v3.22.4
Stockholders' Equity
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Stockholders' Equity
11. Stockholders’ Equity
Stockholders’ Equity
Preferred Stock
The Company has 5,000,000 of authorized preferred stock issuable. There is no preferred stock outstanding as of December 31, 2022 and 2021.
Common Stock
Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding.
Issuance of Common Stock in Public Offerings
In June 2020, the Company issued and sold an aggregate of 865,963 shares of common stock at a public offering price of $166.00 per share, less the underwriters’ discounts and commissions, pursuant to an underwritten public offering. The Company received approximately $134.8 million in net cash proceeds after deducting underwriting discounts and commissions of $8.6 million and other offering expenses of $0.4 million.
Issuance of Common Stock in Connection with the Acquisition of Sixense
As consideration for the acquisition of Sixense, the Company issued 661,877 shares of its common stock as partial consideration. Additionally, on October 1, 2021, the Company converted all stock options held by Sixense service providers that would continue as service providers after the Merger into fully vested options to purchase an aggregate amount of 447,017 shares of the Company’s common stock. Please see Note “5. Business Combinations” for more information.
Stock-Based Benefit Plans
2005 Stock Plan
The Company adopted the Penumbra, Inc. 2005 Stock Plan (the “2005 Plan”) in January 2005. The 2005 Plan was subsequently amended and restated in 2006, 2007, 2008 and 2010. Under the 2005 Plan, the board of directors could grant incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), and/or stock awards to eligible persons, including employees, non-employees, directors, consultants and other independent advisors who provide services to the Company. Stock purchase rights could also be granted under the 2005 Plan. The board of directors had the authority to determine to whom options would be granted, the number of options, the term and the exercise price. ISOs could only be granted to Company employees, which include officers and directors of the Company. NSOs and stock purchase rights could be granted to employees and consultants. For individuals holding more than 10% of the voting rights of all classes of stock, the exercise price for an ISO could not be less than 110% of the fair market value of a share of common stock on the date of grant. Options granted under the 2005 Plan permitted an optionee to exercise options immediately upon grant irrespective of the vesting term. Options generally vest annually at a rate of 1/4 after the first year and 1/48 per month thereafter. The term of the options is no longer than five years for ISOs, for which the grantee owns greater than 10% of the voting power of all classes of stock and no longer than 10 years for all other options. On September 17, 2015, the Penumbra, Inc. 2014 Equity Incentive Plan (as amended and restated, the “2014 Plan”) replaced the 2005 Plan and no further equity awards may be granted under the 2005 Plan. The remaining 564 shares of common stock available for issuance from the 2005 Plan were transferred to and may be granted under the 2014 Plan. As of December 31, 2022, 8,622 shares of common stock were reserved for issuance under the 2005 Plan.
2011 Equity Incentive Plan
The Company adopted the Penumbra, Inc. 2011 Equity Incentive Plan (the “2011 Plan”) in October 2011. Under the 2011 Plan, the board of directors could grant ISOs, NSOs, restricted stock, and/or RSUs to eligible persons, including employees, directors and consultants who provide services to the Company. Stock Appreciation Rights (“SAR”) could also be granted under the 2011 Plan. The board of directors had the authority to determine to whom options would be granted, the number of options, the term and the exercise price. ISOs could only be granted to Company employees, which include officers and directors of the Company. NSOs, SARs, restricted stock and RSUs could be granted to employees and consultants. For individuals holding more than 10% of the voting rights of all classes of stock, the exercise price for an ISO could not be less than 110% of the fair market value of a share of common stock on the date of grant. Stock options granted under the 2011 Plan generally have a contractual life of ten years, and generally vest over a period of four years. On September 17, 2015, the 2014
Plan replaced the 2011 Plan and no further equity awards may be granted under the 2011 Plan. The remaining 89,559 shares of common stock available for issuance under the 2011 Plan were transferred to and may be granted under the 2014 Plan. As of December 31, 2022, 58,000 shares of common stock were reserved for issuance under the 2011 Plan.
Amended and Restated 2014 Equity Incentive Plan
The Company adopted the Penumbra, Inc. 2014 Equity Incentive Plan in May 2014. The plan was amended and restated as of September 17, 2015 (as amended and restated, the “2014 Plan”). The 2014 Plan replaced the 2011 Plan and the 2005 Plan and no further equity awards may be granted under the 2011 Plan or the 2005 Plan. As of December 31, 2022, 7,321,161 shares of common stock were reserved for issuance and 6,050,161 shares of common stock were available for grant under the 2014 Plan.
Employee Stock Purchase Plan
The Penumbra, Inc. Employee Stock Purchase Plan (the “ESPP”), became effective on September 17, 2015. The ESPP initially reserved 600,000 shares of common stock for purchase under the ESPP, with the number of shares reserved for purchase increasing each year pursuant to an “evergreen” provision set forth in the ESPP. As of December 31, 2022, 839,422 shares of common stock were reserved and available for issuance under the plan. All qualifying employees of the Company and its designated subsidiaries are eligible to participate in the ESPP. Each offering to the Company’s employees to purchase stock under the ESPP will begin on each May 20 and November 20 and will end on the following November 19 and May 19, respectively, each referred to as offering periods except that the first offering period under the ESPP began on September 17, 2015 and ended on May 19, 2016. Under the ESPP, each employee may purchase shares by authorizing payroll deductions at a minimum of 1% and up to 15% of his or her eligible compensation for each pay period during the offering period. Unless the participating employee withdraws from the offering, his or her accumulated payroll deductions will be used to purchase the Company’s common stock on the last business day of the offering period at a price equal to 85% of the fair market value of the common stock on either the first or the last day of the offering period, whichever is lower, provided that no more than 2,000 shares of the Company’s common stock or such other lesser maximum number established by the ESPP administrator may be purchased by any one employee during each offering period. Under applicable tax rules, an employee may purchase no more than $25,000 worth of common stock, valued at the start of the purchase period (corresponding to an offering period), under the ESPP in any calendar year.
Early Exercises
The 2005 Plan and 2011 Plan allowed the board of directors to grant stock options that provide employee option holders the right to elect to exercise unvested options in exchange for restricted common stock. As of December 31, 2022 and 2021, there were no such early exercised unvested shares.
Stock-Based Benefit Plan Activity and Stock-Based Compensation
Stock Options
Activity of stock options under the 2005 Plan, 2011 Plan and 2014 Plan (collectively, the “Plans”) is set forth below:
Number of SharesWeighted-Average
Exercise Price		Weighted Average Remaining Contractual Life (in years)Aggregate Intrinsic Value
(in thousands)
Balance at December 31, 20211,141,814 $27.02 
Grants10,120 $197.74 
Exercised(309,004)$25.25 
Canceled/Forfeited(1,157)$22.04 
Balance at December 31, 2022841,773 $29.73 
Vested and expected to vest—December 31, 2022841,046 $29.59 2.85$162,213 
Exercisable—December 31, 2022829,678 $27.38 2.77$161,856 
The total intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $48.2 million, $81.1 million and $70.1 million, respectively. The intrinsic value is calculated as the difference between the estimated fair value of the Company’s common stock at the exercise date and the exercise price of the stock option.
The weighted average grant date fair value of stock options for the years ended December 31, 2022 and 2021 was $197.74 and $263.09 per share, respectively. The Company did not grant stock options during the year ended December 31, 2020.
Restricted Stock and Restricted Stock Units
The activity of unvested restricted stock units (“RSU”) under the Plans is set forth below:
Number
of Shares		Weighted Average
Grant Date
Fair Value
Unvested at December 31, 2021409,482 $210.41 
Granted275,910 187.38 
Released/Vested (151,173)192.66 
Canceled/Forfeited(38,370)212.44 
Unvested at December 31, 2022495,849 $202.84 
The fair value of the RSUs that vested during the years ended December 31, 2022, 2021 and 2020 was $28.1 million, $44.5 million and $32.1 million, respectively. As of December 31, 2022, 468,337 RSUs are expected to vest.
Employee Stock Purchase Plan
Under the ESPP, employees purchased 113,893 shares, 64,852 shares, and 77,528 shares for $13.8 million, $13.7 million, and $11.3 million during the years ended December 31, 2022, 2021, and 2020, respectively.
Stock-based Compensation
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and ESPP rights. The valuation model for stock compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term (weighted average period of time that the options granted are expected to be outstanding); expected volatility of the Company’s common stock and an assumed risk-free interest rate.
The Company used the following assumptions in its Black-Scholes option pricing model to determine the fair value of stock options and ESPP rights:
Stock OptionsESPP Rights
Year Ended December 31,Year Ended December 31,
20222021202220212020
Expected term (in years)5.622.850.500.500.50
Expected volatility42 %42 %46%43%48%
Risk-free interest rate2.76 %0.38 %1.30%0.10%0.70%
Expected dividend yield— %— %0%0%0%
The Company did not grant stock options during the year ended December 31, 2020. All stock options granted by the Company during the year ended December 31, 2021, were granted as replacement stock options in connection with the Merger. Refer to Note “5. Business Combinations” for more information.
Weighted Average Expected Term. The Company’s expected term for stock options and ESPP rights is based on historical data.
Volatility. In 2022, 2021 and 2020, volatility assumptions used in the valuation of options and ESPP rights were calculated based on the historical volatility of the Company’s stock.
Risk-Free Interest Rate. The risk-free interest rate is based upon U.S. Treasury zero-coupon issues with remaining terms similar to the expected term of the stock options or ESPP rights.
Dividend Yield. The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and therefore, used an expected dividend yield of zero in the valuation model.
Forfeitures. The Company estimates forfeitures at the time of grant, and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting forfeitures and record
stock-based compensation expense only for those awards that are expected to vest. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised.
The following table sets forth the stock-based compensation expense included in the consolidated statements of operations (in thousands):
 Year Ended December 31,
 2022
2021(1)
2020
Cost of sales$3,882 $2,898 $2,304 
Research and development5,908 30,037 3,686 
Sales, general and administrative27,588 32,828 19,551 
$37,378 $65,763 $25,541 
(1) The Company recorded a $25.8 million charge to stock-based compensation related to the acceleration of vesting of all replacement stock options in connection with the Merger. Refer to Note “5. Business Combinations” for more information.
As of December 31, 2022, total unrecognized compensation cost was $101.5 million related to unvested stock-based compensation arrangements which is expected to be recognized over a weighted average period of 3.1 years.
The total stock-based compensation cost capitalized in inventory was $2.2 million, $1.8 million and $1.2 million as of December 31, 2022, 2021 and 2020, respectively.