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Stock Incentive Plans

6 Months Ended

Jun. 30, 2020

Note 10 — Stock Incentive Plans

2007 Equity Incentive Plan

In April 2020, the Company’s Board of Directors approved, and in June 2020, the Company’s stockholders approved, the sixth Amended and Restated 2007 Equity Incentive Plan (the “Sixth Amended 2007 Plan”). The Sixth Amended 2007 Plan included an increase of 7,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan.

Performance-based equity awards

The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) has awarded PSOs and/or PSUs to the Company’s executives and certain other employees. These performance-based awards are subject to the achievement of specified annual performance goals. They become eligible to vest only if the applicable performance goals are achieved and will vest only if the grantee remains employed with the Company through each applicable vesting date. The number of shares that may vest depend on the extent to which the Company achieves the specified annual performance goals. The fair value of these awards is estimated on the date of grant. The PSOs have a contractual term of 10 years. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized, and any previously recognized expense is reversed. The expected cost is based on the awards that are probable to vest and is recognized over the service period.

2007 Employee Stock Purchase Plan

In April 2017, the Company’s Board of Directors approved, and in June 2017, the Company’s stockholders approved, the Amended and Restated 2007 Employee Stock Purchase Plan (the “Amended 2007 Purchase Plan”). The Amended 2007 Purchase Plan included an increase of 4,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan and removal of the expiration date of the plan.

2018 Equity Inducement Plan

In April 2018, the Compensation Committee of the Company’s Board of Directors adopted the 2018 Equity Inducement Plan (the “2018 Plan”). The 2018 Plan replaced the Company’s 2008 Equity Inducement Plan that expired by its terms in March 2018, and is intended to augment the shares available for issuance under the Fourth Amended 2007 Plan. The Company did not seek stockholder approval for the 2018 Plan. As such, awards under the Inducement Plan will be granted in accordance with Nasdaq Listing Rule 5635(c)(4) and only to persons not previously considered an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Company initially reserved 400 shares of common stock for issuance under the 2018 Plan.

RSU Activity

A summary of the Company’s RSU activity for the six months ended June 30, 2020 is as follows:


		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	3,951	$	5.66
Granted	3,013	$	6.40
Vested	(885)	$	4.88
Forfeited	(190)	$	5.78
Awarded and unvested, June 30, 2020	5,889	$	6.15	1.73	$	54,592

PSU Activity

A summary of the Company’s PSU activity for the six months ended June 30, 2020 is as follows:


		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Units	Grant Date		Contractual		Intrinsic
	Outstanding	Fair Value		Term (Years)		Value
Awarded and unvested, December 31, 2019	5,417	$	6.06
Vested	(276)	$	3.61
Forfeited	(1,370)	$	6.85
Awarded and unvested, June 30, 2020	3,771	$	5.95	1.24	$	34,953

PSUs expected to vest at June 30, 2020	1,625	$	5.56	0.63	$	15,068

PSO Activity

A summary of the Company’s PSO activity for the six months ended June 30, 2020 is as follows:


		Weighted		Weighted
	Number of	Average		Average Remaining		Aggregate
	Shares	Exercise		Contractual		Intrinsic
	Outstanding	Price		Term (Years)		Value
Balance as of December 31, 2019	6,583	$	4.54
Canceled	(1,377)	$	6.18
Exercised	(948)	$	3.61
Balance as of June 30, 2020	4,258	$	4.21	7.53	$	21,531

PSOs expected to vest at June 30, 2020	526	$	3.60	7.35	$	2,984
PSOs exercisable at June 30, 2020	2,800	$	3.59	7.30	$	15,892

Stock Option Activity

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2020:


	Options Outstanding
		Weighted		Weighted
	Number	Average		Average Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value
Balances at December 31, 2019	16,288	$	3.56
Options granted	210	$	9.00
Options canceled	(287)	$	5.35
Options exercised	(3,460)	$	3.36
Balances at June 30, 2020	12,751	$	3.66	6.98	$	71,487

Options exercisable at June 30, 2020	8,619	$	3.28	6.71	$	51,668

The aggregate intrinsic value in the preceding table is calculated as the difference between the exercise price of the underlying awards and the quoted closing price of the Company’s common stock on The Nasdaq Global Select Market of $9.27 per share as of June 30, 2020 (the last trading day in the quarter). Cash proceeds, net of taxes, from option exercises were $14,873 and $860 during the six months ended June 30, 2020 and 2019, respectively.

Stock-Based Compensation

The cost of RSUs and PSUs are determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost for stock options, RSUs and performance-based awards with a single vesting date is amortized ratably over the requisite service period. For performance-based awards that have multiple vesting dates, the compensation cost is recognized ratably over the requisite service period for each tranche, whereby each vesting tranche is treated as a separate award for determining the requisite service period. The compensation cost for performance-based awards may be adjusted over the vesting period based on interim estimates of performance against the pre-set financial performance measures.

Under Accounting Standard Codification 718, Compensation-Stock Compensation (“ASC 718”), the Company estimated the fair value of each option award on the grant date using the Black-Scholes option valuation model and the weighted average assumptions noted in the following tables:


Stock Options
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Dividend yield	—	%	—	%	—	%	—	%
Risk-free interest rate	0.28	%	2.07	%	0.28	%	2.15	%
Expected volatility	69.3	%	56.1	%	69.3	%	56.1	%
Expected term (years)	4.00		4.00		4.00		4.00

The expected term of stock options gave consideration to early exercises, post-vesting cancellations and the options’ contractual term ranging from 6 to 10 years. The Company based its expected volatility on its own historical volatility. The Company did not grant any PSOs during the three and six months ended June 30, 2020 and 2019. The weighted-average fair value of stock options granted during the three and six months ended June 30, 2020 was $4.63 per share. The weighted-average fair value of stock options granted during the three and six months ended June 30, 2019 was $3.88 and $3.94 per share, respectively.

The following table summarizes the consolidated stock-based compensation expense by line items in the condensed consolidated statement of operations:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Research and development (1)	$	5,298	$	1,128	$	9,260	$	5,074
Sales and marketing		1,013		55		1,888		881
General and administrative		1,795		852		3,340		2,887
Total stock-based compensation expense (2)	$	8,106	$	2,035	$	14,488	$	8,842

(1)	For the three and six months ended June 30, 2020, stock-based compensation expense recorded in research and development includes $486 and $630 from PSUs classified as liabilities.

(2)	Stock-based compensation expense for the three and six months ended June 30, 2019 included a reversal of previously accrued expense of $2,526 due to a decrease in the vesting probability of certain performance-based equity awards.

The following table summarizes total compensation expense related to unvested awards not yet recognized as of June 30, 2020:


	Unrecognized Compensation
	Expense for Unvested
	Awards
Stock options	$	8,276
RSUs		33,063
PSUs (1)		7,048
PSOs		638
Total unrecognized compensation expense	$	49,025

(1)

The unrecognized compensation expense for PSUs classified as equity and vesting in fiscal years 2022 and 2023, except for PSUs classified as liabilities, is excluded in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods.

The unrecognized compensation expense related to stock options and RSUs will be recognized over a weighted average period of 1.47 years and 3.30 years, respectively. The unrecognized compensation expense related to PSOs and PSUs, except for performance awards classified as equity and vesting in fiscal years 2022 and 2023, will be recognized over a weighted average period of 0.63 years.