
	Three Months Ended				Six Months Ended
(in thousands)	July 27, 2025		July 28, 2024		July 27, 2025		July 28, 2024
Cost of sales	$	603	$	714	$	1,308	$	1,396
Product development and engineering	3,424		3,442		7,169		6,603
Selling, general and administrative	13,270		12,982		15,655		24,373
Total share-based compensation	$	17,297	$	17,138	$	24,132	$	32,372

The Company grants restricted stock units to certain employees of which a portion are expected to be settled with shares of the Company's common stock and a portion are expected to be settled in cash. The restricted stock units that are to be settled with shares are accounted for as equity. The grant date for these awards is equal to the measurement date and they are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically between 1 and 4 years). The restricted stock units that are to be settled in cash are accounted for as liabilities and the value of the awards is re-measured at the end of each reporting period until settlement at the end of the requisite vesting period (typically 3 years). In the six months ended July 27, 2025, the Company granted to certain employees 503,657 restricted stock units that settle in shares with a weighted-average grant date fair value of $36.06.

The Company maintains a compensation program pursuant to which restricted stock units are granted to the Company's directors who are not employed by the Company or any of its subsidiaries. Under the Company's director compensation program in effect prior to the Company's 2025 annual meeting of stockholders, a portion of the restricted stock units granted under the program would be settled in cash and a portion would be settled in shares of the Company's common stock. Restricted stock units granted under the program in connection with and following the Company's 2025 annual meeting of stockholders will be settled in shares of the Company's common stock. Restricted stock units awarded under the program are generally scheduled to vest on the earlier of (i) one year after the grant date or (ii) the day immediately preceding the first annual meeting of the Company's stockholders following the grant. Restricted stock units awarded under the program that are to be settled in cash will, subject to vesting, be settled when the director who received the award separates from service. Restricted stock units awarded under the program that are to be settled in shares of stock will, subject to vesting, be settled promptly following vesting; provided that a director may elect to defer the settlement date to the director's separation from service pursuant to the Company's Director Deferred Compensation Plan. In the six months ended July 27, 2025, the Company granted to certain non-employee directors 42,568 restricted stock units that settle in shares with a weighted-average grant date fair value of $37.58.

The restricted stock units that are to be settled in cash are accounted for as liabilities. These awards are not typically settled until a non-employee director's separation from service. The value of both the unvested and vested but unsettled awards are re-measured at the end of each reporting period until settlement. In the six months ended July 27, 2025, $4.1 million was paid to settle the vesting of 73,244 cash-settled restricted stock unit awards upon the separation of service of two former directors. As of July 27, 2025, the total number of vested, but unsettled, shares subject to cash-settled restricted stock unit awards was 133,457 and the liability associated with these awards was $7.4 million, of which $2.5 million was included in "Accrued liabilities" in the Balance Sheets relating to a previous non-employee director currently serving a short-term non-employee consultancy for the Company. The remaining $4.9 million was included in "Other long-term liabilities" in the Balance Sheets as of July 27, 2025. As of January 26, 2025, the total number of vested, but unsettled, shares subject to cash-settled restricted stock unit awards was 206,701 and the liability associated with these awards was $14.5 million, of which $8.3 million was included in "Accrued liabilities" in the Balance Sheets relating to two previous non-employee directors serving short-term non-employee consultancies for the Company and one former non-employee director who separated from service. The remaining $6.2 million was included in "Other long-term liabilities" in the Balance Sheets as of January 26, 2025.

The Company grants financial metric-based restricted stock units with a market condition (the "Performance Awards") to certain executives of the Company, which are settled in shares and accounted for as equity awards. The Performance Awards have both a financial metric-based performance condition and a pre-defined market condition, which together determine the number of shares that ultimately vest, in addition to the condition of continued service. The number of vested shares for each of the three tranches of the awards, which are the one, two and three-year performance periods, is determined based on the Company's attainment of pre-established revenue and non-GAAP operating income targets for the respective performance

period. The vesting for tranches after the initial performance period is dependent on revenue and non-GAAP operating income for the preceding performance period. The market condition is determined based upon the Company's total stockholder return ("TSR") benchmarked against the TSR of an index over the three-year performance period. For fiscal year 2026 grants, the benchmark was against the Russell 3000 Index. The market condition functions as a catch-up provision in determining the vesting of the third tranche of the awards based on the performance over the full three-year performance period. Generally, the award recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards.

The grant-date fair values of the first and second tranches of the Performance Awards are valued using the closing stock price on the grant date and the grant-date fair value of the third tranche of the Performance Awards is valued using a Monte Carlo simulation, which takes into consideration the possible outcomes pertaining to the TSR market condition. The compensation cost of the Performance Awards is recognized using the accelerated attribution method over the requisite service period based on the number of shares that are probable of attainment for each fiscal year.

In the six months ended July 27, 2025, the Company granted 357,441 Performance Awards. The weighted-average grant-date fair values for each of the one, two and three-year performance periods over which the Performance Awards vest were $32.83, $32.83 and $41.67, respectively. Under the terms of these awards, assuming the highest performance level of 200% with no cancellations due to forfeitures, the maximum potential number of shares that can be earned in aggregate for the cumulative fiscal years 2026, 2027 and 2028 performance periods would be 714,882 shares. In the six months ended July 27, 2025, 27,073 Performance Awards were forfeited due to the terminations of certain officers.