Note 3 - Stock-based Compensation

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

3. STOCK-BASED COMPENSATION

2014 Equity Incentive Plan (as amended, the “2014 Plan”)

The Board of Directors adopted the 2014 Plan in  April 2013, and the stockholders approved it in  June 2013. In  October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The 2014 Plan, as amended, became effective on  November 13, 2014 and provides for the issuance of up to 5.5 million shares. The 2014 Plan will expire on  November 13, 2024. As of  September 30, 2019, 1.6 million shares remained available for future issuance under the 2014 Plan. 

Stock-Based Compensation Expense

The Company recognized stock-based compensation expenses as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of revenue	$	641	$	471	$	1,834	$	1,384
Research and development		4,960		3,979		14,801		12,168
Selling, general and administrative		15,699		10,393		43,384		32,213
Total stock-based compensation expense	$	21,300	$	14,843	$	60,019	$	45,765
Tax benefit related to stock-based compensation	$	595	$	764	$	2,139	$	2,723

Restricted Stock Units (“RSUs”)

The Company’s RSUs include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued employment with the Company.

A summary of RSU activity is presented in the table below (in thousands, except per-share amounts):

	Time-Based RSUs					PSUs and MPSUs					MSUs					Total
	Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Outstanding at January 1, 2019		240		$	95.38		2,174		$	61.61		2,219		$	35.69		4,633		$	50.94
Granted		47		$	141.03		535	(1)	$	98.45		-		$	-		582		$	101.89
Vested		(88	)	$	79.91		(571	)	$	54.41		(243	)	$	23.57		(902	)	$	48.61
Forfeited		(6	)	$	110.23		(43	)	$	42.72		(7	)	$	68.48		(56	)	$	53.06
Outstanding at September 30, 2019		193		$	113.22		2,095		$	73.37		1,969		$	37.08		4,257		$	58.38

(1) Amount reflects the number of PSUs that  may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period.

The intrinsic value related to vested RSUs was $26.1 million and $13.9 million for the three months ended September 30, 2019 and 2018, respectively. The intrinsic value related to vested RSUs was $110.1 million and $79.0 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the total intrinsic value of all outstanding RSUs was $617.6 million, based on the closing stock price of $155.63. As of September 30, 2019, unamortized compensation expense related to all outstanding RSUs was $120.5 million with a weighted-average remaining recognition period of approximately 3.4 years. 

Cash proceeds from vested PSUs with a purchase price totaled $14.6 million and $9.6 million for the nine months ended September 30, 2019 and 2018, respectively. 

Time-Based RSUs:

For the nine months ended September 30, 2019, the Compensation Committee granted 88,000 RSUs with service conditions to non-executive employees and non-employee directors. The RSUs vest over four years for employees and one year for directors, subject to continued service with the Company.  

2019 PSUs:

In  February 2019, the Compensation Committee granted 151,000 PSUs to the executive officers, which represent a target number of shares to be earned based on the Company’s average two-year (2019 and 2020) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the Semiconductor Industry Association (“2019 Executive PSUs”). The maximum number of shares that an executive officer can earn is 300% of the target number of the 2019 Executive PSUs. 50% of the 2019 Executive PSUs will vest in the first quarter of 2021 if the pre-determined performance goals are met during the performance period. The remaining 2019 Executive PSUs will vest over the following two years on a quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2019 Executive PSUs is $46.6 million.

The 2019 Executive PSUs contain a purchase price feature, which requires the employees to pay the Company $30 per share upon vesting of the shares. Shares that do not vest will not be subject to the purchase price payment. The Company determined the grant date fair value of the 2019 Executive PSUs using the Black-Scholes model with the following assumptions: stock price of $130.67, expected term of 2.6 years, expected volatility of 29.0% and risk-free interest rate of 2.5%.

2004 Employee Stock Purchase Plan (“ESPP”)

For the three months ended September 30, 2019 and 2018, 14,000 and 15,000 shares, respectively, were issued. For the nine months ended September 30, 2019 and 2018, 28,000 and 33,000 shares, respectively, were issued. As of September 30, 2019, 4.5 million shares were available for future issuance under the ESPP.

 The intrinsic value of the shares issued was $0.4 million and $0.6 million for the three months ended September 30, 2019 and 2018, respectively. The intrinsic value of the shares issued was $0.7 million and $1.1 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the unamortized expense was $0.4 million, which will be recognized through the first quarter of 2020. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions: 

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		36.7	%		30.8	%		37.0	%		29.5	%
Risk-free interest rate		1.9	%		2.2	%		2.2	%		2.0	%
Dividend yield		1.1	%		0.9	%		1.1	%		1.0	%

Cash proceeds from the shares issued under the ESPP were $3.3 million and $3.0 million for the nine months ended September 30, 2019 and 2018, respectively.