Stock option plan

12 Months Ended

Sep. 30, 2020

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

13. Stock option plan

2018 Equity Incentive Plan

On September 26, 2018, the board of directors adopted the 2018 Equity Incentive Plan (the 2018 Plan) as a successor to the 2013 Stock Plan. The maximum aggregate number of shares that may be issued under the 2018 Plan is 5,856,505 shares of the Company’s common stock. The number of shares reserved for issuance under the 2018 Plan will be increased automatically on the first day of each fiscal year, following the fiscal year in which the 2018 Plan became effective, by a number equal to the least of 999,900 shares, 4% of the shares of common stock outstanding at that time, or such number of shares determined by the Company’s board of directors. The common shares issuable under the 2018 Plan were registered pursuant to a registration statement on Form

S-8

on November 1, 2018.

On September 1, 2020, the board of directors approved the implementation of a revised annual equity award program for executive officers and senior level employees to be granted as performance-based stock units (PSUs) under the 2018 Plan. The number of PSUs ultimately earned under these awards is calculated based on the

achievement of

certain total revenue threshold during the fiscal year ending September 30, 2022. The percentage of performance stock units that vest will depend on the board of directors’ determination of total revenue at the end of the performance period and can range from 0% to 150% of the number of units granted. The provisions of the PSU are considered a performance condition, and the effects of that performance condition are

not

reflected in the grant date fair value of the awards. The Company used the

Black-Scholes

method to calculate the fair value at the grant date without regard to the vesting condition and will recognize compensation cost for the units that are expected to vest. The Company determined 225,396 shares are expected to vest under this equity award program. The weighted-average grant date fair value was determined to be $43.06 per share. As of September 30, 2020, the unrecognized compensation costs related to these awards were $9.3 million. The Company expects to recognize those costs over a weighted average period of 2.0 years.

Any shares subject to outstanding awards under the 2013 Stock Plan that are canceled or repurchased subsequent to the 2018 Plan’s effective date are returned to the pool of shares reserved for issuance under the 2018 Plan. Awards granted under the 2018 Plan may be nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance units.

2018 Employee Stock Purchase Plan

On September 26, 2018, the board of directors adopted the 2018 Employee Stock Purchase Plan (the 2018 ESPP). A total of 275,225 shares of the Company’s common stock have been reserved for issuance under the 2018 ESPP. The number of shares reserved for issuance under the 2018 ESPP will be increased automatically on the first day of each fiscal year, following the fiscal year in which the 2018 ESPP becomes effective, by a number equal to the least of 249,470 shares, 1% of the shares of common stock outstanding at that time, or such number of shares determined by the Company’s board of directors. The number of shares reserved for issuance as at September 30, 2020 is as follows:


(In thousands)	Shares available
Outstanding at September 30, 2019		56
Additional shares authorized		249
Shares issued during the period		(126	)

Outstanding at September 30, 2020		179

Subject to any plan limitations, the 2018 ESPP allows eligible service providers (through qualified and

non-qualified

offerings) to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods are beginning in February and August of each year, except the initial offering period which commenced with the initial public offering in October 2018 and ended on August 20, 2019. The common shares issuable under the 2018 ESPP were registered pursuant to a registration statement on Form

S-8

on November 26, 2018.

Unless otherwise determined by the board of directors, the Company’s common stock will be purchased for the accounts of employees participating in the 2018 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period, which for the initial offering period is the price at which shares of the Company’s common stock were first sold to the public, or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period. During the year

ended September 30, 2020 and 2019, activity under the 2018 ESPP was immaterial.

Activity under the equity incentive plans during the year ended September 30, 2020 is as follows:


(In thousands, except per share data)	Shares available			Options outstanding			Weighted average exercise price per share		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Outstanding at September 30, 2019		1,521			3,550		$	15.99		8.3	$	31,998
Additional shares authorize d		1,000			—			—
Stock options granted		(1,481	)		1,481			35.49
Stock options exercised		—			(915	)		11.50
Stock options forfeited		203			(203	)		23.39
Restricted stock units granted		(312	)		—			—
Early exercised options repurchased		2			—			—
Forfeiture of restricted stock units		30			—			—
Shares withheld for payment of taxes		71			—			—

Outstanding at September 30, 2020		1,034			3,913		$	24.35		8.1	$	204,365

Vested or expected to vest at September 30, 2020					3,913		$	24.35		8.1	$	204,365
Vested and exercisable at September 30, 2020					1,312		$	14.26		7.0	$	80,995

As of September 30, 2020, there was $42.4 million of total unrecognized compensation cost related to

non-vested

stock options under the equity incentive plans that are expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock Units

Restricted stock primarily consists of restricted stock unit awards (RSUs) which have been granted to employees. The value of an RSU award is based on the Company’s stock price on the date of grant. The shares underlying the RSU awards are not issued until the RSUs vest. Upon vesting, each RSU converts into one share of the Company’s common stock.

Activity with respect to the Company’s restricted stock units during the year ended September 30, 2020 is as follows:


(in thousands, except per share data)	Number of Shares			Weighted average grant date fair value per share		Weighted average remaining contractual term (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2019		462		$	26.16		3.9	$	8,959
Restricted stock units granted		312			38.66		—		—
Restricted stock units vested		(175	)		26.36		—		—
Restricted stock units forfeited		(30	)		26.12		—		—
Outstanding at September 30, 2020		569		$	32.96		3.2	$	43,260

Expected to vest at September 30, 2020		569		$	32.96		3.2	$	43,260

As of September 30, 2020, there was $17.6 million of total unrecognized compensation cost related to these issuances that is expected to be recognized over a weighted average period of 2.8 years.

Stock-based compensation

Total stock-based compensation expense recognized were as follows:


	Year ended September 30,
(in thousands)	2020		2019		2018
Cost of revenues	$	1,290	$	1,345	$	376
Research and development		3,346		2,378		705
Selling, general and administrative		12,460		7,447		1,880

Total stock-based compensation	$	17,096	$	11,170	$	2,961

The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of a stock option. The Black-Scholes model requires various assumptions, including the fair value of the Company’s common stock, expected term, expected dividend yield and expected volatility.

The expected volatility of the Company’s stock options is estimated from the historical volatility of selected public companies with comparable characteristics to it, including similarity in size and lines of business. The expected term of stock options represents the period that the Company’s stock-options are expected to be outstanding before being exercised. The risk-free interest rate is based on the implied yield currently available on U.S. treasury notes with terms approximately equal to the expected life of the option. The expected dividend rate is zero as the Company currently has no history or expectation of declaring cash dividends on the Company’s common stock.

The fair value of options granted during the years ended September 30, 2020, 2019 and 2018, respectively, were calculated using the weighted average assumptions set forth below:


	Year ended September 30,
	2020			2019			2018
Expected term (years)		6.2			6.4			6.3
Expected volatility		62.1	%		60.2	%		66.3	%
Risk-free interest rate		1.3	%		2.7	%		2.7	%
Dividend yield		0	%		0	%		0	%

Weighted average grant date fair value of options granted during the years ended September 30, 2020, 2019 and 2018 were $20.76, $15.06 and $7.08, respectively.

Shares subject to repurchase

The Company has a right of repurchase with respect to unvested shares issued upon early exercise of options at an amount equal to the original exercise price of each unvested share being repurchased. The Company’s right to repurchase these shares lapses pursuant to the vesting schedule of the original grant, which is generally 25% on the first anniversary of the original grant and ratably on a monthly basis over the remaining 36 months. As of September 30, 2020, 16,815 shares remain subject to the Company’s right of repurchase.