Note 15. Stock-Based Compensation

 

Prior to becoming a publicly traded entity, the Company issued incentive stock options, non-qualified stock options, and restricted stock to employees and non-employee consultants under its 2015 Stock Plan (the “2015 Plan”). Since the closing of the business combination between Gores Metropoulos, Inc. and Luminar Technologies, Inc. on December 2, 2020 (the “Business Combination”), the Company has not issued any new stock-based awards under the 2015 Plan.

 

In December 2020, the Board adopted, and the Company’s stockholders approved, the 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan became effective upon the closing of the Business Combination. Under the 2020 Plan, the Company was originally authorized to issue a maximum number of 2,439,218 shares of Class A common stock.

 

In June 2022, the Company’s stockholders approved an amendment and restatement of the Company’s 2020 Plan (the “Amended 2020 Plan”) to increase the number of shares of Class A common stock authorized for issuance by 2,400,000 additional shares and added an evergreen provision under which the number of shares of Class A common stock available for issuance under the Amended 2020 Plan will be increased on the first day of each fiscal year of the Company, beginning with the 2023 fiscal year and ending on (and including) the first day of the 2030 fiscal year, in an amount equal to the lesser of (i) 5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, (ii) 2,666,666 shares, or (iii) such number of shares determined by the Board. Pursuant to the evergreen provision, 1,399,437 and 1,902,833 additional shares of Class A common stock were added to the Amended 2020 Plan on January 1, 2024 and 2025, respectively.

 

In June 2024, the Company’s stockholders approved an amendment and restatement of the Company’s Amended 2020 Plan (the “Amended and Restated EIP”) to increase the number of shares of Class A common stock authorized for issuance by 1,333,333 additional shares of Class A common stock.

 

In May 2024, the Company announced the suspension of the employer match to the 401k plan. As of June 14, 2024, the Company no longer matches the 401k plan contributions made by the employee. This action was part of the cost reduction initiatives undertaken by management.

 

Stock Options

 

Under the terms of the 2015 Plan, incentive stock options had an exercise price at or above the fair market value of the stock on the date of the grant, while non-qualified stock options were permitted to be granted below fair market value of the stock on the date of grant. Stock options granted have service-based vesting conditions only. The service-based vesting conditions vary, though typically, stock options vest over four years with 25% of stock options vesting on the first anniversary of the grant and the remaining 75% vesting monthly over the remaining 36 months. Option holders have a 10-year period to exercise the options before they expire. Forfeitures are recognized in the period of occurrence.

 

The Company’s stock option activity for the year ended December 31, 2025 was as follows (in thousands, except years and per share data):

 

No stock options were granted by the Company during the year ended December 31, 2025, and no stock options vested during that period, as all outstanding awards were fully vested. The total grant date fair value of options that vested during the years ended December 31, 2024 and 2023 was $1.6 million and $2.1 million, respectively.

 

Restricted Stock Units

 

Since the closing of the Business Combination, the Company has granted restricted stock units (“RSUs”) under the Amended and Restated EIP (and prior to its amendment and restatement, under the Amended 2020 Plan and the 2020 Plan). Each RSU granted under the Amended and Restated EIP represents a right to receive one share of the Company’s Class A common stock when the RSU vests. RSUs generally vest over a period up to six years. The Company has granted certain performance-based equity awards that vest upon achievement of certain performance milestones. The fair value of RSUs is equal to the fair value of the Company’s common stock on the date of grant.

 

The Company’s Time-Based RSUs and Performance-Based and Other RSUs activity for the year ended December 31, 2025 was as follows:

 

The total fair value of RSUs vested during the year ended December 31, 2025, 2024 and 2023 was $56.2 million, $153.4 million and $164.9 million, respectively.

 

As of December 31, 2025, the Company had $17.8 million of unrecognized stock-based compensation expense related to RSUs. This cost is expected to be recognized over a weighted-average period of 1.6 years.

 

Fixed Value Equity Awards

 

The Company issues fixed value equity awards to certain employees as a part of their compensation package. These awards are issued as RSUs under the Amended and Restated EIP (and prior to its amendment and restatement, under the Amended 2020 Plan and the 2020 Plan) and are accounted for as liability classified awards under ASC 718, Compensation — Stock Compensation. Fixed value equity awards granted have service-based conditions only and vest quarterly over a period of up to six years. These awards represent a fixed dollar amount settled in a variable number of shares determined at each vesting date.

 

Employee Stock Purchase Plan

 

In December 2020, the Board and the Company’s stockholders adopted the 2020 Employee Stock Purchase Plan (“ESPP”) under which 487,843 shares were authorized for issuance. The 2020 ESPP became effective on February 26, 2021.

 

The ESPP permits eligible employees to purchase the Company’s Class A common stock through payroll deduction with up to 15% of their pre-tax earnings subject to certain Internal Revenue Code limitations. The purchase price of shares is 85% of the lower of the fair market value of the Company’s common stock on the first day of a six-month offering period, or the relevant purchase date. In addition, no participant may purchase more than 333 shares of common stock in each purchase period. The Company suspended the ESPP in December 2025. No offering periods commenced after such suspension date.

 

Optogration Milestone Awards

 

As part of the Optogration acquisition in August 2021, the Company owed up to $22.0 million of post combination compensation related to certain service and performance conditions (“Optogration Milestone Awards”). In August 2022, the Company issued 108,799 shares of Class A common stock for $11.0 million of the Optogration Milestone Awards and in August 2023, the Company issued 101,848 shares of Class A common stock for the remaining $11.0 million obligation.

 

Freedom Photonics Awards

 

As part of the Freedom Photonics acquisition in April 2022, the Company owed up to $29.8 million of post combination compensation related to certain service and performance conditions including achievement of certain technical and financial milestones. In March 2024, the Company issued 176,730 shares of Class A common stock for $5.4 million of the post combination compensation due to achievement of the service and performance conditions. In May 2024, the Company issued 206,589 shares of Class A common stock for $5.5 million of the post combination compensation due to achievement of the service and performance conditions. In June 2024, the Company issued 112,606 shares of Class A common stock for $2.5 million of the post combination compensation due to achievement of the certain milestones. During the year ended December 31, 2025, the Company made payments of $2.3 million related to these arrangements. As of December 31, 2025, the remaining conditions were not considered probable of being achieved.

 

Management Awards

 

On May 2, 2022, the Board granted an award of 720,000 RSUs to Austin Russell, the Company’s former Chief Executive Officer. The grant date fair value per share was $130.50 per share. On August 19, 2022, the Board granted 33,333 RSUs to each of Thomas Fennimore, the Company’s former Chief Financial Officer and Alan Prescott, the Company’s then Chief Legal Officer. The grant date fair value per share was $91.80 per share. Mr. Prescott stepped down as Chief Legal Officer and Secretary of the Company effective December 12, 2024 upon mutual agreement with the Company.

 

These awards to Mr. Russell and Mr. Fennimore were subject to all of the following vesting conditions:

 

 

On March 16, 2023, the Board granted a $12.0 million stock-price based award to the Company’s Executive Vice President & General Manager that vested in six tranches of $2.0 million each, upon achievement of the six stock price milestones of $300, $375, $450, $600, $750 and $900 based on 90 trading day volume-weighted average price of a share of common stock over a 7.0 years performance period. The grant date fair value per share of the award granted to the said executive was $128.70 per share. On June 20, 2023, this award was modified to settle in a fixed number of shares and the impact of modification was not material. In September 2023, this award was forfeited and the impact of forfeiture was not material.

 

On June 4, 2024, the Board granted 45,831 RSUs to an executive, contingent upon market-based performance conditions. The grant date fair value of the award was $17.28 per share. On December 12, 2024, the Board granted 116,666 RSUs to an executive, contingent upon market-based performance conditions. The grant date fair value of the award was $2.10 per share.

 

On July 28, 2025, the Company granted 820,379 performance-based RSUs (“PSUs”) to Paul Ricci, the Company’s Chief Executive Officer. The grant date fair value per share was $2.96 per share. The award is subject to service-based vesting and the achievement of specified 90-day average market capitalization targets.

 

During the year ended December 31, 2025, certain unvested awards were forfeited in connection with executive departures. As a result, the Company reversed $38.3 million of previously recognized share-based compensation expense, which was recorded in general and administrative expenses in the consolidated statements of operations.

 

The Company measured the compensation cost for the management awards outlined above using a Monte Carlo simulation model.

 

As of December 31, 2025, the Company had $1.7 million of unrecognized stock-based compensation expense related to management awards. This cost is expected to be recognized over a weighted-average period of 0.89 years.

 

Activity of the Company’s management awards that include market conditions described above for the year ended December 31, 2025 was as follows:

 

On November 8, 2023, the Board approved a formula for RSU grants to Messrs. Fennimore and Prescott for each year from 2024 through 2029 for Mr. Fennimore and through 2026 for Mr. Prescott based on achievement of annual performance goals with respect to the immediately preceding year (“Annual Performance Awards”). The number of RSUs to be awarded in a year will be determined at the sole discretion of the Human Resources and Compensation Committee of the Board (the “Compensation Committee”) based on actual achievement of the annual performance goals established by the Board based on the Company’s approved operating plan in respect of the immediately preceding year, with such awards ranging from 9,166 RSUs at the threshold level, 36,666 RSUs at the target level, and 55,000 RSUs at the maximum level for extraordinary performance (interpolated linearly between target levels, as applicable). For a potential award to be made in 2024, the Compensation Committee had determined that annual performance goals will be weighted 50% based on revenue and 50% based on free cash flow, with target performance for the revenue performance goal equal to $81.4 million and target performance for the 2023 fourth quarter free cash flow goal equal to $(37) million. Each Annual Performance Award will vest over time as to one-third immediately upon approval of the grant by the Compensation Committee, and one-third annually for 2 years from the beginning of the performance period to incentivize performance and retention, subject to continued active employment through each vesting date.

 

Compensation expense

 

Stock-based compensation expense by function was as follows (in thousands):