MACOM Technology Solutions Holdings, Inc.MTSI
MACOM Technology Solutions Holdings, Inc. Stock Compensation Disclosure
SHARE-BASED COMPENSATION PLANS
Stock Plans
We have two equity incentive plans: the 2021 Omnibus Incentive Plan (“2021 Plan”) and the 2021 Employee Stock Purchase Plan (“2021 ESPP”).
We have outstanding awards under the 2021 Plan. Under the 2021 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights (“SARS”), restricted stock awards (“RSAs”), unrestricted stock awards, stock units (including restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”)), performance awards, cash awards, and other share-based awards to employees, directors, consultants and advisors. The ISOs and NSOs must be granted at an exercise price, and the SARS must be granted at a base value, per share of not less than 100% of the closing price of a share of our common stock on the date of grant (or, if no closing price is reported on that date, the closing price on the immediately preceding date on which a closing price was reported) (110% in the case of certain ISOs). Options granted primarily vested based on certain market-based and performance-based criteria as described below and generally have a term of to seven years. Certain of the share-based awards granted and outstanding as of October 3, 2025, are subject to accelerated vesting upon a sale of the Company or similar changes in control.
As of October 3, 2025, we had 3.2 million shares available for future issuance under the 2021 Plan and 1.0 million shares available for issuance under our 2021 ESPP.
Incentive Stock Units
Outside of the two equity plans described above, we also grant incentive stock units (“ISUs”) to certain of our international employees which typically vest over or four years and for which the fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting.
During fiscal years 2025, 2024 and 2023, the fair value of awards granted were $1.9 million, $2.2 million and $1.8 million, respectively. ISU awards were paid out at a fair value of $4.2 million, $2.0 million and $3.5 million for the fiscal years 2025, 2024 and 2023, respectively. As of October 3, 2025 and September 27, 2024, the fair value of outstanding awards was $5.1 million and $6.8 million, respectively, and the associated accrued compensation liability was $3.7 million and $4.6 million, respectively.
During fiscal years 2025, 2024 and 2023, we recorded an expense for these ISU awards of $3.2 million, $3.3 million and $3.4 million, respectively. These expenses are not included in the share-based compensation expense totals below.
Employee Stock Purchase Plan
The 2021 ESPP allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. In administering the 2021 ESPP, the board of directors has limited discretion to set the length of the offering periods thereunder. In fiscal years 2025, 2024 and 2023, 106,615, 116,346 and 120,774 shares of common stock were issued under the 2021 ESPP, respectively.
Share-Based Compensation
The following table shows a summary of share-based compensation expense included in the Consolidated Statements of Operations during the periods presented (in thousands):
| Fiscal Years | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of revenue | $ | 8,524 | $ | 5,938 | $ | 4,325 | |||||||||||
| Research and development | 32,144 | 18,072 | 14,808 | ||||||||||||||
| Selling, general and administrative | 38,694 | 21,634 | 18,970 | ||||||||||||||
| Total | $ | 79,362 | $ | 45,644 | $ | 38,103 | |||||||||||
As of October 3, 2025, the total unrecognized compensation costs related to outstanding restricted stock awards and units including awards with time-based, performance-based, and market-based vesting was $80.1 million, which we expect to recognize over a weighted-average period of 1.8 years. As of October 3, 2025, total unrecognized compensation cost related to the 2021 ESPP was $0.5 million.
Restricted Stock Awards and Units
A summary of RSU, PRSU and RSA activity for fiscal year 2025 is as follows (in thousands, except per share amounts):
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Issued and unvested - September 27, 2024 | 1,634 | $ | 72.37 | ||||||||
| Granted | 677 | 127.24 | |||||||||
Performance-based adjustment (1) | 144 | 89.82 | |||||||||
| Vested | (917) | 76.22 | |||||||||
| Forfeited, canceled or expired | (119) | 80.14 | |||||||||
| Issued and unvested - October 3, 2025 | 1,419 | $ | 97.19 | ||||||||
(1) The amount shown represents performance adjustments for performance-based awards. These were granted in prior fiscal years and vested during 2025 based on the Company’s achievement of adjusted earnings per share and total shareholder return performance conditions.
The weighted-average grant date fair value per share for restricted stock awards and units, inclusive of PRSUs, granted during the fiscal years 2025, 2024 and 2023, was $127.24, $80.42 and $63.53, respectively. The total fair value of restricted stock awards and units vested, inclusive of PRSUs, was $119.1 million, $42.8 million and $85.5 million for fiscal years 2025, 2024 and 2023, respectively. RSUs granted generally vest over a period of or four years.
Performance-Based Equity Incentives
We issue PRSUs with specific performance vesting criteria. These PRSUs have both a service and performance-based vesting condition and awards are typically divided into three equal tranches and vest based on achieving certain adjusted earnings per share growth metrics. The service condition requires participants to be employed in November following the performance period in which the performance condition was met, when the Company's annual financial performance is announced to the financial markets. Depending on the actual performance achieved, a participant may earn between 0% to 300% of the target number of shares for each tranche, which is determined based on a straight-line interpolation applied for the achievement between the specified performance ranges.
During fiscal year 2025, we granted 53,411 PRSUs and 55,080 PRSUs were forfeited. The weighted-average grant date fair value per share for PRSUs granted during the fiscal years 2025, 2024 and 2023 was $115.57, $73.01 and $56.15, respectively. During fiscal year 2025, the performance condition for 17,310 target shares issued in prior years were earned at 60%, and as a result a total of 10,386 shares vested in November 2024 when the service condition was achieved. The total fair value of PRSUs vested was $1.4 million, $7.9 million and $19.0 million in fiscal years 2025, 2024 and 2023, respectively. As of October 3, 2025, the total amount of PRSU awards that could ultimately vest if all performance criteria are achieved would be 346,968 shares assuming a maximum of 300% of the target shares.
Market-based PRSUs
We also issue PRSUs with specific market-based performance vesting criteria. Recipients may earn between 0% and 200% of the target number of shares based on the Company's achievement of total stockholder return in comparison to a peer group of companies in the Nasdaq composite index over a period of approximately three years. The fair value of the awards was estimated using a Monte Carlo simulation and compensation expense is recognized ratably over the service period based on the grant date fair value of the awards subject to the market condition. The expected volatility of the Company's common stock was estimated based on the historical average volatility rate over the three-year period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free rate assumption was based on observed interest rates consistent with the three-year measurement period.
The weighted-average assumptions used to value the awards are as follows:
| Fiscal Years | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted-average grant date fair value | $ | 168.47 | $ | 88.88 | $ | 80.37 | |||||||||||
| Assumptions: | |||||||||||||||||
| Weighted-average grant date stock price | $ | 115.69 | $ | 73.01 | $ | 56.65 | |||||||||||
| Weighted-average stock price at the start of the performance period | $ | 103.09 | $ | 79.43 | $ | 54.12 | |||||||||||
| Weighted-average risk free interest rate | 4.0% | 4.6% | 4.2% | ||||||||||||||
| Weighted-average years to maturity | 2.9 | 2.9 | 2.9 | ||||||||||||||
| Weighted-average expected volatility rate | 39.2% | 41.7% | 51.8% | ||||||||||||||
| Weighted-average expected dividend yield | — | — | — | ||||||||||||||
During fiscal year 2025, we granted 108,300 market-based PRSUs and 14,829 market-based PRSUs were forfeited. During fiscal year 2025, the market-based PRSU performance condition for 144,014 target shares issued in prior years were earned at 200%, and as a result a total of 288,028 shares vested in November 2024 when the service condition was achieved. The total fair value of market-based PRSUs vested was $40.1 million and $18.1 million in fiscal years 2025 and 2023, respectively. No market-based PRSUs vested in fiscal years 2024. As of October 3, 2025, the total amount of market-based PRSU awards that could ultimately vest if all performance criteria are achieved would be 768,456 shares assuming a maximum of 200% of the target shares.
Stock Options
As of October 3, 2025, there were no stock options outstanding and exercisable. The total intrinsic value of options exercised was $0.6 million and $0.8 million for fiscal years 2025 and 2024, respectively. There were no options exercised during the fiscal year ended September 29, 2023. There were no stock options granted for fiscal years 2025, 2024 and 2023.
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.