interest Rate—The Company bases the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S. Treasury zero coupon issues with an equivalent expected term of the options for each option group.
Expected Term—The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. The expected term assumption is based on the simplified method. The Company expects to continue using the simplified method until sufficient information about the Company’s historical behavior is available.
Volatility—The Company determines the price volatility factor based on the historical volatility of the Company’s common stock.
Dividend Yield—The Company has never declared or paid any cash dividend and does not currently plan to pay a cash dividend in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.
The following table summarizes the ESPP weighted-average valuation assumptions:
| Year Ended December 31, | ||||||||||||||
2025 | 2024 | |||||||||||||
| Expected volatility | 83.2% | 65.1% | ||||||||||||
| Expected term (in years) | 0.5 | 0.5 | ||||||||||||
| Risk-free interest rate | 4.1% | 4.9% | ||||||||||||
| Expected dividend yield | 0% | 0% | ||||||||||||
Stock-based Compensation
Stock-based compensation expense is recorded on a departmental basis, based on the classification of the award holder. The following table presents the amount of stock-based compensation related to stock-based awards to employees on the Company’s consolidated statements of operations (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cost of revenue | $ | 877 | $ | 783 | |||||||
Research and development | 7,990 | 7,509 | |||||||||
Sales and marketing | 4,492 | 3,079 | |||||||||
General and administrative | 5,017 | 4,567 | |||||||||
Total stock-based compensation | $ | 18,376 | $ | 15,938 | |||||||
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.