2009 Equity Incentive Plan

We adopted an equity incentive plan in 2009 (the “2009 Plan”) that provided for the issuance of incentive and nonqualified common stock options and other share-based awards for employees, directors and consultants. Under the 2009 Plan, the exercise price for incentive and nonqualified stock options were not to be less than the fair market value of our common stock at the date of grant. Stock options granted under this plan expire no later than ten years from the grant date and vesting was established at the time of grant. Pursuant to the terms of the 2019 Plan, any shares subject to outstanding stock options originally granted under the 2009 Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof shall become available for issuance pursuant to awards granted under the 2019 Plan. While no shares are available for future grant under the 2009 Plan, it continues to govern outstanding equity awards granted thereunder.

2019 Equity Incentive Plan

The 2019 Plan became effective immediately prior to the closing of our initial public offering in July 2019. The 2019 Plan provides for the issuance of awards in the form of stock options and other share-based awards for employees, directors and consultants. Under the 2019 Plan, the stock option exercise price per share shall not be less than the fair market value of a share of stock on the effective date of grant, as defined by the 2019 Plan, unless explicitly qualified under the provisions of Section 409A or Section 424(a) of the Internal Revenue Code of 1986. Additionally, unless otherwise specified, stock options granted under this plan expire no later than ten years from the grant date and vesting is established at the time of grant. Except for certain awards granted to non-employee directors, stock options and restricted stock units granted under the 2019 Plan generally vest over a four-year period, subject to continuous service through each applicable vesting date. As of December 31, 2025, we had 35,203,141 shares of common stock authorized for issuance under the 2019 Plan.

Changes in shares available for grant during the year ended December 31, 2025 were as follows:


	Shares Available for Grant
Shares available for grant at December 31, 2024		18,018,312
Stock options, restricted stock units and performance-based restricted stock units granted and the maximum market-based restricted stock units granted eligible to be earned		(8,204,870	)
Stock options, restricted stock units and market-based restricted stock units forfeited or expired		1,728,677
Shares available for grant at December 31, 2025		11,542,119

Stock Options

Stock option activity under the 2009 Plan and 2019 Plan during the year ended December 31, 2025 was as follows:


	Shares Subject to Outstanding Stock Options			Weighted-Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)
Stock options outstanding at December 31, 2024		12,295,297		$	15.11
Stock options granted		759,724			8.12
Stock options forfeited		(205,125	)		8.80
Stock options expired		(406,973	)		22.93
Stock options exercised		(2,398,663	)		7.45
Stock options outstanding at December 31, 2025		10,044,260		$	16.22	$	56,982
Stock options vested and exercisable at December 31, 2025		8,598,207		$	17.69	$	44,297

The weighted-average remaining contractual life for stock options outstanding as of December 31, 2025 was 5.1 years. The weighted-average remaining contractual life for stock options vested and exercisable as of December 31, 2025 was 4.5 years.

The total intrinsic value of stock options exercised during the year ended December 31, 2025, 2024 and 2023 was $12.3 million, $0.2 million and $1.4 million, respectively.

Restricted Stock Units

Restricted stock unit activity under the 2019 Plan during the year ended December 31, 2025 was as follows:


	Restricted Stock Units Outstanding			Weighted-Average Grant Date Fair Value per Share
Nonvested restricted stock units outstanding at December 31, 2024		10,174,852		$	7.20
Restricted stock units granted		5,300,170			8.31
Restricted stock units forfeited		(869,462	)		7.51
Restricted stock units vested		(3,359,894	)		8.65
Nonvested restricted stock units outstanding at December 31, 2025		11,245,666		$	7.26

The total fair value of restricted stock units vested during the year ended December 31, 2025, 2024 and 2023 was $28.9 million, $10.6 million and $12.0 million, respectively.

Performance-Based Restricted Stock Units

In addition to the restricted stock units described above, one of our executive officers was granted an award of 124,976 shares of performance-based restricted stock units in 2025. The shares will vest and be issued only if a certain financial metric is deemed to have been achieved for fiscal year 2025 and if the service conditions are met. If the performance condition is deemed to have been achieved, the shares will vest in three annual installments, subject to the grantee's continuous service through the respective vest dates.

Market-Based Restricted Stock Units

Separate from the restricted stock units described above, certain of our executive officers have been granted awards of market-based restricted stock units. The number of shares of common stock that may be earned under the respective awards range from zero shares to a defined maximum number of shares and are calculated based on our total shareholder return during a three-year performance period as measured against that of the group of companies comprising the S&P Biotechnology Select Industry Index as of the grant date or other applicable date, subject to certain adjustments to such index group. Except as expressly provided in the terms of each award's agreement, vesting is subject to the respective grantee's continuous service through the end of the three-year performance period.

Market-based restricted stock unit activity under the 2019 Plan during the year ended December 31, 2025 was as follows:


	Maximum Market-Based Restricted Stock Units Outstanding			Weighted-Average Grant Date Fair Value per Share
Nonvested maximum market-based restricted stock units outstanding at December 31, 2024		3,831,114		$	10.80
Maximum market-based restricted stock units granted		2,020,000			13.50
Portion of maximum market-based restricted stock units that was not earned and vested at the end of the performance period, and therefore forfeited		(247,117	)		18.89
Market-based restricted stock units vested		(247,117	)		18.89
Nonvested maximum market-based restricted stock units outstanding at December 31, 2025		5,356,880		$	11.07

The total fair value of market-based restricted stock units vested during the year ended December 31, 2025 was $2.0 million.

Grant Date Fair Value of Stock Options, Restricted Stock Units, Performance-Based Restricted Stock Units and Market-Based Restricted Stock Units Granted

The estimated grant date fair values of stock options granted during the years ended December 31, 2025, 2024 and 2023 were estimated using the Black-Scholes option-pricing model with the following assumptions:


	Year Ended December 31,
	2025		2024			2023
Fair value of common stock	$8.12		$3.99			$8.46
Expected term (in years)	5.27 - 6.08		5.27 - 6.08			5.27 - 6.08
Risk-free interest rate	4.0% - 4.1%			4.2	%	4.2% - 4.3%
Expected volatility	74.2% - 74.7%		74.5% - 75.0%			71.2% - 71.6%
Expected dividend yield		—		—			—

The determination of the grant date fair value of stock options granted using a Black-Scholes option-pricing model is affected by the fair value of our common stock, as well as assumptions regarding a number of variables that are subjective and generally require judgment to determine. The valuation assumptions were determined as follows:

Fair value of common stock—The fair value of each share of common stock is based on the closing price of our common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Global Select Market.

Expected term—The expected term of stock options granted to employees and non-employee directors is determined using the “simplified” method, as illustrated in ASC Topic 718, Compensation—Stock Compensation, as we do not have sufficient exercise history to determine a better estimate of expected term. Under this approach, the expected term is based on the midpoint between the vesting date and the end of the contractual term of the stock option.

Risk-free interest rate—We utilize a risk-free interest rate in the option valuation model based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected terms of the stock options.

Expected volatility—Until 2024, as we did not have sufficient trading history for our common stock, expected volatility was based on the historical volatility of our publicly traded industry peers utilizing a period of time consistent with our estimate of expected term. Beginning in 2024, expected volatility was based on a weighted average of our historical volatility and the historical volatility of our publicly traded industry peers utilizing a period of time consistent with our estimate of expected term.

Expected dividend yield—We do not anticipate paying any cash dividends in the foreseeable future and, therefore, use an expected dividend yield of zero in the option valuation model.

The weighted-average grant date fair value per share of stock options granted during the year ended December 31, 2025, 2024 and 2023 was $5.50, $2.70 and $5.61, respectively.

The grant date fair value of restricted stock units granted is based on the closing price of our common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Global Select Market. The weighted-average grant date fair value per share of restricted stock units granted during the year ended December 31, 2025, 2024 and 2023 was $8.31, $4.03 and $8.29, respectively.

The weighted-average grant date fair value per share of the performance-based restricted stock units granted during 2025 was $7.28 and was based on the closing price of our common stock on the date of grant, as reported on The Nasdaq Global Select market. Expense will be recognized ratably over the requisite service period only if achievement of the performance condition is deemed to have been met. If the performance condition is deemed to have been met and the grantee ceases to provide continued service through any of the applicable vesting dates for reasons other than those expressly provided in the terms of the respective award, compensation cost recognized for unvested shares will be reversed in the period in which service ceased.

The weighted-average grant date fair value per share of the market-based restricted stock units granted during the year ended December 31, 2025, 2024 and 2023 was $13.50, $6.49 and $13.82, respectively, and was determined using a Monte Carlo valuation model, which uses assumptions such as volatility, risk-free interest rate and dividend estimated for the respective performance periods. The aggregate share-based compensation expense of the market-based restricted stock units granted during the year ended December 31, 2025, 2024 and 2023 was $13.6 million, $7.2 million and $9.8 million, respectively. Aggregate share-based compensation expense is calculated based on the target payout level of shares granted and is recognized on a straight-line basis over the respective grants' performance periods, which are also the requisite service periods. Attainment of each grant's respective market condition and the number of shares earned and vested does not impact the related share-based compensation expense recognized. Share-based compensation expense is reversed only if the respective grantee does not provide continuous service through the respective performance period for reasons other than those expressly provided in the terms of the respective award.

The compensation cost related to stock options, restricted stock units and market-based restricted stock units for the years ended December 31, 2025, 2024 and 2023 are included on the consolidated statements of operations as follows (in thousands):


	Year Ended December 31,
	2025		2024		2023
Cost of revenue	$	3,624	$	3,632	$	4,186
Research and development		16,664		17,081		20,465
Sales and marketing		13,266		12,370		14,553
General and administrative		17,929		20,527		23,704
Total share-based compensation expense	$	51,483	$	53,610	$	62,908

As of December 31, 2025, unrecognized share-based compensation expense and the remaining weighted-average recognition period were as follows:


	Unrecognized Share-Based Compensation Expense (in thousands)		Remaining Weighted-Average Recognition Period (in years)
Nonvested stock options	$	6,080		2.11
Nonvested restricted stock units		56,083		2.55
Nonvested market-based restricted stock units		12,876		1.90

Adaptive Biotechnologies Corp 10-K