
	Employee Benefit Plans

The Company grants options and RSUs under the 2016 Incentive Plan (the "2016 Plan"), under which awards may be granted to all employees. Award vesting periods for this plan are generally four years. As of April 2, 2017, approximately 3.0 million shares were reserved for future grants under the 2016 Plan.

Additionally, the Company sponsors the ESPP, pursuant to which eligible employees may contribute up to 10% of base compensation, subject to certain income limits, to purchase shares of the Company’s common stock. The terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85% of the lesser of the fair market value at the beginning of the offering period or the purchase date. As of April 2, 2017, approximately 0.9 million shares were available for issuance under the ESPP.

Option Activity

Stock option activity during the three months ended April 2, 2017 was as follows:



	Number of shares		Weighted Average Exercise Price Per Share
	(In thousands)		(In dollars)
Outstanding at December 31, 2016	1,884		$	31.14
Granted	—		—
Exercised	(83	)	29.35
Cancelled	—		—
Expired	—		—
Outstanding at April 2, 2017	1,801		$	31.23

RSU Activity

RSU activity during the three months ended April 2, 2017 was as follows:



	Number of shares		Weighted Average Grant Date Fair Value Per Share
	(In thousands)		(In dollars)
Outstanding at December 31, 2016	996		$	36.22
Granted	59		57.00
Vested	(106	)	37.64
Cancelled	(14	)	44.34
Outstanding at April 2, 2017	935		$	37.25

Valuation and Expense Information

The fair value of each option award and share granted under the ESPP commencing February 16, 2016 is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. The estimated expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk free interest rate for options and ESPP shares is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term. Expected volatility for options and ESPP shares is based on historical volatility over the most recent period commensurate with the estimated expected term. Upon the adoption of ASU 2016-09, the Company elected to account for forfeitures as they occur, rather than estimating expected forfeitures. Refer to recently adopted accounting pronouncement under Note 2, Summary of Significant Accounting Policies, for a further discussion of the impact from the adoption of ASU 2016-09.

The table below sets forth the weighted average assumptions used to estimate the fair value of option grants and purchase rights granted under the ESPP during the three months ended April 2, 2017 and April 3, 2016.



	Three Months Ended
	Stock Options		ESPP
	April 2, 2017	April 3, 2016	April 2, 2017	April 3, 2016
Expected life (in years)	N/A	4.4	0.5	0.5
Risk-free interest rate	N/A	1.28%	0.66%	0.42%
Expected volatility	N/A	35.4%	27.6%	44.7%
Dividend yield	N/A	—	—	—

The following table sets forth the stock-based compensation expense resulting from stock options, RSUs and the ESPP included in the Company’s unaudited condensed consolidated statements of operations:



	Three Months Ended
	April 2, 2017		April 3, 2016
	(In thousands)
Cost of revenue	$	436	$	439
Research and development	1,319		866
Sales and marketing	1,247		1,197
General and administrative	2,126		1,909
Total stock-based compensation	$	5,128	$	4,411

As of April 2, 2017, $5.8 million of unrecognized compensation cost related to stock options, adjusted for estimated forfeitures, is expected to be recognized over a weighted-average period of 2.3 years. $25.9 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.1 years.