Guardant Health, Inc.GH
Guardant Health, Inc. Stock Compensation Disclosure
Stock-Based Compensation
2012 Stock Plan and 2018 Incentive Award Plan
In June 2012 and September 2018, the Company’s Board of Directors adopted and its stockholders approved the Company’s 2012 Stock Plan (as amended and restated), or the 2012 Plan, and the Company’s 2018 Incentive Award Plan, or the 2018 Plan, respectively, under which the Company may grant cash and equity incentive awards to its employees and non-employees. Upon effectiveness of the 2018 Plan in connection with the IPO in October 2018, the 2012 Plan was terminated and 508,847 shares reserved under the 2012 Plan were forfeited. Any outstanding awards granted under the 2012 Plan remain outstanding, subject to the terms of the 2012 Plan and applicable award agreement, and further cancellation of awards granted under the 2012 Plan are not available for grant in the future. No further grants will be made under the 2012 Plan. The number of shares of common stock available for issuance under the 2018 Plan may be increased on January 1 of each calendar year beginning in 2019 and ending in 2028 by an amount equal to the least of (i) 3,689,000 shares, (ii) four percent of the shares of common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by the Company’s Board of Directors.
2023 Employment Inducement Incentive Award Plan
In August 2023, the Company’s Board of Directors adopted the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, under which the Company may exclusively grant awards to its new employees as an inducement material to the employee’s entry into employment with the Company. The 2023 Plan was approved by the Company's Board of Directors without stockholder approval in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules.
Stock Option Activity
A summary of the Company’s stock option activity and related information is as follows:
| Options Outstanding | |||||||||||||||||||||||||||||
| Shares Available for Grant | Shares Subject to Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
Balance as of January 1, 2023 | 5,438,296 | 3,402,574 | $ | 34.34 | 6.8 | $ | 39,749 | ||||||||||||||||||||||
2018 Plan annual increase(1) | 3,689,000 | — | |||||||||||||||||||||||||||
| Shares authorized under the 2023 Plan | 5,000,000 | — | |||||||||||||||||||||||||||
| Granted | (1,000,760) | 1,000,760 | 30.80 | ||||||||||||||||||||||||||
| Exercised | — | (51,124) | 7.93 | ||||||||||||||||||||||||||
| Canceled | 338,570 | (339,307) | 58.45 | ||||||||||||||||||||||||||
| Restricted stock units granted | (2,436,947) | — | |||||||||||||||||||||||||||
Restricted stock units canceled | 1,049,447 | — | |||||||||||||||||||||||||||
| Performance-based restricted stock units granted | (126,041) | — | |||||||||||||||||||||||||||
| Performance-based restricted stock units canceled | 51,829 | — | |||||||||||||||||||||||||||
Balance as of December 31, 2023 | 12,003,394 | 4,012,903 | 31.76 | 6.6 | 39,115 | ||||||||||||||||||||||||
2018 Plan annual increase(1) | 3,689,000 | — | |||||||||||||||||||||||||||
| Granted | (1,440,273) | 1,440,273 | 27.07 | ||||||||||||||||||||||||||
| Exercised | — | (609,495) | 5.12 | ||||||||||||||||||||||||||
| Canceled | 211,931 | (211,931) | 49.71 | ||||||||||||||||||||||||||
| Restricted stock units granted | (5,004,910) | — | |||||||||||||||||||||||||||
Restricted stock units canceled | 1,164,260 | — | |||||||||||||||||||||||||||
| Market-based restricted stock units canceled | 2,260,764 | — | |||||||||||||||||||||||||||
| Performance-based restricted stock units granted | (913,829) | — | |||||||||||||||||||||||||||
Performance-based restricted stock units adjusted for performance achievement | (48,234) | — | |||||||||||||||||||||||||||
| Performance-based restricted stock units canceled | 74,161 | — | |||||||||||||||||||||||||||
Balance as of December 31, 2024 | 11,996,264 | 4,631,750 | 32.98 | 7.1 | 35,980 | ||||||||||||||||||||||||
2018 Plan annual increase(1) | 3,689,000 | — | |||||||||||||||||||||||||||
| Granted | (649,423) | 649,423 | 45.23 | ||||||||||||||||||||||||||
| Exercised | — | (627,325) | 30.64 | ||||||||||||||||||||||||||
| Canceled | 105,354 | (105,354) | 42.81 | ||||||||||||||||||||||||||
| Restricted stock units granted | (2,842,050) | — | |||||||||||||||||||||||||||
Restricted stock units canceled | 1,142,190 | — | |||||||||||||||||||||||||||
| Performance-based restricted stock units granted | (293,981) | — | |||||||||||||||||||||||||||
Performance-based restricted stock units adjusted for performance achievement | (144,972) | — | |||||||||||||||||||||||||||
| Performance-based restricted stock units canceled | 178,807 | — | |||||||||||||||||||||||||||
Balance as of December 31, 2025 | 13,181,189 | 4,548,494 | $ | 34.83 | 6.4 | $ | 310,466 | ||||||||||||||||||||||
Vested and Exercisable as of December 31, 2025 | 2,878,206 | $ | 34.25 | 5.1 | $ | 199,675 | |||||||||||||||||||||||
(1)Effective as of January 1, 2023, 2024 and 2025, an additional 3,689,000 shares of common stock became available for issuance under the 2018 Plan, as a result of the operation of the automatic annual increase provision therein.
Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of the options exercised was $33.2 million, $9.4 million and $1.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The weighted-average grant date fair value of options granted was $28.32, $17.20 and $19.90 per share for the years ended December 31, 2025, 2024 and 2023, respectively.
Future stock-based compensation for unvested options as of December 31, 2025 was $31.6 million, which is expected to be recognized over a weighted-average period of 1.7 years.
Restricted Stock Units
A summary of the Company’s restricted stock unit activity excluding the performance-based and market-based restricted stock units and related information is as follows:
| Restricted Stock Units Outstanding | Weighted-Average Grant Date Fair Value | |||||||||||||
Balance as of January 1, 2023 | 3,687,888 | $ | 60.70 | |||||||||||
| Granted | 2,436,947 | 26.62 | ||||||||||||
| Vested and released | (728,603) | 60.07 | ||||||||||||
| Canceled | (1,049,447) | 56.85 | ||||||||||||
Balance as of December 31, 2023 | 4,346,785 | 42.63 | ||||||||||||
| Granted | 5,004,910 | 25.94 | ||||||||||||
| Vested and released | (1,167,184) | 46.36 | ||||||||||||
| Canceled | (1,164,260) | 42.61 | ||||||||||||
Balance as of December 31, 2024 | 7,020,251 | 30.11 | ||||||||||||
| Granted | 2,842,050 | 47.56 | ||||||||||||
| Vested and released | (2,404,898) | 32.69 | ||||||||||||
| Canceled | (1,142,190) | 32.47 | ||||||||||||
Balance as of December 31, 2025 | 6,315,213 | $ | 36.56 | |||||||||||
Future stock-based compensation for unvested restricted stock units as of December 31, 2025 was $179.6 million, which is expected to be recognized over a weighted-average period of 1.9 years.
Performance-based Restricted Stock Units
Since November 2020, the Compensation Committee of the Board of Directors started to approve, and the Company started to grant performance-based restricted stock units, or PSUs, to its employees and non-employees. The PSUs granted consist of financial and/or operational metrics to be met over a performance period of approximately 1.0 to 3.0 years and an additional service period requirement of up to 2.0 years after the performance metrics are met. In addition, granted units might be adjusted when certain performance metrics are met. The PSUs are expected to be expensed over a period of approximately 1.0 to 3.1 years subject to meeting the respective performance metrics and service requirements.
In November 2020 and May 2021, and as part of these PSU programs, the Company granted PSUs consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met with a grant date fair value of $113.40 per share and $148.19 per share, respectively. Before 2024, no compensation expense for these PSUs had been recorded since the achievement of the performance metrics did not meet the criteria for accrual. In 2024, the performance metrics of these PSUs were considered to be achieved; as such the Company recorded $24.8 million in stock-based compensation expense related to these PSUs, based on 219,161 shares granted with fair values of $113.40 per share and $148.19 per share. In the first quarter of 2025, these PSUs were vested after the additional six months service requirements were fulfilled.
A summary of the Company’s PSU activity and related information is as follows:
| Performance-based Restricted Stock Units Outstanding | Weighted-Average Grant Date Fair Value | |||||||||||||
Balance as of January 1, 2023 | 341,713 | $ | 110.64 | |||||||||||
| Granted | 126,041 | 32.84 | ||||||||||||
| Vested and released | (3,435) | 32.86 | ||||||||||||
| Canceled | (51,829) | 80.91 | ||||||||||||
Balance as of December 31, 2023 | 412,490 | 91.25 | ||||||||||||
| Granted | 913,829 | 18.73 | ||||||||||||
| Vested and released | (9,708) | 94.73 | ||||||||||||
Adjusted for performance achievement | 48,234 | 32.84 | ||||||||||||
| Canceled | (74,161) | 102.14 | ||||||||||||
Balance as of December 31, 2024 | 1,290,684 | 37.07 | ||||||||||||
| Granted | 293,981 | 49.21 | ||||||||||||
| Vested and released | (269,992) | 69.33 | ||||||||||||
Adjusted for performance achievement | 144,972 | 19.29 | ||||||||||||
| Canceled | (178,807) | 63.34 | ||||||||||||
Balance as of December 31, 2025 | 1,280,838 | $ | 27.38 | |||||||||||
Stock-based compensation recorded for the PSUs for the years ended December 31, 2025, 2024 and 2023 was $19.4 million, $33.3 million and $2.6 million, respectively. Future stock-based compensation for unvested PSUs that are probable to vest as of December 31, 2025 was $24.4 million, which is expected to be recognized over a weighted-average period of 1.8 years.
Market-based Restricted Stock Units
In May 2020, the Board of Directors approved and granted 1,695,574 market-based restricted stock units, or MSUs, under the 2018 Plan to each of the Company's Co-Chief Executive Officers, which is subject to the achievement of market-based share price goals established by the Board of Directors. The MSUs consist of three separate tranches and the vesting of each tranche is subject to the Company's common stock closing price being maintained at or above a predetermined share price goal for a period of 30 consecutive calendar days. The grant date fair values of the MSUs were determined using a Monte Carlo valuation model for each tranche. The related stock-based compensation expense for each tranche was recognized based on an accelerated attribution method over the estimated derived service period, which was the median duration of the successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model. The weighted-average grant date fair value of the MSUs was $67.00 per share and the weighted-average derived service period was estimated to be in the range of 0.83 - 2.07 years.
All three tranches of the MSUs were fully expensed as of June 30, 2022. No MSUs were granted, vested or canceled during the year ended December 31, 2023. As of December 31, 2023, 2,260,764 shares of the MSUs, with a weighted-average grant date fair value of $65.20 per share, were outstanding under the 2018 Plan. In March 2024, the Board of Directors approved to cancel the unvested MSUs and concurrently approved to grant new awards to the Co-Chief Executive Officers, which was accounted for as a modification, however no stock-based compensation expense was reversed as the Company's Co-Chief Executive Officers had fulfilled the service requirement.
Stock‑Based Compensation Expense
The following table presents the effect of employee and non‑employee related stock‑based compensation expense:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
Cost of revenue | $ | 10,699 | $ | 9,365 | $ | 6,465 | |||||||||||
Research and development expense | 50,937 | 50,566 | 34,682 | ||||||||||||||
Sales and marketing expense | 44,724 | 36,479 | 24,764 | ||||||||||||||
General and administrative expense | 59,857 | 44,001 | 24,848 | ||||||||||||||
Total stock-based compensation expense | $ | 166,217 | $ | 140,411 | $ | 90,759 | |||||||||||
Valuation of Stock Options
The grant date fair value of stock options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Expected term (in years) | 5.50 – 6.10 | 5.50 – 6.09 | 5.50 – 6.10 | |||||||||||||||||
Expected volatility | 65.4% – 67.2% | 67.4% – 69.4% | 69.3% – 70.5% | |||||||||||||||||
Risk-free interest rate | 3.7% – 4.3% | 3.8% – 4.5% | 3.4% – 4.5% | |||||||||||||||||
Expected dividend yield | —% | —% | —% | |||||||||||||||||
The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the estimated fair value of common stock of the Company, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The valuation assumptions were determined as follows:
Fair Value of Common Stock
The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market.
Expected Term
The expected term represents the period that the options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term.
Expected Volatility
Prior to the commencement of trading of the Company’s common stock on the Nasdaq Global Select Market on October 4, 2018 in connection with its IPO, there was no active trading market for the Company’s common stock. Due to limited historical data for the trading of the Company’s common stock, for awards granted prior to fiscal year 2025, expected volatility was estimated based on the average volatility for comparable publicly traded peer group companies in the same industry plus the Company's expected volatility for the available periods. The comparable companies are chosen based on their similar size, stage in the life cycle or area of specialty. As sufficient historical trading data became available, for awards granted since fiscal year 2025, the Company estimates expected volatility based on its own historical stock price volatility.
Risk-Free Interest Rate
The risk-free interest rate is based on the U.S. Treasury rate, with maturities similar to the expected term of the stock options.
Expected Dividend Yield
The Company does not anticipate paying any dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero.
2018 Employee Stock Purchase Plan
In September 2018, the Company’s Board of Directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan, or the ESPP. A total of 922,250 shares of common stock were initially reserved for issuance under the ESPP. On the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of shares of common stock available for issuance under the ESPP may be increased by the least of (i) 1,106,700 shares, (ii) 1% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by the Company’s Board of Directors.
Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 10% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The price at which common stock is purchased under the ESPP is equal to 85% of the fair market value of the Company’s common stock on the first or last day of the offering period, whichever is lower. The ESPP provides for separate six-month offering periods beginning on May 15 and November 15 of each year.
Shares of common stock purchased under the ESPP were 482,099, 577,758 and 464,870, for the years ended December 31, 2025, 2024 and 2023, respectively.
The grant date fair value of the stock purchase rights granted under the ESPP was estimated on the first day of each offering period using the Black-Scholes option pricing model. The following valuation assumptions used were substantially consistent with the assumptions used to value stock options with the exception of the expected term which was based on the term of each purchase period:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Expected term (in years) | 0.50 | 0.50 | 0.50 | |||||||||||||||||
| Expected volatility | 59.5% – 69.0% | 62.7% – 64.2% | 51.5% – 76.6% | |||||||||||||||||
| Risk-free interest rate | 3.8% – 4.3% | 4.4% – 5.4% | 5.2% – 5.4% | |||||||||||||||||
| Expected dividend yield | —% | —% | —% | |||||||||||||||||
The total compensation expense related to the ESPP was $5.8 million, $4.7 million and $5.1 million, for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, the unrecognized stock-based compensation expense related to the ESPP was $3.3 million, which is expected to be recognized over the remaining term of the offering period of 0.4 years.
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.