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Equity Incentive Plans and Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Equity Incentive Plans and Stock-Based Compensation | Equity Incentive Plans and Stock-Based Compensation Equity Incentive Plans The Company has three equity incentive plans under which grants are currently outstanding: the 2006 Equity Incentive Plan (the “2006 Plan”), the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”). On April 23, 2015, the Company’s stockholders approved the 2015 Plan, which replaced the 2006 Plan. Additionally, in the third quarter of 2019, the Company adopted the 2019 Inducement Plan and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 400,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the 2019 Inducement Plan. The 2015 Plan and 2019 Inducement Plan were the Company’s only plans for providing stock-based incentive awards to eligible employees, executive officers, non-employee directors and consultants as of December 31, 2019. Grants under all plans typically have a requisite service period of 60 months or 48 months, have straight-line vesting schedules and expire not more than 10 years from date of grant. No further awards will be made under the 2006 Plan, but the 2006 Plan will continue to govern awards previously granted under it. In addition, any shares subject to stock options or other awards granted under the 2006 Plan that on or after the effective date of the 2015 Plan are forfeited, cancelled, exchanged or surrendered or terminate under the 2006 Plan will become available for grant under the 2015 Plan. The Board will periodically review actual share consumption under the 2015 Plan and may make a request for additional shares as needed. The 2019 Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2015 Plan. However, awards under the 2019 Inducement Plan may only be granted to individuals who previously have not been employees or non-employee directors of the Company (or who will become employed following a bona fide period of non-employment or service with the Company), as an inducement material to the individuals’ entry into employment with the Company, or, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules, in connection with a merger or acquisition. A summary of shares available for grant under the Company’s plans is as follows:
| Shares Available for Grant
Total shares available for grant as of December 31, 2016 | 7,305,368
Stock options granted | (558,426)
Stock options forfeited | 1,978,042
Nonvested equity stock and stock units granted (1) (2) | (5,007,947)
Nonvested equity stock and stock units forfeited (1) | 1,334,110
Total shares available for grant as of December 31, 2017 | 5,051,147
Increase in shares approved for issuance | 5,500,000
Stock options granted | (711,479)
Stock options forfeited | 877,803
Nonvested equity stock and stock units granted (1) (3) | (4,993,802)
Nonvested equity stock and stock units forfeited (1) | 4,350,377
Total shares available for grant as of December 31, 2018 | 10,074,046
Increase in shares approved for issuance (5) | 400,000
Stock options granted | (80,000)
Stock options forfeited | 426,960
Nonvested equity stock and stock units granted (1) (4) | (7,261,845)
Nonvested equity stock and stock units forfeited (1) | 3,267,702
Total shares available for grant as of December 31, 2019 | 6,826,863
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(1) | For purposes of determining the number of shares available for grant under the 2015 Plan against the maximum number of shares authorized, each restricted stock granted reduces the number of shares available for grant by 1.5 shares and each restricted stock forfeited increases shares available for grant by 1.5 shares.
(2) | Amount includes 0.4 million shares that had been reserved for potential future issuance related to certain performance unit awards discussed under the section titled “Nonvested Equity Stock and Stock Units” below.
(3) | Amount includes 0.5 million shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section titled “Nonvested Equity Stock and Stock Units” below.
(4) | Amount includes 1.0 million shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section titled “Nonvested Equity Stock and Stock Units” below.
(5) | Shares were reserved under the 2019 Inducement Plan adopted in the third quarter of 2019.
General Stock Option Information The following table summarizes stock option activity under the Company’s equity incentive plans for the years ended December 31, 2019, 2018 and 2017 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2019:
| Options Outstanding |  | Weighted Average Remaining Contractual Term |  |
| Number of Shares |  | Weighted Average Exercise Price per Share |  |  | Aggregate Intrinsic Value
| (Dollars in thousands, except per share amounts)
Outstanding as of December 31, 2016 | 7,008,833 |  | $ | 9.34 |  |  |  |  |
Options granted | 558,426 |  | $ | 12.95 |  |  |  |  |
Options exercised | (1,278,856) |  | $ | 7.34 |  |  |  |  |
Options forfeited | (1,978,042) |  | $ | 10.68 |  |  |  |  |
Outstanding as of December 31, 2017 | 4,310,361 |  | $ | 9.78 |  |  |  |  |
Options granted | 711,479 |  | $ | 12.84 |  |  |  |  |
Options exercised | (908,146) |  | $ | 6.70 |  |  |  |  |
Options forfeited | (877,803) |  | $ | 13.73 |  |  |  |  |
Outstanding as of December 31, 2018 | 3,235,891 |  | $ | 10.25 |  |  |  |  |
Options granted | 80,000 |  | $ | 13.25 |  |  |  |  |
Options exercised | (1,249,785) |  | $ | 7.79 |  |  |  |  |
Options forfeited | (426,960) |  | $ | 13.71 |  |  |  |  |
Outstanding as of December 31, 2019 | 1,639,146 |  | $ | 11.37 |  |  | 4.54 |  | $ | 4,631 |
Vested or expected to vest at December 31, 2019 | 1,627,218 |  | $ | 11.36 |  |  | 4.49 |  | $ | 4,621 |
Options exercisable at December 31, 2019 | 1,319,210 |  | $ | 11.01 |  |  | 3.63 |  | $ | 4,327 |
Employee Stock Purchase Plans During the years ended December 31, 2019, 2018, and 2017, the Company had one employee stock purchase plan, the 2015 Employee Stock Purchase Plan (“2015 ESPP”). Employees generally will be eligible to participate in the plan if they are employed by Rambus for more than 20 hours per week and more than five months in a fiscal year. The 2015 ESPP provides for six month offering periods, with a new offering period commencing on the first trading day on or after May 1 and November 1 of each year. Under the plans, employees may purchase stock at the lower of 85% of the beginning of the offering period (the enrollment date), or the end of each offering period (the purchase date). Employees generally may not purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the purchase date. The Company issued 629,438 shares at a weighted average price of $8.53 per share during the year ended December 31, 2019. The Company issued 541,395 shares at a weighted average price of $9.99 per share during the year ended December 31, 2018. The Company issued 615,370 shares at a weighted average price of $10.47 per share during the year ended December 31, 2017. As of December 31, 2019, 1,665,440 shares under the ESPP remain available for issuance. Stock-Based Compensation Stock Options During the years ended December 31, 2019, 2018 and 2017, Rambus granted 80,000, 711,479 and 558,426 stock options, respectively, with an estimated total grant-date fair value of $0.3 million, $3.0 million and $2.3 million, respectively. During the years ended December 31, 2019, 2018 and 2017, Rambus recorded stock-based compensation related to stock options of $1.0 million, $1.7 million and $2.8 million, respectively. As of December 31, 2019, there was $2.0 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock-based compensation arrangements granted under the stock option plans. This cost is expected to be recognized over a weighted-average period of 2.3 years. The total fair value of options vested for the years ended December 31, 2019, 2018 and 2017 was $6.7 million, $12.9 million and $17.3 million, respectively. Employee Stock Purchase Plans During the years ended December 31, 2019, 2018 and 2017, Rambus recorded stock-based compensation related to the ESPP of $1.5 million, $1.4 million and $1.7 million, respectively. As of December 31, 2019, there was $0.7 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP. That cost is expected to be recognized over four months. There were no tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the years ended December 31, 2019 and December 31, 2018. Tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the year ended December 31, 2017, calculated in accordance with accounting for share-based payments were $1.3 million. Valuation Assumptions Rambus estimates the fair value of stock options using the Black-Scholes-Merton model (“BSM”). The BSM model determines the fair value of stock-based compensation and is affected by Rambus’ stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include expected volatility, expected life of the award, expected dividend rate, and expected risk-free rate of return. The assumptions for expected volatility and expected life are the two assumptions that significantly affect the grant date fair value. If actual results differ significantly from these estimates, stock-based compensation expense and Rambus’ results of operations could be materially impacted. The fair value of stock awards is estimated as of the grant date using the BSM option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the following tables: The following table presents the weighted-average assumptions used to estimate the fair value of stock options granted that contain only service conditions in the periods presented:
| Stock Option Plan for Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Stock Option Plan |  |  |  |  |
Expected stock price volatility | 33%-36% |  | 24%-32% |  | 24%-32%
Risk free interest rate | 1.4%-1.6% |  | 2.6%-2.8% |  | 1.8%-2.0%
Expected term (in years) | 5.1-5.2 |  | 5.8 |  | 5.3-5.4
Weighted-average fair value of stock options granted | $4.36 |  | $4.23 |  | $4.09
| Employee Stock Purchase Plan for Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Employee Stock Purchase Plan |  |  |  |  |
Expected stock price volatility | 32% |  | 27%-34% |  | 25%-27%
Risk free interest rate | 1.6%-2.4% |  | 2.05%-2.5% |  | 0.98%-1.3%
Expected term (in years) | 0.5 |  | 0.5 |  | 0.5
Weighted-average fair value of purchase rights granted under the purchase plan | $3.13 |  | $2.59 |  | $3.07
Expected Stock Price Volatility: Given the volume of market activity in its market traded options, Rambus determined that it would use the implied volatility of its nearest-to-the-money traded options. The Company believes that the use of implied volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. If there is not sufficient volume in its market traded options, the Company will use an equally weighted blend of historical and implied volatility. Risk-free Interest Rate: Rambus bases the risk-free interest rate used in the BSM valuation method on implied yield currently available on the U.S. Treasury zero-coupon issues with an equivalent term. Where the expected terms of Rambus’ stock-based awards do not correspond with the terms for which interest rates are quoted, Rambus uses an approximation based on rates on the closest term currently available. Expected Term: The expected term of options granted represents the period of time that options granted are expected to be outstanding. The expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The expected term of ESPP grants is based upon the length of each respective purchase period. Nonvested Equity Stock and Stock Units The Company grants nonvested equity stock units to officers, directors and employees. For the years ended December 31, 2019, 2018 and 2017, the Company granted nonvested equity stock units totaling 4,233,701, 2,978,558 and 3,075,396 shares, respectively. These awards have a service condition, generally a service period of four years, except in the case of grants to directors, for which the service period is one year. For the years ended December 31, 2019, 2018 and 2017, the fair value of nonvested equity stock units at the date of grant was approximately $43.0 million, $38.1 million and $40.0 million, respectively. During the years ended December 31, 2019, 2018 and 2017, the Company granted performance unit awards to certain Company executive officers with vesting subject to the achievement of certain performance conditions. The ultimate number of performance units that can be earned can range from 0% to 200% of target depending on performance relative to target over the applicable period. The shares earned will vest on the third anniversary of the date of grant. The Company’s shares available for grant has been reduced to reflect the shares that could be earned at the maximum target. For the years ended December 31, 2019, 2018 and 2017, the Company recorded stock-based compensation expense of approximately $23.9 million, $18.6 million and $22.9 million, respectively, related to all outstanding nonvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of an estimate of forfeitures, was approximately $33.2 million at December 31, 2019. This cost is expected to be recognized over a weighted average period of 2.4 years. The following table reflects the activity related to nonvested equity stock and stock units for the three years ended December 31, 2019:
Nonvested Equity Stock and Stock Units | Shares |  | Weighted-Average Grant-Date Fair Value
Nonvested at December 31, 2016 | 4,863,056 |  | $ | 12.33 |
Granted | 3,075,396 |  | $ | 13.02 |
Vested | (1,216,476) |  | $ | 12.15 |
Forfeited | (860,627) |  | $ | 12.61 |
Nonvested at December 31, 2017 | 5,861,349 |  | $ | 12.68 |
Granted | 2,978,558 |  | $ | 12.77 |
Vested | (1,713,930) |  | $ | 12.39 |
Forfeited | (2,266,842) |  | $ | 12.97 |
Nonvested at December 31, 2018 | 4,859,135 |  | $ | 12.71 |
Granted | 4,233,701 |  | $ | 10.17 |
Vested | (1,896,283) |  | $ | 12.40 |
Forfeited | (1,907,070) |  | $ | 11.33 |
Nonvested at December 31, 2019 | 5,289,483 |  | $ | 11.27 |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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