Stockholders’ Equity

Issuances of Common Stock

During the nine months ended September 30, 2018, the Company issued 275,440 shares of common stock in conjunction with the vesting and release of RSUs. The Company also issued 842,967 shares of common stock upon the exercise of stock options and 49,270 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 $16.0 million during the nine months ended September 30, 2018. The Company withheld 81,247 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 $3.8 million during the nine months ended September 30, 2018.

During the nine months ended September 30, 2017, the Company issued 99,669 shares of common stock in conjunction with the vesting and release of RSUs. The Company also issued 954,527 shares of common stock upon the exercise of stock options and 58,099 shares of common stock in connection with the Company’s ESPP, resulting in net proceeds to the Company of approximately $15.2 million during the nine months ended September 30, 2017. The Company withheld 25,079 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 $0.5 million during the nine months ended September 30, 2017.

As discussed in Note 6, during the nine months ended September 30, 2018, the Company issued 3,699,043 shares of common stock in exchange for $108.8 million in aggregate principal of the Convertible Senior Notes.

Stock-Based Compensation

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



	Three months ended September 30,				Nine months ended September 30,
	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Cost of sales	$	255	$	117	$	751	$	354
Research and development	539		396		1,732		1,212
Sales and marketing	686		434		2,199		1,341
General and administrative	1,295		932		4,508		3,031
Total stock-based compensation expense	$	2,775	$	1,879	$	9,190	$	5,938

Total compensation expense recognized for the three and nine months ended September 30, 2018 includes $0.8 million and $2.7 million related to stock options and $2.0 million and $6.5 million related to RSUs. Total compensation expense recognized for the three and nine months ended September 30, 2017 includes $1.0 million and $3.1 million related to stock options and $0.9 million and $2.8 million related to RSUs. As of September 30, 2018, total unrecognized compensation expense related to non-vested stock options was $5.4 million, which is expected to be recognized over a weighted-average period of approximately 1.9 years. As of September 30, 2018, total unrecognized compensation expense related to non-vested restricted stock was $13.2 million, which is expected to be recognized over a weighted-average period of approximately 2.3 years. Compensation expense capitalized to inventory and compensation expense related to the Company’s ESPP were not material for the three and nine months ended September 30, 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.



	Nine months ended September 30,
	2018		2017
Risk-free interest rate	2.49	%	2.31	%
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 nine months ended September 30, 2018 and 2017 was $18.76 and $8.71, respectively. The Company granted 159,017 and 253,844 stock options during the nine months ended September 30, 2018 and 2017, respectively. The Company granted 231,657 and 335,716 RSUs during the nine months ended September 30, 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 nine months ended September 30, 2018 and 2017 was $49.45 and $21.61, respectively.