VERACYTE, INC.VCYT
VERACYTE, INC. Stock Compensation Disclosure
Stock Incentive Plans
Stock Plans
On June 8, 2023, the Company’s stockholders approved the Company’s 2023 Equity Incentive Plan, as amended to the date hereof, or the 2023 Plan. The 2023 Plan, which became effective on June 8, 2023, serves as the successor to the Company’s 2013 Stock Incentive Plan, or the Prior Plan, and will terminate 10 years after the date approved by the Company’s board of directors. The 2023 Plan initially reserved for issuance 5,306,156 shares, which equaled the number of reserved shares available for grant under the Prior Plan as of June 8, 2023, which was subsequently increased to 12,806,156 shares. In addition, the number of (a) shares of common stock that are subject to awards granted under the Prior Plan that cease to be subject to such awards by forfeiture or otherwise after the effective date, (b) shares of common stock issued under the Prior Plan, including shares of common stock issued pursuant to the exercise of stock options, that are forfeited after the effective date, (c) shares of common stock issued under the Prior Plan that are repurchased by the Company at the original issue price after the effective date, (d) shares of common stock that are subject to awards granted under the Prior Plan that are settled in cash after the effective date, and (e) shares of common stock that are subject to awards under the Prior Plan that are used to pay the exercise price of an award or withheld to satisfy the tax withholding obligations related to an award after the effective date, is also reserved and eligible for issuance by the Company upon the exercise or settlement of awards to be granted under the 2023 Plan. The 2023 Plan permits the granting of stock options, restricted stock units, or RSUs, restricted stock awards, stock bonus awards, stock appreciation rights and performance awards to employees, consultants, and outside directors of the Company. Options granted may be either ISOs or NSOs. As of December 31, 2025, 10,937,821 shares were available for future issuance under the 2023 Plan.
Stock options are governed by stock option agreements between the Company and recipients of stock options. Incentive stock options (ISOs), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and nonqualified stock options (NSOs), may be granted under the 2023 Plan at an exercise price of not less than 100% of the fair market value of the common stock on the date of grant, determined by the Compensation Committee of the board of directors. Options become exercisable and expire as determined by the Compensation Committee, provided that the term of ISOs may not exceed ten years from the date of grant. Stock option agreements may provide for time-based and/or performance-based vesting as well as for accelerated exercisability in the event of an optionee's death, disability, or retirement or other events.
RSUs are governed by restricted stock unit agreements between the Company and recipients of RSUs. RSUs may be granted under the 2023 Plan and the number of stock units awarded are determined by the Compensation Committee of the board of directors. RSUs vest and expire as determined by the Compensation Committee. RSU agreements may provide for
time-based and/or performance-based vesting as well as for accelerated vesting in the event of a RSU holder's death, disability, or retirement or other events.
Pursuant to the 2023 Plan, no non-employee director may receive awards under the 2023 Plan that, when combined with cash compensation received for service as a non-employee director, exceeds $750,000 in value in any calendar year ($1,500,000 in the calendar year in which such non-employee director first joins the board of directors). Awards under the 2023 Plan may be granted to non-employee directors, may be automatically made pursuant to a policy adopted by the Board of Directors, or made from time to time as determined in the discretion of the Board of Directors. In the event of a change in control transaction, the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable (as applicable) in full upon the consummation of such event at such times and on such conditions as the Compensation Committee determines.
The following table summarizes activity under the Company's stock incentive plans (aggregate intrinsic value in thousands):
| Stock Options Outstanding and Unvested Restricted Stock Units | Weighted Average Exercise Price of Stock Options | Weighted Average Remaining Contractual Life of Stock Options (Years) | Aggregate Intrinsic Value of Stock Options | ||||||||||||||||||||
| Balance—December 31, 2024 | 5,773,382 | $ | 25.11 | 5.74 | $ | 38,056 | |||||||||||||||||
| Granted - restricted stock units | 1,423,977 | ||||||||||||||||||||||
| Canceled | (472,983) | 10.59 | |||||||||||||||||||||
| Exercised | (591,008) | 18.66 | |||||||||||||||||||||
| Restricted stock units vested | (1,326,375) | ||||||||||||||||||||||
| Balance—December 31, 2025 | 4,806,993 | $ | 26.41 | 5.28 | $ | 28,887 | |||||||||||||||||
| Options vested and exercisable—December 31, 2025 | 1,513,876 | $ | 26.86 | 5.00 | $ | 24,680 | |||||||||||||||||
| Options vested and expected to vest—December 31, 2025 | 1,722,236 | $ | 26.44 | 5.26 | $ | 28,580 | |||||||||||||||||
The aggregate intrinsic value was calculated as the difference between the exercise price of the options to purchase common stock and the fair market value of the Company's common stock, which was $42.10 and $39.60 per share as of December 31, 2025 and 2024, respectively.
No options to purchase common stock were granted for the years ended December 31, 2025 and 2024. The weighted average fair value of options was $14.90 for the year ended December 31, 2023.
The aggregate estimated grant date fair value of employee options to purchase common stock vested during the years ended December 31, 2025, 2024 and 2023 was $5.4 million, $9.8 million and $8.1 million, respectively.
The intrinsic value of stock options exercised was $11.2 million, $15.5 million and $9.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The weighted average fair value of RSUs granted was $32.41 and $23.77 for the years ended December 31, 2025, and 2024, respectively. The intrinsic value of RSUs vested was $40.8 million and $27.1 million for the years ended December 31, 2025 and 2024, respectively.
Included in RSUs granted for 2025, 2024 and 2023 are PSUs with a grant date fair value for remaining participants of $8.4 million, $7.0 million and $4.7 million, respectively. These PSUs vest based on the achievement of certain performance conditions, subject to the employees’ continued service with the Company. For the years ended December 31, 2025 and 2024 and 2023, the Company recorded $8.8 million, $3.4 million and $0.7 million, respectively, of expense related to these PSUs.
Employee Stock Purchase Plan
The Company's stockholders approved the Company's ESPP in May 2015 and approved an amendment and restatement of the Company’s ESPP in June 2020. The ESPP provides eligible employees with an opportunity to purchase common stock from the Company and to pay for their purchases through payroll deductions. The ESPP will be implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the Compensation Committee of the Company's board of directors may specify offerings with a duration of not more than 12 months and may specify shorter purchase periods within each offering. During each purchase period, payroll deductions will accumulate, without interest. On the last day of the purchase period, accumulated payroll deductions will be used to purchase common stock for employees participating in the offering.
Pursuant to the ESPP, the purchase price will be 85% of the fair market value per share of the Company's common stock on either the offering date or on the purchase date, whichever is less.
The Company's board of directors has determined that the offering periods will begin each calendar year on August 1 and February 1, will be twelve (12) months in duration and include two (2) purchase periods, each purchase period lasting six (6) months. The Company's board of directors has determined that the purchase price will be 85% of the fair market value per share of the Company's common stock on either the offering date, which is the first trading day of the offering period, or the purchase date, which is the last trading day of the purchase period, whichever is less. The length of the offering period, the purchase period and the purchase price may not be changed without the approval of the independent members of the Compensation Committee of the Company's board of directors. If the fair market value of a share of the Company's common stock on any purchase date within a particular offering period is less than the fair market value on the start date of that offering period, then the offering period will automatically terminate and the employees in that offering period will automatically be transferred and enrolled in a new offering period which will begin on the next day following such purchase date.
No employee is permitted to accrue, under the ESPP, a right to purchase stock of the Company having a value in excess of $25,000 of the fair market value of such stock (determined at the time the right is granted) for each calendar year. As of December 31, 2025, 895,255 shares of common stock were reserved for issuance under the ESPP.
Stock-based Compensation
The following table summarizes stock-based compensation expense related to stock options, RSUs and the ESPP for the years ended December 31, 2025, 2024 and 2023, and are included in the consolidated statements of operations as follows (in thousands of dollars):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of revenue | $ | 2,286 | $ | 2,319 | $ | 1,779 | |||||||||||
| Research and development | 7,919 | 7,511 | 5,277 | ||||||||||||||
| Selling and marketing | 8,317 | 6,897 | 9,588 | ||||||||||||||
| General and administrative | 25,079 | 19,522 | 16,497 | ||||||||||||||
| Total stock-based compensation expense | $ | 43,601 | $ | 36,249 | $ | 33,141 | |||||||||||
As of December 31, 2025, the Company had $60.9 million of unrecognized compensation expense related to unvested stock options and RSUs, which is expected to be recognized over an estimated weighted-average period of 2.2 years.
The estimated grant-date fair value of stock options was calculated using the Black-Scholes option-pricing model, based on the following assumptions.
•Expected Term: The expected term represents the period that the options granted are expected to be outstanding, and is determined using the Company's historical data.
•Expected Volatility: The Company uses the historical volatility of its common stock.
•Risk-Free Interest Rate: The Company based the risk-free interest rate over the expected term of the options based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of the grant.
•Expected Dividend Yield: The Company has not paid and does not anticipate paying any dividends in the near future. Therefore, the expected dividend yield was zero.
No employee stock options were granted in 2025 or 2024. During the year ended December 31, 2023, the estimated grant-date fair value of employee stock options using the Black-Scholes option-pricing model was based on the following assumptions:
| Year Ended December 31, 2023 | |||||
| Weighted-average volatility | 68.82 - 69.78% | ||||
| Weighted-average expected term (years) | 5.44 - 5.66 | ||||
| Risk-free interest rate | 3.51 - 4.72% | ||||
| Expected dividend yield | — | ||||
The estimated grant date fair value of the ESPP shares was calculated using the Black-Scholes option-pricing model, based on the following assumptions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted-average volatility | 46.68% - 54.09% | 46.29 - 51.73% | 54.86 - 83.69% | ||||||||||||||
| Weighted-average expected term (years) | 0.50 - 1.00 | 0.50 - 1.00 | 0.50 - 1.00 | ||||||||||||||
| Risk-free interest rate | 3.83% - 4.24% | 4.57 - 5.09% | 4.61 - 5.46% | ||||||||||||||
| Expected dividend yield | — | — | — | ||||||||||||||
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.