We grant share-based compensation awards to our team members and members of our Board of Directors as provided for under our 2023 Omnibus Incentive Compensation Plan (“2023 Plan”), approved on May 24, 2023, which replaced our 2014 Long-Term Incentive Plan. In 2023, 2022 and 2021, we granted share-based compensation in the form of RSUs or deferred stock units (“DSUs”). Our grants, which have three methods of measuring fair value, generally include a time-based service or a performance-based or a market-based portion, which collectively represent the target award.

In 2023 and 2022, we also granted options to purchase common stock to certain employees under our 2023 Plan. The options are granted at an exercise price equal to the closing market price of Advance's common stock on the date of the grant, expire after ten years and vest one-third annually over three years. We record compensation expense for the grant date fair value of the option awards evenly over the vesting period.

At December 30, 2023, there were 2.4 million shares of common stock available for future issuance under the 2023 Plan based on management’s current estimate of the probable vesting outcome for performance-based awards. Shares forfeited become available for reissuance and are included in availability.

For time-based RSUs, the fair value of each award was determined based on the market price of our common stock on the date of grant. Time-based RSUs generally vest over a three-year period in equal annual installments beginning on the first anniversary of the grant date. During the vesting period, holders of RSUs are entitled to receive dividend equivalents, but are not entitled to voting rights.

For performance-based RSUs, the fair value of each award was determined based on the market price of our common stock on the date of grant. Performance-based awards generally may vest following a three-year period subject to the achievement of certain financial goals as specified in the grant agreements. Depending on our results during the three-year performance period, the actual number of awards vesting at the end of the period generally ranges from 0% to 200% of the performance award. Performance-based RSUs generally do not have dividend equivalent rights and do not have voting rights until the

shares are earned and issued following the applicable performance period. The number of performance-based awards outstanding is based on the number of awards that we believed were probable of vesting at December 30, 2023.

There were 22 thousand performance-based RSUs granted during 2023. There were no performance-based RSUs granted during 2022 or 2021. The change in units based on performance represents the change in the number of granted awards expected to vest based on the updated probability assessment as of December 30, 2023. Compensation expense for performance-based awards of $6.4 million, $11.8 million and $22.8 million in 2023, 2022 and 2021 was determined based on management’s estimate of the probable vesting outcome.

For market-based RSUs, the fair value of each award was determined using a Monte Carlo simulation model. The model uses multiple input variables that determined the probability of satisfying the market condition requirements as follows:

(2)Expected volatility is determined based on historical volatility over a matching look-back period and is consistent with the correlation coefficients between our stock prices and our peer group.

Additionally, we estimated a liquidity discount of 12.2% using the Chaffe Model to adjust the fair value for the post-vest restrictions. Vesting of market-based RSUs depends on our relative total shareholder return among a designated group of peer companies during a three-year period and will be subject to a one-year holding period after vesting.


	Time-Based			Performance-Based			Market-Based
	Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2022	394	$	180.41	105	$	130.88	135	$	191.72
Granted	627	$	89.81	22	$	135.13	73	$	139.75
Change in units based on performance	—	$	—	(15)	$	137.11	—	$	—
Vested (1)	(195)	$	169.61	(112)	$	130.88	(30)	$	145.04
Forfeited	(126)	$	139.70	—	$	130.03	(55)	$	173.13
Nonvested at December 30, 2023	700	$	109.56	—	$	—	123	$	180.63


	Year Ended
	December 30, 2023		December 31, 2022		January 1, 2022
Time-based:
Weighted average fair value of RSUs granted	$	89.81	$	196.61	$	183.41
Total grant date fair value of RSUs vested	$	33,125	$	34,685	$	34,555
Performance-based:
Weighted average fair value of RSUs granted	$	135.13	$	—	$	—
Total grant date fair value of RSUs vested	$	14,711	$	12,460	$	7,987
Market-based:
Weighted average fair value of RSUs granted	$	139.75	$	205.52	$	204.97
Total grant date fair value of RSUs vested	$	4,400	$	3,695	$	3,650

In 2023, we granted 316 thousand stock options where the weighted average fair value of stock options granted was $28.97 per share. The fair value was estimated on the date of grant by applying the Black-Scholes-Merton option-pricing valuation model.


	Number of Awards	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2022	206	$	190.75
Granted	316	$	94.03
Exercised	—	$	—
Forfeited	(104)	$	162.54
Outstanding at December 30, 2023	417	$	124.59	8.7	$	529
Exercisable at December 30, 2023	80	$	186.22	6.9	$	—


	Year Ended
	December 30, 2023
Risk-free interest rate (1)	4.08%	–	4.31%
Expected life (2)	6 years
Expected volatility (3)	35.1%	–	42.9%
Expected dividend yield (4)	1.45%	–	4.05%

(1) The risk-free interest rate is based on the yield in effect at grant for zero-coupon U.S. Treasury notes with maturities equivalent to the expected term of the stock options.

(2) The expected term represents the period of time options granted are expected to be outstanding. As we do not have sufficient historical data, we utilized the simplified method provided by the Securities and Exchange Commission to calculate the expected term as the average of the contractual term and vesting period.

(3) Expected volatility is the measure of the amount by which the stock price has fluctuated or is expected to fluctuate. We utilized historical trends and the implied volatility of our publicly traded financial instruments in developing the volatility estimate for our stock options.

As of December 30, 2023, there was $69.5 million of unrecognized compensation expense related to all share-based awards that is expected to be recognized over a weighted average period of 1.50 years.

We grant share-based awards annually to our Board of Directors in connection with our annual meeting of stockholders. These awards are granted in the form of DSUs as provided for in the Advance Auto Parts, Inc. Deferred Stock Unit Plan for Non-Employee Directors and Selected Executives (“DSU Plan”). Each DSU is equivalent to one share of our common stock and will be distributed in common shares after the director’s service on the Board ends. DSUs granted vest over a one-year service period. Additionally, the DSU Plan provides for the deferral of compensation earned in the form of (i) an annual retainer for directors and (ii) wages for certain highly compensated team members. These DSUs are settled in common stock with the participants at a future date, or over a specified time period, as elected by the participants in accordance with the DSU Plan.

We granted 74 thousand, nine thousand and ten thousand DSUs in 2023, 2022 and 2021. The weighted average fair value of DSUs granted during 2023, 2022 and 2021 was $66.60, $193.05 and $191.24. The DSUs were awarded at a price equal to the market price of our underlying common stock on the date of the grant. For 2023, 2022 and 2021, we recognized $3.4 million, $1.7 million and $1.6 million of share-based compensation expense for these DSU grants.

We also offer an employee stock purchase plan (“ESPP”). Under the ESPP, eligible team members may elect salary deferrals to purchase our common stock at a discount of 10% from its fair market value on the date of purchase. There are annual limitations on the amounts a team member may elect of either $25 thousand per team member or 10% of compensation, whichever is less. As of December 30, 2023, there were 2.5 million shares available to be issued under the ESPP.