Employee Equity-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Employee Equity-Based Compensation

NOTE 12. EMPLOYEE EQUITY-BASED COMPENSATION

The following table summarizes option activity under all plans for the three months ended March 31, 2020:

	Number of Shares	Weighted Average Exercise Price per Share
Options Outstanding January 1, 2020	10,132,562	$	12.28
Granted	1,136,303	7.72
Forfeited	(83,896)	16.86
Exercised	(266,725)	4.94
Expired	(67,193)	20.04
Options Outstanding March 31, 2020	10,851,051	$	11.90

The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020			2019
Expected term (in years)	5.98			6.17
Volatility	56		%	62		%
Expected dividends	—			—
Risk free interest rates	0.74		%	2.59		%
Weighted average fair value	$	3.98		$	6.90

The following table shows summary information for outstanding options and options that are exercisable (vested) as of March 31, 2020:

	Options Outstanding		Options Exercisable
Number of options	10,851,051		656,318
Weighted average remaining contractual term (in years)	5.99		4.10
Weighted average exercise price	$	11.90	$	9.78
Weighted average fair value	$	7.53	$	6.38
Aggregate intrinsic value (in thousands)	$	22,821	$	21,281

The following table summarizes RSU and restricted stock award activity for the three months ended March 31, 2020:

	Number of Shares	Weighted Average Grant Date Fair Value per Share
Outstanding January 1, 2020	14,332	$	16.66
Granted	147,766	9.66
Forfeited	(4,666)	14.67
Vested/released	(3,234)	14.51
Outstanding March 31, 2020	154,198	$	10.05

The table below summarizes equity-based compensation expense for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
Cost of sales	$	71	$	55
Research and development	1,123		1,527
Sales, general and administrative	3,005		1,815
	$	4,199	$	3,397

For each of the three months ended March 31, 2020 and 2019, $0.1 million of share-based compensation cost was capitalized to inventory or inventory transferred to property and equipment (also referred to as instruments).

As of March 31, 2020, unrecognized equity-based compensation expense related to unvested stock options and unvested RSUs was $23.4 million and $0.8 million, respectively. This is expected to be recognized over the years 2020 through 2025.

Included in the above-noted stock options outstanding and stock compensation expense are performance-based stock options which vest only upon the achievement of certain targets. Performance-based stock options are generally granted at-the-money, contingently vest over a period of 1 to 2 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These options were valued in the same manner as the time-based options, with the assumption that performance goals will be achieved. The inputs for expected volatility, expected dividends, and risk-free rate used in estimating those options’ fair value are the same as the time-based options issued under the plan. The expected term for performance-based stock options is 5 to 6 years. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options.

In August 2018, the Company granted 225,000 performance-based stock options. The performance obligations were met for 75,000 options and are exercisable as of March 31, 2020. Of the 225,000 performance-based stock options granted 100,000 performance-based stock options were forfeited for the performance targets not being achieved.

125,000 performance-based stock options were outstanding as of March 31, 2020, which included 50,000 performance-based stock options not yet probable of being achieved and have not started being expensed. No performance-based stock options have been exercised as of March 31, 2020. For the three months ended March 31, 2020 and 2019, the Company recognized $0 and $0.1 million of stock compensation expense for performance-based stock options, respectively.

Included in the above-noted RSU and restricted stock award outstanding amount are performance-based RSU's which vest only upon the achievement of certain targets. Performance-based RSU's contingently vest over a period of 3 years, depending on the nature of the performance goal, and have contractual lives of 10 years. These units were valued in the same manner as other RSUs, based on the published closing market price on the day before the grant date. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. For the three months ended March 31, 2020 the Company granted 95,866 performance-based RSU's, all of which were outstanding at March 31, 2020. None of the performance goals had become probable of being achieved, and no expense was recorded at March 31, 2020.