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Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Equity Incentive Plans

The Company’s equity incentive plans include the 2015 Equity Incentive Plan (the “2015 Plan”), the 2006 Equity Incentive Plan (the “2006 Plan”), and the 2008 Employee Stock Purchase Plan (the “ESPP”). Under these plans, the Company has granted stock options, RSUs, and PSAs. In addition, in connection with certain past acquisitions, the Company has assumed or substituted stock options, RSUs, RSAs, and PSAs granted under the stock plans of the acquired companies. Such awards were converted into or replaced with the Company's stock options, RSUs, RSAs, and PSAs, respectively.

The 2015 Plan was adopted and approved by the Company's stockholders in May 2015 and had an initial authorized share reserve of 38.0 million shares of common stock, plus the addition of any shares subject to outstanding awards under the 2006 Plan and the Amended and Restated 1996 Stock Plan that were outstanding as of May 19, 2015, and that subsequently expire or otherwise terminate, up to a maximum of an additional 29.0 million shares. In May 2017, the Company's stockholders approved an additional 23.0 million shares of common stock for issuance under the 2015 Plan, and in May 2019, the Company's stockholders approved an additional 3.7 million shares of common stock for issuance under the 2015 Plan. As of December 31, 2019, an aggregate of 13.7 million shares were subject to outstanding equity awards under the 2015 Plan and the 2006 Plan. As of December 31, 2019, 16.6 million shares were available for future issuance under the 2015 Plan and no shares were available for future issuance under the 2006 Plan or the 1996 Plan.

The ESPP was adopted and approved by the Company's stockholders in May 2008. To date, the Company's stockholders have approved a share reserve of 35.0 million shares of the Company's common stock for issuance under the ESPP. The ESPP permits eligible employees to acquire shares of the Company’s common stock at a 15% discount (as determined in the ESPP) through periodic payroll deductions of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000 worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar year. The ESPP provides 24 month offering periods with four 6-month purchase periods. A new 24-month offering period will commence every six months thereafter. The purchase price for the Company’s common stock under the ESPP is 85% of the lower of the fair market value of the shares at (1) the beginning of the applicable offering period or (2) the end of each 6-month purchase period during such offering period. The ESPP will continue in effect until February 25, 2028, unless terminated earlier under the provisions of the ESPP. As of December 31, 2019, approximately 28.7 million shares have been issued and 6.3 million shares remain available for future issuance under the ESPP.

During 2019, 2018, and 2017, the Company completed the acquisitions of Mist, HTBase, and Cyphort. In connection with these acquisitions, the Company assumed or substituted an aggregate of 2.2 million shares of stock options, RSUs, RSAs, and PSAs. No additional awards can be granted under the stock plans of the acquired companies. As of December 31, 2019, approximately 3.8 million shares of common stock were outstanding under all awards assumed or substituted through the Company's acquisitions.

RSU, RSA, and PSA Activities

RSUs and RSAs generally vest over three years from the date of grant, and PSAs generally vest over a period of two to three years provided that certain annual performance targets and other vesting criteria are met. Until vested, RSUs and PSAs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

The following table summarizes the Company’s RSU, RSA, and PSA activity and related information as of and for the year ended December 31, 2019 (in millions, except per share amounts and years):



	Outstanding RSUs, RSAs, and PSAs ⁽⁴⁾
	Number of Shares		Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at December 31, 2018	17.4		$	25.32
RSUs granted⁽¹⁾	7.6		25.06
RSUs assumed upon the acquisition of Mist⁽¹⁾	0.1		25.81
RSAs assumed upon the acquisition of Mist⁽¹⁾	0.7		27.20
PSAs granted⁽²⁾	2.1		25.30
RSUs vested⁽³⁾	(5.5	)	25.99
RSAs vested⁽³⁾	(0.2	)	25.32
PSAs vested⁽³⁾	(0.9	)	25.13
RSUs canceled	(2.3	)	25.97
RSAs canceled	(0.1	)	27.65
PSAs canceled	(1.4	)	21.53
Balance at December 31, 2019	17.5		$	25.30	1.1	$	430.9

As of December 31, 2019
Vested and expected-to-vest RSUs, RSAs, and PSAs	16.2		$	25.32	1.1	$	399.2

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⁽¹⁾

The weighted-average grant-date fair value of RSUs, RSAs, and PSAs granted and assumed or substituted during 2019, 2018, and 2017 was $25.26, $25.33, and $27.53, respectively. The grant date fair value of RSUs and PSAs was reduced by the present value of dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested. During 2019, the Company declared a quarterly cash dividend of $0.19 per share of common stock on January 29, 2019, April 25, 2019, July 25, 2019 and October 24, 2019.

⁽²⁾

Includes performance-based and market-based RSUs granted under the 2015 Plan according to their terms. The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to performance-based conditions that would be issued if performance goals determined by the Compensation Committee are achieved at target is 0.7 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is zero to 1.0 million shares. The aggregate number of shares subject to market-based conditions that would be issued if market criteria are achieved at target is 0.2 million shares. Depending on achievement of such market criteria, the range of shares that could be issued under these awards is zero to 0.4 million shares.


⁽³⁾	Total fair value of RSUs, RSAs, and PSAs vested during 2019, 2018, and 2017 was $170.0 million, $200.5 million, and $187.3 million, respectively.


⁽⁴⁾	0.9 million shares of PSAs were modified in 2019, which relate to PSAs granted in 2018 and PSAs assumed by the Company in connection with acquisitions consummated in 2016. Compensation cost resulting from the modifications totaled $21.2 million to be recognized over the remaining terms of the modified awards.

Shares Available for Grant

The following table presents the stock activity and the total number of shares available for grant under the 2015 Plan (in millions):



	Number of Shares
Balance as of December 31, 2018	21.9
Additional shares authorized	3.7
RSUs and PSAs granted⁽¹⁾	(15.5	)
RSUs and PSAs canceled⁽¹⁾⁽²⁾	6.5
Balance as of December 31, 2019	16.6

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⁽¹⁾

In May 2019, the 2015 Plan was amended, and the amendment removed the fungible share adjustment used to determine shares available for issuance. Under the original terms of the 2015 Plan, RSUs and PSAs with a per share or unit purchase price lower than 100% of the fair market value of the Company's common stock on the day of the grant were counted against shares authorized under the plan as two and one-tenth shares of common stock for each share subject to such award. Pursuant to the amendment, beginning on May 14, 2019, each share award granted under the 2015 Plan reduces the share reserve by one share and all share awards granted on May 14, 2019 and thereafter that are later forfeited, canceled or terminated are returned to the share reserve in the same manner. The number of shares subject to PSAs granted represents the maximum number of shares that may be issued pursuant to the award over its full term.

⁽²⁾

Canceled or expired options and canceled RSUs and PSAs under the 2006 Plan are no longer available for future grant under such plan; however, the number of shares available for grant under the 2015 Plan are increased by the amount of such canceled or expired options, RSUs or PSAs, as applicable, up to a maximum of 29.0 million additional shares of common stock, pursuant to the terms of the 2015 Plan.

Employee Stock Purchase Plan

During 2019, 2018, and 2017, employees purchased 2.4 million, 2.5 million and 2.7 million shares of common stock through the ESPP at an average exercise price of $22.04, $22.31, and $20.83 per share, respectively.

Valuation Assumptions

The weighted-average assumptions used and the resulting estimates of fair value for ESPP and market-based RSUs were as follows:



	Years Ended December 31,
	2019	2018	2017
ESPP:
Volatility	27%	29%	25%
Risk-free interest rate	2.1%	1.9%	0.9%
Expected life (years)	1.2	1.2	0.5
Dividend yield	2.9%	2.7%	1.5%
Weighted-average fair value per share	$6.65	$6.93	$6.04

Market-based RSUs:
Volatility	25%	28%	30%
Risk-free interest rate	2.4%	2.4%	1.9%
Dividend yield	2.8%	2.6%	1.4%
Weighted-average fair value per share	$27.32	$28.39	$19.30

Share-Based Compensation Expense

Share-based compensation expense associated with stock options, RSUs, RSAs, PSAs, and ESPP was recorded in the following cost and expense categories in the Company's Consolidated Statements of Operations (in millions):



	Years Ended December 31,
	2019		2018		2017
Cost of revenues - Product	$	5.7	$	6.3	$	4.6
Cost of revenues - Service	17.3		18.0		17.5
Research and development	94.0		120.6		86.6
Sales and marketing	56.0		51.1		55.6
General and administrative	29.2		21.1		23.2
Total	$	202.2	$	217.1	$	187.5

The following table summarizes share-based compensation expense by award type (in millions):



	Years Ended December 31,
	2019		2018		2017
Stock options	$	7.7	$	0.4	$	0.5
RSUs, RSAs, and PSAs	176.5		198.2		171.3
ESPP	18.0		18.5		15.7
Total	$	202.2	$	217.1	$	187.5

For the years ended December 31, 2019, 2018 and 2017, the Company recognized tax benefits on total stock-based compensation expense, which are reflected in the income tax provision in the Consolidated Statements of Operations, of $29.6 million, $33.8 million, and $29.1 million, respectively.

For the years ended December 31, 2019, 2018 and 2017, the realized tax benefit related to awards vested or exercised during the period was $30.6 million, $38.9 million and $64.1 million, respectively. These amounts do not include the indirect effects of stock-based awards, which primarily relate to the research and development tax credit.

As of December 31, 2019, the total unrecognized compensation cost related to unvested share-based awards was $280.7 million to be recognized over a weighted-average period of 1.6 years.

401(k) Plan

The Company maintains a savings and retirement plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended (the "IRC"). Employees meeting the eligibility requirements, as defined under the IRC, may contribute up to the statutory limits each year. The Company currently matches 30% of all eligible employee contributions which vest immediately. The Company’s matching contributions to the plan totaled $20.2 million, $20.2 million, and $21.1 million during 2019, 2018, and 2017, respectively.

Deferred Compensation Plan

The Company’s NQDC plan is an unfunded and unsecured deferred compensation arrangement. Under the NQDC plan, officers and other senior employees may elect to defer a portion of their compensation and contribute such amounts to one or more investment funds. As of December 31, 2019, the liability of the Company to the plan participants was $26.8 million, of which $4.1 million was included within other accrued liabilities and $22.7 million was included in other long-term liabilities on the Consolidated Balance Sheets. The Company had investments of $26.8 million correlating to the deferred compensation obligations, of which $4.1 million was included within prepaid expenses and other current assets and $22.7 million was included within other long-term assets on the Consolidated Balance Sheets. As of December 31, 2018, the liability of the Company was $24.3 million, of which $3.6 million was included within other accrued liabilities and $20.7 million was included in other long-term liabilities on the Consolidated Balance Sheets. The Company had investments of $24.3 million correlating to the deferred compensation obligations, of which $3.6 million was included within prepaid expenses and other current assets and $20.7 million was included within other long-term assets on the Consolidated Balance Sheets.