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Share-based Compensation | 3 Months Ended
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Sep. 30, 2018
Share Based Compensation [Abstract] |
Share-based Compensation | 7.Share-based Compensation Shares reserved for issuance The Company had reserved for issuance for the periods noted (in thousands):
|  | September 30, 2018 |  |  | June 30, 2018 |
2013 Equity Incentive Plan shares available for grant |  |  | 7,804 |  |  |  | 9,957 |
Employee stock options and awards outstanding |  |  | 12,236 |  |  |  | 12,060 |
2014 Employee Stock Purchase Plan |  |  | 4,084 |  |  |  | 5,365 |
Total shares reserved for issuance |  |  | 24,124 |  |  |  | 27,382 |
Share-based compensation expense recognized in the condensed consolidated financial statements by line item caption is as follows (in thousands):
|  | Three Months Ended |
|  | September 30, 2018 |  |  | September 30, 2017 |
Cost of product revenue |  | $ | 178 |  |  | $ | 92 |
Cost of service revenue |  |  | 345 |  |  |  | 133 |
Research and development |  |  | 2,342 |  |  |  | 1,051 |
Sales and marketing |  |  | 2,359 |  |  |  | 1,643 |
General and administrative |  |  | 1,601 |  |  |  | 1,884 |
Total share-based compensation expense |  | $ | 6,825 |  |  | $ | 4,803 |
During the three months ended September 30, 2018 or 2017, the Company did not capitalize any share-based compensation expense in inventory, as the amounts were immaterial. Stock Awards Stock awards may be granted under the 2013 Equity Incentive Plan (the “2013 Plan”) on terms approved by the Compensation Committee of the Board of Directors. Stock awards generally provide for the issuance of restricted stock units (“RSUs”) including performance or market-based RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria. The Company uses the straight-line method for expense attribution, and beginning with fiscal 2017, the Company does not estimate forfeitures, but accounts for them as incurred. The following table summarizes stock award activity for the three months ended September 30, 2018 (in thousands, except grant date fair value):
|  | Number of Shares |  |  | Weighted- Average Grant Date Fair Value |  |  | Aggregate Fair Market Value |
Non-vested stock awards outstanding at June 30, 2018 |  |  | 7,764 |  |  | $ | 8.60 |  |  | $ | 61,804 |
Granted |  |  | 3,337 |  |  |  | 6.44 |  |  |  |  |
Vested |  |  | (1,142 | ) |  |  | 6.28 |  |  |  |  |
Cancelled |  |  | (565 | ) |  |  | 8.69 |  |  |  |  |
Non-vested stock awards outstanding at September 30, 2018 |  |  | 9,394 |  |  | $ | 8.11 |  |  | $ | 51,479 |
The following table summarizes stock option activity for the three months ended September 30, 2018 (in thousands, except per share and contractual term):
|  | Number of Shares |  |  | Weighted-Average Exercise Price Per Share |  |  | Weighted-Average Remaining Contractual Term (years) |  |  | Aggregate Intrinsic Value |
Options outstanding at June 30, 2018 |  |  | 2,193 |  |  | $ | 3.88 |  |  |  | 2.90 |  |  | $ | 8,996 |
Granted |  |  | 852 |  |  |  | 6.40 |  |  |  |  |  |  |  |  |
Exercised |  |  | (123 | ) |  |  | 3.81 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (80 | ) |  |  | 6.18 |  |  |  |  |  |  |  |  |
Options outstanding at September 30, 2018 |  |  | 2,842 |  |  | $ | 4.57 |  |  |  | 3.88 |  |  | $ | 3,343 |
Vested and expected to vest at September 30, 2018 |  |  | 2,842 |  |  | $ | 4.57 |  |  |  | 3.88 |  |  | $ | 3,343 |
Exercisable at September 30, 2018 |  |  | 1,939 |  |  | $ | 3.98 |  |  |  | 2.68 |  |  | $ | 2,946 |
The fair value of each stock option grant under the 2013 Plan and 2005 Equity Incentive Plan is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The Company uses the Monte-Carlo simulation model to determine the fair value and the derived service period of stock awards with market conditions, on the date of the grant. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate is based upon the estimated life of the option and the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock. The fair value of each RSUs grant with performance-based vesting criteria (“PSUs”) under the 2013 Plan is estimated on the date of grant using the Monte-Carlo simulation model to determine the fair value and the derived service period of stock awards with market conditions, on the date of the grant. During the first quarter of fiscal 2019, the Company approved the grant of 1,269,800 stock awards to its vice president level employees or above (“VPs”), including 278,000 stock awards to its Executive Officers, and 2,067,074 stock awards to its other employees. Fifty percent (50%) of the stock awards granted to the VPs and the chief executive officer, were in the form of PSUs, with grant date fair values of $6.40, and fifty percent (50%) of the stock awards granted were in the form of service-based RSUs. The RSUs vest from the original grant date as to one-third (1/3) on the one-year anniversary and one-twelfth (1/12) each quarter thereafter, subject to continued service to the Company. For the PSUs referenced in the preceding paragraph, they will be considered earned once the Company’s combined earnings per share equals or exceeds $0.20 over two consecutive quarters (the “FY19 Performance Threshold”). Upon satisfying the FY19 Performance Threshold, the PSUs shall vest with respect to the same number of RSUs that have vested which were granted on the same date and thereafter, shall vest on the same schedule as the RSUs, subject to continued service to the Company. If the FY19 Performance Threshold is not met by the third anniversary of the grant date the award is canceled. In addition, the FY19 Performance Threshold shall be deemed satisfied upon the closing of a Change in Control (within the meaning of the Company’s 2013 Equity Incentive Plan) in the event the per share consideration received by the Company’s stockholders equals or exceeds $10.00 per share. During the first quarter of fiscal 2019, the Company granted 851,700 Performance Stock Options (“PSOs”) to certain officers and executive vice presidents that will vest if the Company’s stock price achieves a price hurdle of $10.00 during the three-year performance period from August 29, 2018 through August 31, 2021. The price hurdle will be deemed to have been achieved if, at any time over the performance period, the Company’s stock maintains a price of $10.00 for 30 consecutive days. If the price hurdle is achieved, the PSOs will vest as follows: If the price hurdle is met before or on August 31, 2019, one-third of the PSOs will vest on August 31, 2019 and the remainder will vest quarterly over two years. If the price hurdle is met after August 31, 2019, a number of the PSOs will vest (ratably calculated based upon the time elapsed between August 31, 2018 and the date the hurdle is met) and the remainder will vest quarterly through August 31, 2021. The grant date fair value was $2.62. 2014 Employee Stock Purchase Plan The fair value of each share purchase option under the Company’s 2014 Employee Stock Purchase Plan (“ESPP”) is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The expected term of the ESPP represents the term of the offering period of each option. The risk-free rate is based upon the estimated life and on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock. There were 1,280,708 and 1,267,930 shares issued under the ESPP during the three months ended September 30, 2018 and 2017, respectively. The following assumptions were used to calculate the fair value of shares granted under the ESPP during the following periods:
|  | Employee Stock Purchase Plan |
|  | Three Months Ended |
|  | September 30, 2018 |  |  | September 30, 2017 |
Expected life |  | 0.5 years |  |  | 0.5 years |
Risk-free interest rate |  |  | 2.20 | % |  |  | 1.15 | %
Volatility |  |  | 63 | % |  |  | 42 | %
Dividend yield |  |  | — | % |  |  | — | %
The weighted-average fair value of shares granted under the ESPP during the three months ended September 30, 2018 and 2017 was $2.73 and $2.41, respectively.

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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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