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Note 9 - Stock-based Compensation

3 Months Ended

Apr. 03, 2021

Share-based Payment Arrangement [Text Block]

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:

	*Three Months Ended*
	*April 3,*		*March 28,*
(In thousands)	*2021*		*2020*
Cost of revenue	$	666	$	591
Research and development		2,767		2,594
Selling, general, and administrative		7,021		5,543
Total stock-based compensation	$	10,454	$	8,728

Market-Based and Performance-Based Stock Compensation

In the first quarter of fiscal 2021, we granted awards of RSUs with a market condition to certain executives. Under the terms of these grants, the RSUs with a market condition vest and become payable over a three-year period based on the Company’s total shareholder return ("TSR") relative to the Russell 2000 index, which condition is measured for the grants on the third anniversary of the grant date. The awards may vest at 250% or 200%, depending upon the executive, if the 75th percentile of the market condition is achieved, with 100% of the units vesting at the 55th percentile, zero vesting if relative TSR is below the 25th percentile, and vesting scaling for achievement between the 25th and 75th percentile. We also granted awards of RSUs with a performance condition to certain executives. Under the terms of these grants, the RSUs with a performance condition will vest and become payable based on the Company generating specified levels of year-over-year revenue growth, which will be measured annually for one-fourth of the grants after each fiscal year-end through the end of fiscal 2024, with vesting occurring 13 months after the end of each measurement period. Vesting of these awards scales for achievement of year-over-year revenue growth compared to certain targets, with maximum vesting up to 200%.

During the first quarter of fiscal 2021, the market condition for awards granted to certain executives in the first quarter of fiscal 2019 exceeded the 75^th percentile of the TSR condition, and the second tranche of these awards vested at 200%.

Prior to 2020, we granted awards of RSUs with either a market condition or a performance condition to certain executives, as described in our 2020 10-K. During the first quarter of fiscal 2020, the Board of Directors determined that making grants with longer performance periods better aligned the interests of our executives and our stockholders. In connection with adopting longer performance periods for new equity grants with market or performance conditions, the Board approved a modification to the market condition measurement periods associated with the unvested portions of certain of the Company’s awards with a market condition that were granted prior to fiscal 2020. The modification extended the duration of the measurement period by adjusting the beginning date of each measurement period to the original grant date, resulting in approximately $1.8 million additional stock compensation expense during the first quarter of fiscal 2020.

For our awards with a market condition or a performance condition, we incurred stock compensation expense of approximately $4.6 million in the first quarter of fiscal 2021, and of approximately $4.2 million, including the effect of the modification, in the first quarter of fiscal 2020, which is recorded as a component of total stock-based compensation expense.

The following table summarizes the activity for our awards with a market condition or performance condition:

(Shares in thousands)	*Total*
Balance, January 2, 2021		1,021
Granted		607
Effect of vesting multiplier		55
Vested		(110	)
Balance, April 3, 2021		1,573