Employee Benefits and Share-Based Compensation

Stock-Based Plans

For a detailed explanation of the Company's stock plans, please refer to Note 11, Employee Benefits and Share-Based Compensation, of the Company's annual report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 27, 2019.

Share-Based Compensation Expense

The following table sets forth the total share-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018:



	Three months ended
	March 31, 2019		March 31, 2018
	(In thousands)
Cost of product and service revenues	$	1,462	$	1,019
Research and development	1,702		1,234
Selling, general, and administrative	5,246		4,275
Total share-based compensation expense	$	8,410	$	6,528

In the first quarter of 2019, the Company modified the terms of its stock options by extending the post-employment exercise period for certain employees. The Company recorded share-based compensation expense related to this option modification of approximately $0.2 million during the three months ended March 31, 2019. The Company will incur an additional $0.8 million of share-based compensation expense for the impacted options over the remaining weighted-average vesting periods of 1.9 years.

Stock Options and ESPP Shares

The following assumptions were used to value stock options and Employee Stock Purchase Plan (“ESPP”) shares granted pursuant to the Company’s equity incentive plans for the three months ended March 31, 2019 and 2018:



	Three months ended
	March 31, 2019		March 31, 2018
Stock options
Expected life, years	4.5		4.8
Expected volatility, %	33.1	%	32.2	%
Risk-free interest rate, %	2.6	%	2.6	%
Estimated forfeiture rate, %	7.2	%	6.9	%
Dividend yield, %	—	%	—	%



	Three months ended
	March 31, 2019		March 31, 2018
Employee stock purchase plan shares
Expected life, years	0.5 - 2.0		0.5 - 2.0
Expected volatility, %	28.2% - 38.4%		27.7% - 33.8%
Risk-free interest rate, %	1.3% - 2.7%		0.7% - 2.3%
Dividend yield, %	—	%	—	%

Stock Options Activity

The following table summarizes the share option activity under the Company’s equity incentive plans during the three months ended March 31, 2019:



	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Years	Aggregate Intrinsic Value
	(In thousands, except per share data)
Outstanding at December 31, 2018	3,748		$	41.27	7.6	$	78,365
Granted	292		76.18
Exercised	(379	)	31.83
Expired	—		—
Forfeited	(117	)	44.18
Outstanding at March 31, 2019	3,544		$	45.06	7.9	$	127,007
Exercisable at March 31, 2019	1,275		$	31.24	6.3	$	63,241
Vested and expected to vest at March 31, 2019 and thereafter	3,544		$	45.06	7.9	$	127,007

The weighted-average fair value per share of options granted during the three months ended March 31, 2019 and 2018 was $24.07 and $14.22, respectively. The intrinsic value of options exercised during the three months ended March 31, 2019 and 2018 was $17.1 million and $2.0 million, respectively.

As of March 31, 2019, total unrecognized compensation cost related to unvested stock options was $32.5 million, which is expected to be recognized over a weighted-average vesting period of 2.9 years.

Employee Stock Purchase Plan Activity

For the three months ended March 31, 2019 and 2018, employees purchased approximately 210,000 and 289,000 shares of common stock, respectively, under the ESPP at weighted average prices of $40.20 and $26.30, respectively. As of March 31, 2019, the unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately $3.9 million and is expected to be recognized over a weighted-average period of 1.5 years.

Restricted Stock Units (“RSUs”) and Restricted Stock Awards (“RSAs”)

Summaries of the restricted stock activity under the Company’s 2009 Equity Incentive Plan, as amended (the “2009 Plan”) are presented below for the three months ended March 31, 2019:



	Number of Shares		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Years	Aggregate Intrinsic Value
	(In thousands, except per share data)
Restricted stock units
Outstanding at December 31, 2018	538		$	51.52	1.6	$	32,935
Granted (Awarded)	30		78.23
Vested (Released)	(36	)	39.78
Forfeited	(27	)	44.87
Outstanding and unvested at March 31, 2019	505		$	54.32	1.5	$	40,813

As of March 31, 2019, total unrecognized compensation cost related to RSUs was $23.4 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.7 years.



	Number of Shares	Weighted-Average Grant Date Fair Value
	(In thousands, except per share data)
Restricted stock awards
Outstanding at December 31, 2018	21	$	46.60
Granted (Awarded)	—	—
Vested (Released)	—	—
Forfeited	—	—
Outstanding and unvested at March 31, 2019	21	$	46.60

As of March 31, 2019, total unrecognized compensation cost related to RSAs was $0.1 million, which is expected to be recognized over the remaining weighted-average vesting period of 0.1 years.

Performance-Based Restricted Stock Units

A summary of the performance-based restricted stock activity under the 2009 Plan is presented below for the three months ended March 31, 2019:



	Number of Shares		Weighted-Average Grant Date Fair Value Per Unit
	(In thousands, except per share data)
Outstanding at December 31, 2018	197		$	34.83
Granted	61		72.02
Vested	(26	)	38.03
Forfeited	(20	)	34.37
Outstanding and unvested at March 31, 2019	212		$	45.18

As of March 31, 2019, total unrecognized compensation cost related to PSUs was approximately $5.3 million, which is expected to be recognized over the remaining weighted-average period of 1.3 years.

Summary of Shares Reserved for Future Issuance under Equity Incentive Plans

The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of March 31, 2019:



	Number of Shares
	(In thousands)
Share options outstanding	3,544
Non-vested restricted share awards	738
Shares authorized for future issuance	2,140
ESPP shares available for future issuance	1,703
Total shares reserved for future issuance	8,125

Stock Repurchase Program

On August 2, 2016, the Company's Board of Directors (the “Board”) authorized a stock repurchase program providing for the repurchase of up to $50.0 million of the Company’s common stock (the “2016 Repurchase Program”). The 2016 Repurchase Program is in addition to the stock repurchase program approved by the Board on November 4, 2014 (the “2014 Repurchase Program”). As of March 31, 2019, the maximum dollar value of shares that may yet be purchased under the two repurchase programs was $54.9 million. The stock repurchase programs do not obligate the Company to repurchase any specific number of shares, and the Company may terminate or suspend the repurchase programs at any time.

During the three months ended March 31, 2019 and 2018, the Company did not repurchase any of its outstanding common stock.