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Share - Based Compensation Plans
 12 Months Ended
Oct. 02, 2020
Share-based Payment Arrangement [Abstract]  
Share - Based Compensation Plans SHARE-BASED COMPENSATION PLANS
Stock Plans
We have three equity incentive plans: the Amended and Restated 2009 Omnibus Stock Plan (“2009 Plan”), the 2012 Omnibus Incentive Plan, as amended (“2012 Plan”) and the 2012 Employee Stock Purchase Plan, as amended and restated (“ESPP”).
Upon the closing of our initial public offering, all shares that were reserved under the 2009 Plan but not awarded were assumed by the 2012 Plan. No additional awards will be made under the 2009 Plan. Under the 2012 Plan, we have the ability to issue incentive stock options (“ISOs”), nonqualified stock options (“NQs”), stock appreciation rights, restricted stock (“RSAs”), restricted stock units (“RSUs”), performance-based stock units (“PRSUs”) and other equity-based awards to employees, directors and outside consultants. The ISOs and NQs must be granted at a price per share not less than the fair value of our common stock on the date of grant. Options granted to date primarily vest based on certain market-based and performance-based criteria as described below. Certain of the share-based awards granted and outstanding as of October 2, 2020, are subject to accelerated vesting upon a sale of the Company or similar changes in control. Options granted generally have a term of four to seven years.
As of October 2, 2020, we had 17.0 million shares available for future issuance under the 2012 Plan and 3.6 million shares available for issuance under our ESPP.
Outside of the three equity plans described above, we also grant incentive stock units (“ISUs”) to certain of our international employees which typically vest over four years and for which the fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting. As of October 2, 2020, we had 225,523 ISU awards outstanding with a fair
value of $7.6 million and an associated accrued compensation liability of $4.6 million. As of September 27, 2019, we had approximately 195,598 ISU awards outstanding with a fair value of $2.0 million recorded as an accrued compensation liability. During fiscal years 2020, 2019 and 2018, 62,344, 69,035 and 68,813 ISU awards vested and were paid at a fair value of $1.9 million, $1.2 million and $1.4 million, respectively. We recorded an expense for these ISU awards of $4.4 million in fiscal year 2020, primarily as a result of an increase in our stock price, and we recorded an expense of $1.3 million and a gain of $1.1 million in fiscal years 2019 and 2018, respectively. These expenses are not included in the share-based compensation expense totals below.
Employee Stock Purchase Plan
The ESPP allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. In administering the ESPP, the board of directors has limited discretion to set the length of the offering periods thereunder. As of October 2, 2020, total unrecognized compensation cost related to the ESPP was $0.3 million. In fiscal years 2020, 2019 and 2018, 272,469, 421,777 and 305,851 shares of common stock were issued under the ESPP, respectively.
The 2012 Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock available for issuance under the 2012 Plan can be increased on the first day of each fiscal year by the lesser of (a) 4.0% of outstanding common stock on a fully diluted basis as of the end of the immediately preceding fiscal year, (b) 1.9 million shares of common stock and (c) a lesser amount determined by the board of directors; provided, however, that any shares from any increases in previous years that are not actually issued will continue to be available for issuance under the 2012 Plan. The ESPP also contains an “evergreen” provision, pursuant to which the number of shares of common stock available for issuance under the ESPP can be increased on the first day of each fiscal year by the lesser of (a) 1.25% of outstanding common stock on a fully diluted basis as of the end of the immediately preceding fiscal year, (b) 550,000 shares of common stock and (c) a lesser amount determined by the board of directors; provided, however, that any shares from any increases in previous years that are not actually issued will continue to be available for issuance under the ESPP.
In fiscal year 2020, pursuant to the evergreen provisions, the number of shares of common stock available for issuance under the 2012 Plan and the ESPP were increased by 1.9 million shares and 550,000 shares, respectively.

Share-Based Compensation
The following table shows a summary of share-based compensation expense included in the Consolidated Statements of Operations during the periods presented (in thousands): 
Fiscal Years
202020192018
Cost of revenue$3,609 $2,936 $3,869 
Research and development12,794 8,551 13,448 
Selling, general and administrative19,271 12,305 14,620 
Total$35,674 $23,792 $31,937 
As of October 2, 2020, the total unrecognized compensation costs related to outstanding stock options, restricted stock awards and units including awards with time-based, performance-based, and market-based vesting was $45.3 million, which we expect to recognize over a weighted-average period of 2.1 years.

Stock Options
A summary of stock option activity for fiscal year 2020 is as follows (in thousands, except per share amounts and contractual term):
Number of SharesWeighted-Average Exercise Price per ShareWeighted-Average Remaining Contractual Term (in Years)Aggregate Intrinsic Value
Options outstanding - September 27, 2019376 $13.58 
Granted— — 
Exercised(51)3.70 
Forfeited, canceled or expired— — 
Options outstanding - October 2, 2020325 $15.12 6.99$6,071 
Options vested and expected to vest - October 2, 2020325 $15.12 6.99$6,071 
Options exercisable - October 2, 202040 $17.50 3.57$652 
Aggregate intrinsic value represents the difference between our closing stock price on October 2, 2020, and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was $1.4 million, $0.7 million and $0.9 million for fiscal years 2020, 2019 and 2018, respectively.
Stock Options with Market-based Vesting Criteria
We grant NQs that are subject to vesting only upon the market price of our underlying public stock closing above a certain price target within seven years of the date of grant. Share-based compensation expense is recognized regardless of the number of awards that are earned based on the market condition and is recognized on a straight-line basis over the estimated service period of approximately three years. If the required service period is not met for these options, then the share-based compensation expense would be reversed. In the event that our common stock achieves the target price per share based on a 30-day trailing average prior to the end of the estimated service period, any remaining unamortized compensation cost will be recognized.
There were no stock options with market-based vesting criteria granted for fiscal year 2020. Stock options with market-based vesting criteria granted for fiscal years 2019 and 2018 were 585,000 and 325,000, respectively, at weighted average grant date fair values of $7.47 and $15.52 per share, or total grant date fair value of $2.4 million and $5.0 million, respectively.
These NQs with market-based vesting criteria were valued using a Monte Carlo simulation model. The weighted average Monte Carlo input assumptions used for calculating the fair value of these market-based stock options are as follows:
Fiscal Years
20192018
Risk-free interest rate2.8 %2.3 %
Expected term (years)3.93.4
Expected volatility51.9 %45.8 %
Target price$53.87$98.99
During our fiscal first quarter of 2019, we canceled 1,122,500 performance-based stock options with a concurrent grant of 748,328 PRSUs for 13 then current employees, which was accounted for as a modification. The incremental compensation cost resulting from the modification was $8.2 million, and was being recognized as share-based compensation expense over the requisite service period of three years for the new PRSU awards. As a result of subsequent actions that resulted in forfeitures, the remaining compensation expense associated with this modification as of October 2, 2020 was $1.7 million.

Restricted Stock Awards and Units
A summary of restricted stock awards and units activity for fiscal year 2020 is as follows (in thousands):
Number of SharesWeighted-Average Grant Date Fair Value
Issued and unvested - September 27, 20192,615 $21.81 
Granted1,210 22.07 
Vested(648)26.24 
Forfeited, canceled or expired(389)22.18 
Issued and unvested - October 2, 20202,788 20.84 
The total fair value of restricted stock awards and units vested was $19.1 million, $11.7 million and $19.7 million for the fiscal years 2020, 2019 and 2018, respectively. RSUs granted generally vest over a period of three or four years.
In addition to RSUs, we also issue PRSUs with specific performance vesting criteria. These PRSUs have both a service and performance-based vesting condition and awards are divided into three equal tranches and vest based on achieving certain adjusted earnings per share growth metrics. The service condition requires participants to be employed in November following the performance period in which the performance condition was met, when the Company's annual financial performance is announced to the financial markets. Depending on the actual performance achieved, a participant may earn between 0% to 300% of the targeted shares for each tranche, which is determined based on a straight-line interpolation applied for the achievement between the specified performance ranges. As of October 2, 2020, the performance condition for 147,929 target shares had been met, and 443,787 shares with a total grant date fair value of $7.9 million vested in November 2020 when the service condition was achieved. During fiscal year 2020, we granted 132,668 PRSUs and 168,481 were forfeited. The amount of incremental PRSU awards that could ultimately vest if all performance criteria are achieved would be 1,388,898 shares assuming a maximum of 300% of the targeted shares.
We granted 200,000 market-based RSUs during fiscal year 2019, at a weighted average grant date fair value of $17.65 per share, and a total fair value of $3.5 million. Recipients may earn between 0% and 150% of the target number of shares based on the Company's achievement of total stockholder return in comparison to a peer group of companies in the Nasdaq composite index over a
period of approximately three years. The fair value of the awards was estimated using a Monte Carlo simulation and compensation expense is recognized ratably over the service period based on the grant date fair value of the awards of $3.5 million subject to the market condition. The expected volatility of the Company's common stock was estimated based on the historical average volatility rate over the three-year period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free rate assumption was based on observed interest rates consistent with the three-year measurement period. The assumptions used to value the awards are as follows:
Fiscal Year
2019
Risk free interest rate1.9 %
Years to maturity3.33
Expected volatility rate61.5 %
Dividend yield—