Share-Based Compensation

3 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

Stock Plans

As of December 31, 2021, we had 5.4 million shares available for issuance under our 2021 Omnibus Incentive Plan (the “2021 Plan”), which replaced our 2012 Omnibus Incentive Plan (as amended and restated) (the “2012 Plan”), and 1.4 million shares available for issuance under our 2021 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), which replaced our 2012 Employee Stock Purchase Plan. We have outstanding awards under the 2021 Plan, as well as the 2012 Plan. Following the adoption of the 2021 Plan, no additional awards have been or will be made under the 2012 Plan. Under the 2021 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), unrestricted stock awards, stock units (including restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”)), performance awards, cash awards, and other share-based awards to employees, directors, consultants and advisors. The ISOs and NSOs must be granted at an exercise price, and the SARs must be granted at a base value, per share of not less than 100% of the closing price of a share of our common stock on the date of grant (or, if no closing price is reported on that date, the closing price on the immediately preceding date on which a closing price was reported) (110% in the case of certain ISOs). Options granted under the 2012 Plan primarily vested based on certain market-based and performance-based criteria and generally have a term of four years to seven years. Certain of the share-based awards granted and outstanding as of December 31, 2021 are subject to accelerated vesting upon a change in control of the Company.

Incentive Stock Units

Outside of the equity plans described above, we also grant incentive stock units (“ISUs”) to certain of our international employees which typically vest over three or four years and for which the fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting.

As of December 31, 2021 and October 1, 2021, the fair value of outstanding awards was $9.2 million and $8.9 million, respectively, and the associated accrued compensation liability was $5.4 million and $6.2 million, respectively. During the

three months ended December 31, 2021 and January 1, 2021, we recorded an expense for ISU awards of $1.4 million and $3.0 million, respectively. These expenses are not included in the share-based compensation expense totals below.

Share-Based Compensation

The following table shows a summary of share-based compensation expense included in the condensed consolidated statements of operations (in thousands):


	Three Months Ended
	December 31, 2021		January 1, 2021
Cost of revenue	$	1,033	$	871
Research and development	3,599		3,554
Selling, general and administrative	5,317		5,706
Total share-based compensation expense	$	9,949	$	10,131

As of December 31, 2021, the total unrecognized compensation costs related to RSAs, RSUs and PRSUs was $71.2 million, which we expect to recognize over a weighted-average period of 2.3 years. As of December 31, 2021, total unrecognized compensation cost related to our Employee Stock Purchase Plan was $0.6 million.

Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Unit Awards

A summary of stock award activity for the three months ended December 31, 2021 is as follows:


	Number of shares (in thousands)	Weighted- Average Grant Date Fair Value
Balance as of October 1, 2021	2,351	$	24.57
Granted	913	53.08
Vested and released	(969)	22.99
Forfeited, canceled or expired	(40)	27.54
Balance as of December 31, 2021	2,255	$	36.73

Stock awards that vested during the three months ended December 31, 2021 and January 1, 2021 had combined fair values of $69.9 million and $31.0 million, respectively, as of the vesting date. RSUs granted generally vest over a period of three or four years.

We granted 161,349 market-based PRSUs during the three months ended December 31, 2021, at a weighted average grant date fair value of $89.82 per share, or $14.5 million. Recipients may earn between 0% and 200% of the target number of shares granted, based on our achievement of total shareholder return in comparison to a selected group of peer companies over a three-year performance period. The fair value of these awards was estimated using a Monte Carlo simulation and share-based compensation expense is recognized ratably over the service period, based on the grant date fair value of the awards subject to the market condition. The significant assumptions used in the Monte Carlo simulation to calculate the fair value of these market-based PRSUs are as follows:


	Three Months Ended
	December 31, 2021
Grant date stock price	$	66.12
Average stock price at the start of the performance period	$	64.11
Risk free interest rate	0.8		%
Years to maturity	3.00
Expected volatility rate	57.8		%
Expected dividend yield	—

Stock Options

A summary of stock option activity for the three months ended December 31, 2021 is as follows (in thousands, except per share amounts and contractual term):


	Number of Shares	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Options outstanding as of October 1, 2021	205	$	14.29

Exercised	(190)	14.15
Forfeited, canceled or expired	—	—
Options outstanding as of December 31, 2021	15	$	16.06	3.85	$	934
Options vested and exercisable as of December 31, 2021	15	16.06		3.85	934

Aggregate intrinsic value represents the difference between our closing stock price on December 31, 2021 and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was $11.0 million for the three months ended December 31, 2021 and was $0.3 million for the three months ended January 1, 2021.