Azenta, Inc. Stock Compensation Disclosure

14.    Stock Based Compensation

 

In accordance with the 2020 Equity Incentive Plan (the “2020 Plan”), the Company may issue eligible employees options to purchase shares of the Company’s common stock, restricted stock units and other equity incentives, which vest upon the satisfaction of a performance condition and/or a service condition. In addition, the Company issues common stock to participating employees pursuant to an employee stock purchase plan, and may issue common stock awards and deferred restricted stock units to members of its Board of Directors in accordance with its Board of Directors compensation program.

 

2020 Equity Incentive Plan

 

In accordance with the 2020 Plan, the Company may grant employees (i) restricted stock and other stock-based awards, (ii) nonqualified stock options, and (iii) options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code. All employees of the Company or any affiliate of the Company, independent directors, consultants and advisors are eligible to participate in the 2020 Plan. The 2020 Plan provides for the issuance of an aggregate of 2,800,000 shares of common stock, including 2,500,000 shares reserved for issuance pursuant to the 2020 Plan, and up to 300,000 additional shares which may be issued pursuant to the 2020 Plan if outstanding awards granted under the Company’s previous 2000 Plan or the Company’s previous 2015 Plan are forfeited, expire or are cancelled.

 

The following table reflects stock-based compensation expense for continuing operations recorded during the fiscal years ended September 30, 2025, 2024 and 2023 (in thousands):

 

		Year Ended September 30,
		2025				2024				2023
Restricted stock units		$	18,886			$	12,505			$	7,446
Employee stock purchase plan			963				1,245				1,345
Total stock-based compensation expense for continuing operations		$	19,849			$	13,750			$	8,791
Income tax benefit			(3,374	)			(1,925	)			(1,319	)
Total compensation expense included in the statement of operations		$	16,475			$	11,825			$	7,472

 

During the fiscal years ended September 30, 2025, 2024 and 2023 the Company recorded $1.0 million, $0.9 million, and $0.6 million, respectively, of stock-based compensation expense for discontinued operations.

  

Restricted Stock Unit Activity

 

The following table summarizes restricted stock unit activity for the fiscal year ended September 30, 2025:

 

						Weighted
						Average
		Shares				Grant Date
		(in thousands)				Fair Value
Unvested as of September 30, 2024			764,111			$	59.65
Granted			641,843			$	45.00
Vested			(208,178	)		$	58.75
Forfeited			(167,942	)		$	68.77
Unvested as of September 30, 2025			1,029,834			$	49.29

 

The fair value of restricted stock units vested during fiscal years 2025, 2024 and 2023 was $8.2 million, $9.6 million, and $14.8 million, respectively. As of September 30, 2025, the future unrecognized stock-based compensation expense related to restricted stock units expected to vest is $20.8 million and is expected to be recognized over an estimated weighted average amortization period of 1.6 years.

 

The following table reflects restricted stock units and stock awards granted during fiscal years ended September 30, 2025, 2024 and 2023:

 

		Year Ended September 30,
		2025				2024				2023
Time-based restricted stock units			448,375				282,268				311,609
Performance-based restricted stock units			193,468				383,625				278,457
Total units			641,843				665,893				590,066

 

All restricted stock units granted during the fiscal year ended September 30, 2025 included in the table above relate to continuing operations. Restricted stock units granted during the fiscal years ended September 30, 2024 and September 30, 2023 included in the table above include 35,999 and 53,942 units related to discontinued operations, respectively.

 

Time-Based Restricted Stock Unit Grants

 

Restricted stock units granted with a required service period typically have three-year vesting schedules in which one-third of awards vest at each annual anniversary of grant date, subject to the award holders meeting service requirements.

 

Performance-Based Restricted Stock Unit Grants

 

Performance-based restricted stock units are earned based on the achievement of performance criteria established by the Human Resources and Compensation Committee and approved by the Board of Directors. The criteria for performance-based awards are weighted and have threshold, target and maximum performance goals. Performance-based restricted stock units may also have a required service period following the achievement of all or a portion of the performance goals.

 

In  October 2023, the Company’s Board of Directors approved an amendment to the performance goals associated with the previously issued performance-based restricted stock units for all impacted employees, excluding members of the Company’s executive team. The performance goals, as amended, were more reflective of the then current macroeconomic environment and consideration toward employee retention in the competitive life sciences industry. Before the amendment, the original performance goals were not expected to be satisfied. Subsequent to the amendment, vesting became probable based on the forecasted achievement of the amended performance goals. The amendment of these restricted stock units is treated as a modification with the total potential maximum compensation cost of $3.0 million recognized over the service period through  November 2025. The Company recorded expense of $1.1 million during the fiscal year ended September 30, 2025 related to the modified awards.

 

These performance-based restricted stock unit awards granted allow participants to earn 100% of restricted stock units if the Company’s performance meets or exceeds its target goal for each applicable financial metric, and up to a maximum of 200% if the Company’s performance for such metrics meets or exceeds the maximum or stretch goal. Performance below the minimum threshold for each financial metric results in award forfeiture. Performance goals are measured over a three-year period for each year’s restricted stock unit awards and at the end of the period to determine the number of restricted stock units earned, if any, by recipients who continue to meet the service requirement. Upon the third anniversary of each year’s restricted stock unit awards’ grant date, the Company’s Board of Directors approves the number of restricted stock units earned for participants who continue to meet the service requirements on the vest date. For restricted stock unit awards that include vesting based on performance conditions, the fair values are estimated based on the intrinsic values of the awards at the grant date.

 

In  November 2024, the Company issued restricted stock unit awards with vesting based on market conditions, which will vest based on achievement of the Company's relative total shareholder return against the defined peer group over a three-year period. The fair values for those grants that include vesting based on market conditions are estimated using the Monte Carlo simulation model. The key assumptions used in the Monte Carlo simulation included (i) the expected volatility of 49.3% to 50.3% based on the three-year daily historical volatility as measured on the grant date, (ii) risk-free interest rate of 3.96% to 4.27% based on U.S. Treasury constant maturities yields as of the grant date, (iii) correlation assumption based on daily share price changes over three years between the Company and the peer companies measured on the grant date, and (iv) no expected dividend yield. The compensation cost is recognized ratably over the requisite service period for those grants, which will not be reversed solely because the market condition is not satisfied.

 

Awards Granted to the Board of Directors

 

The stock-based compensation granted to members of the Company’s Board of Directors includes Company shares or restricted stock units. Non-employee directors may elect to defer receipt of their stock compensation in exchange for a credit, in restricted stock units, to a deferred restricted stock unit (“deferred RSU”) account. Directors who make a deferral election will have no rights as stockholders of the Company with respect to amounts credited to their deferred RSU account. The restricted stock units credited to the deferred RSU account will be released at the time specified in the director’s deferral election, but no later than as soon as administratively feasible following the date the director reaches age 65 or the director’s termination of Board service. Certain members of the Board of Directors have elected to defer receipt of their stock compensation and received a credit of restricted stock units in their deferred RSU account and the total number of deferred stock awards held by the non-employee directors was 26,079 as of September 30, 2025.

 

Employee Stock Purchase Plan

 

The Company maintains an employee stock purchase plan that allows its employees to purchase shares of common stock at a price equal to 85% of the fair market value of the Company’s stock at the beginning or the end of the semi-annual offering period, whichever is lower. On February 8, 2017, the stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 Plan”). The 2017 Plan allows for purchases by employees of up to 1,250,000 shares of the Company’s common stock. As of September 30, 2025, 436,369 shares of common stock remain available for purchase under the 2017 Plan. During the fiscal years ended September 30, 2025, 2024 and 2023, the Company issued 77,265 shares, 72,787 shares, and 83,715 shares respectively, under the 2017 Plan.

 

Valuation Assumptions for an Employee Stock Purchase Plan

 

The fair value of shares issued under the 2017 Plan is estimated on the commencement date of each offering period using the Black-Scholes option-pricing model with the following weighted average assumptions for the fiscal years ended September 30, 2025, 2024 and 2023:

 

		Year Ended September 30,
		2025				2024				2023
Risk-free interest rate			4.6	%			5.3	%			5.2	%
Volatility			41	%			47	%			57	%
Expected life			6 months				6 months				6 months

 

The risk-free rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of the shares granted. The expected stock price volatility is determined based on the Company’s historic stock prices over a period commensurate with the expected life of the shares granted. The expected life represents the weighted average period over which the shares are expected to be purchased. Dividend yields are projected based on the Company’s history of dividend declarations and management’s intention for future dividend declarations.