11. Equity Incentive Plans

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 March 31, 2026, we had 37,352,836 shares of common stock authorized for issuance under the 2019 Plan.

Changes in shares available for grant during the three months ended March 31, 2026 were as follows:


	Shares Available for Grant
Shares available for grant at December 31, 2025		11,542,119
2019 Equity Incentive Plan reserve increase effective January 1, 2026		7,688,970
Stock options and restricted stock units granted and the maximum performance-based and market-based restricted stock units granted eligible to be earned		(3,249,296	)
Stock options, restricted stock units and performance-based restricted stock units forfeited or expired		541,526
Shares available for grant at March 31, 2026		16,523,319

Stock Options

Stock option activity under the 2009 Plan and 2019 Plan during the three months ended March 31, 2026 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, 2025		10,044,260		$	16.22
Stock options forfeited		(1,109	)		12.76
Stock options expired		(15,192	)		40.41
Stock options exercised		(655,786	)		7.83
Stock options outstanding at March 31, 2026		9,372,173		$	16.77	$	35,878
Stock options vested and exercisable at March 31, 2026	8,353,536			$	17.99	$	28,610

The weighted-average remaining contractual life for stock options outstanding as of March 31, 2026 was 4.8 years. The weighted-average remaining contractual life for stock options vested and exercisable as of March 31, 2026 was 4.4 years.

Restricted Stock Units

Restricted stock unit activity under the 2019 Plan during the three months ended March 31, 2026 was as follows:


	Restricted Stock Units Outstanding			Weighted-Average Grant Date Fair Value per Share
Nonvested restricted stock units outstanding at December 31, 2025		11,245,666		$	7.26
Restricted stock units granted	2,041,792				16.44
Restricted stock units forfeited		(400,249	)		7.52
Restricted stock units vested		(3,843,577	)		7.71
Nonvested restricted stock units outstanding at March 31, 2026		9,043,632		$	9.13

Performance-Based Restricted Stock Units

One of our executive officers was granted an award of 124,976 shares of performance-based restricted stock units in 2025 (which had a grant date fair value of $7.28 per share), which was subsequently forfeited during the three months ended March 31, 2026, given the related financial metric was not achieved.

Separately, during the three months ended March 31, 2026, our executive officers were granted awards of performance-based restricted stock units. The total number of shares of common stock that may be earned under the respective awards range from zero shares to 603,746 shares and are calculated based on an MRD revenue compound annual growth rate metric, as measured over a three-year performance period. 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 Units

Separate from the restricted stock units described above, 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 three months ended March 31, 2026 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, 2025		5,356,880		$	11.07
Maximum market-based restricted stock units granted		603,758			27.15
Market-based restricted stock units vested		(1,418,440	)		13.82
Nonvested maximum market-based restricted stock units outstanding at March 31, 2026		4,542,198		$	12.35

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

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 three months ended March 31, 2026 and 2025 was $16.44 and $8.12, respectively.

The weighted-average grant date fair value per share of the performance-based restricted stock units granted during the three months ended March 31, 2026 and 2025 was $16.44 and $7.28, respectively, 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 is recognized ratably over the requisite service period, at the estimated attainment level, only if achievement of the performance attainment level is deemed probable. Previously recognized compensation cost will be reversed to the extent a prior attainment level is no longer deemed probable or is deemed not met. Probability of achievement is assessed periodically. If a grantee ceases to provide continued service through the applicable vesting date 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 three months ended March 31, 2026 and 2025 was $27.15 and $13.50, 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. 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, performance-based restricted stock units and market-based restricted stock units for the three months ended March 31, 2026 and 2025 are included on the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended March 31,
	2026		2025
Cost of revenue	$	713	$	879
Research and development		3,471		4,058
Sales and marketing		3,229		3,144
General and administrative		4,515		4,066
Total share-based compensation expense	$	11,928	$	12,147

As of March 31, 2026, 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	$	4,490		2.29
Nonvested restricted stock units		78,814		3.00
Nonvested performance-based restricted stock units		4,841		2.93
Nonvested market-based restricted stock units		18,674		2.25

Adaptive Biotechnologies Corp 10-Q