Stockholders’ Equity

Issuances of Common Stock

During the three months ended March 31, 2018, the Company issued 202,851 shares of common stock in conjunction with the vesting and release of RSUs. The Company also issued 291,555 shares of common stock upon the exercise of stock options and 21,342 shares of common stock in connection with the Company’s employee stock purchase plan (the “ESPP”), resulting in net proceeds to the Company of approximately $5.7 million during the three months ended March 31, 2018. The Company withheld 72,713 shares of outstanding common stock in connection with payment of minimum tax withholding obligations for certain employees relating to the lapse of restrictions on certain RSUs with a value of approximately $3.2 million during the three months ended March 31, 2018.

During the three months ended March 31, 2017, the Company issued 57,713 shares of common stock in conjunction with the vesting and release of RSUs. The Company also issued 222,378 shares of common stock upon the exercise of stock options and 32,358 shares of common stock in connection with the Company’s ESPP, resulting in net proceeds to the Company of approximately $3.1 million during the three months ended March 31, 2017. The Company withheld 21,538 shares of outstanding common stock in connection with payment of minimum tax withholding obligations for certain employees relating to the lapse of restrictions on certain RSUs with a value of approximately $0.4 million during the three months ended March 31, 2017.

As discussed in Note 6, during the three months ended March 31, 2018, the Company issued 2,427,547 of common stock in exchange for $70.2 million in aggregate principal of the Convertible Senior Notes.

Stock-Based Compensation

The compensation expense related to the Company’s stock-based compensation plans included in the accompanying Consolidated Statements of Income was as follows (in thousands):



	Three months ended March 31,
	Three months ended March 31,
	2018		2017
Cost of sales	$	231	$	130
Research and development	592		412
Sales and marketing	796		470
General and administrative	1,317		909
Total stock-based compensation expense	$	2,936	$	1,921

Total compensation expense recognized for the three months ended March 31, 2018 includes $1.0 million related to stock options and $1.9 million related to RSUs. Total compensation expense recognized for the three months ended March 31, 2017 includes $1.1 million related to stock options and $0.8 million related to RSUs. As of March 31, 2018, total unrecognized compensation expense related to non-vested stock options was $7.0 million, which is expected to be recognized over a weighted-average period of approximately 2.3 years. As of March 31, 2018, total unrecognized compensation expense related to non-vested restricted stock was $13.5 million, which is expected to be recognized over a weighted-average period of approximately 2.5 years. Compensation expense capitalized to inventory and compensation expense related to the Company’s ESPP were not material for the three months ended March 31, 2018 or 2017.

The estimated fair value of each stock option was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for the option grants.



	Three months ended March 31,
	2018		2017
Risk-free interest rate	2.49	%	2.33	%
Expected option life (in years)	6.29		6.63
Volatility rate	36	%	36	%
Dividend rate	—	%	—	%

The weighted-average fair value of stock options granted during the three months ended March 31, 2018 and 2017 was $18.76 and $8.55, respectively. The Company granted 158,758 and 230,261 stock options during the three months ended March 31, 2018 and 2017, respectively. The fair value of RSUs is determined based on the closing market price of the Company’s common stock on the grant date. The weighted-average fair value of RSUs granted during the three months ended March 31, 2018 and 2017 was $46.48 and $21.06, respectively. The Company granted 184,377 and 289,338 shares of restricted stock during the three months ended March 31, 2018 and 2017, respectively.