5. STOCK‑BASED COMPENSATION

Stock-Based Compensation Plans

In October 2018, our Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”) and ceased granting awards under the 2012 Equity and Performance Incentive Plan (the “2012 Plan”). The 2018 Plan became effective with the completion of our IPO. Any remaining shares available for issuance under the 2012 Plan as of our IPO effectiveness date are not available for future issuance. However, shares subject to stock awards granted under the 2012 Plan (a) that expire or terminate without being exercised, (b) that are forfeited under an award, or (c) that are transferred, surrendered, or relinquished upon the payment of any exercise price by the transfer to us of our common stock or upon satisfaction of any withholding amount, return to the 2018 Plan share reserve for future grant.

Subject to adjustments as described above, the 2018 Plan provides for up to 4.8 million shares of authorized stock to be awarded as stock options, appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, cash incentive awards, and certain other awards based on or related to shares of our common stock. The 2012 Plan provided for up to 8.8 million shares of authorized stock to be awarded as either stock options or RSUs.

We recognized $4.0 million and $3.0 million for the three months ended March 30, 2019 and March 31, 2018, respectively, of non-cash stock-based compensation expense in the accompanying condensed consolidated statements of operations. As of March 30, 2019, total unrecognized non-cash stock-based compensation expense for unvested options was $18.8 million and will be recognized over the next three years. As of March 30, 2019, total unrecognized non-cash stock-based compensation expense for unvested performance-based RSUs was $42.7 million and will be recognized upon consummation of a change in control. As of March 30, 2019, total unrecognized stock-based compensation expense for unvested RSUs and deferred stock units (“DSUs”) was $0.1 million and $0.1 million, respectively, which will be recognized immediately prior to the first annual meeting of our stockholders at which directors are elected, subject to the non-employee director’s continued service through the applicable vesting date. However, both awards of RSUs and DSUs are subject to accelerated vesting in the event the non-employee director dies or becomes disabled or in the event of a change in control.

On February 13, 2019, we granted 2,948 RSUs and 1,141 DSUs to a new member of our Board of Directors. The RSUs and DSUs will vest immediately prior to the first annual meeting of our stockholders at which directors are elected, subject to the non-employee director’s continued service through the applicable vesting date. However, both awards of RSUs and DSUs are subject to accelerated vesting in the event the non-employee director dies or becomes disabled or in the event of a change in control. On February 15, 2019, we granted 540,952 options and 280,196 RSUs to various employees. Each of the stock options and RSUs have a ten year term and vest in accordance with the following schedule: (a) one-third will vest on the first anniversary of the grant date, and (b) an additional one-sixth will vest on the first four six-month anniversaries of the initial vesting date.

Stock Options Fair Value

The exercise price of options granted under the 2012 Plan and 2018 Plan is equal to the estimated fair market value of our common stock at the date of grant. Before our IPO in October 2018, we estimated the fair value of our common stock based on the appraisals performed by an independent valuation specialist. Subsequent to our IPO, we began using the market closing price for our common stock as reported on the New York Stock Exchange.

We estimate the fair value of stock options on the date of grant using a Black‑Scholes option‑pricing valuation model, which uses the expected option term, stock price volatility, and the risk‑free interest rate. The expected option term assumption reflects the period for which we believe the option will remain outstanding. We elected to use the simplified method to determine the expected option term, which is the average of the option’s vesting and contractual term. Our computation of expected volatility is based on the historical volatility of selected comparable publicly-traded companies over a period equal to the expected term of the option. The risk‑free interest rate reflects the U.S. Treasury yield curve for a similar instrument with the same expected term in effect at the time of the grant.

The following assumptions were utilized to calculate the fair value of stock options granted during the three months ended March 30, 2019:


		Three Months Ended
		March 30,
		2019
Expected option term		6 years
Expected stock price volatility		27%
Risk-free interest rate		2.5%
Expected dividend yield		–%