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Employee Benefit Plans (Tables) | 9 Months Ended
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Sep. 29, 2019
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] |
Schedule of Shares Available for Grant | The following table sets forth the available shares for grant under the 2018 Plan as of September 29, 2019 and December 31, 2018:
| Number of Shares
| (In thousands)
Shares available for grant as of December 31, 2018 (1) | 3,969 |
Additional authorized shares | 2,970 |
Granted (3) | (6,303 | )
Forfeited / cancelled (2) | 1,464 |
Expired | 1 |
Shares traded for taxes | 349 |
Shares available for grant as of September 29, 2019 | 2,450 |
_________________________
(1) | Includes Arlo IPO Options of 2.8 million shares granted to the Company’s NEOs with performance-based vesting criteria (in addition to service-based vesting criteria for any of such IPO Options that are deemed to have been earned). As of September 29, 2019, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria had been satisfied except for Tranche 4 Performance Option. Therefore, this line item includes all such performance-based IPO Options granted during the year ended December 31, 2018, reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied. Tranche 4 Performance Option’s measurement period was completed and none of the shares vested.
(2) | Includes 0.3 million shares subject to awards that were cancelled in connection with Mr. Collins’ separation from the Company. In addition, also includes 0.5 million shares subject to the IPO Options that were voluntarily forfeited by the Chief Executive Officer as the performance metrics for Tranches 4 and 5 of the IPO Options were not expected to be achieved.
(3) | Includes 0.8 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant) and MPSUs (25% of the grant) granted to the Company's NEOs during the fiscal quarter ended September 29, 2019. The RSUs will vest in three equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a revenue milestone for the fiscal year ending December 31, 2019 is achieved. The MPSUs will vest at the end of the three-year period that begins on the MPSU grant date based on performance of the Company's common stock relative to the Russell 2000 Index (“the Benchmark”) during the three-year period from the grant date.
Schedule of Stock Option Activity | NETGEAR’s stock option activity for Arlo employees during the nine months ended September 29, 2019 was as follows:
| Number of shares |  | Weighted Average Exercise Price Per Share
| (In thousands) |  | (In dollars)
Outstanding as of December 31, 2018 | 283 |  |  | $ | 26.53 |
Exercised | (48 | ) |  | $ | 21.35 |
Forfeited / cancelled | (16 | ) |  | $ | 36.27 |
Expired | (14 | ) |  | $ | 41.67 |
Outstanding as of September 29, 2019 | 205 |  |  | $ | 25.94 |
Arlo’s stock option activity during the nine months ended September 29, 2019 was as follows:
| Number of shares |  | Weighted Average Exercise Price Per Share
| (In thousands) |  | (In dollars)
Outstanding as of December 31, 2018 (1) | 7,209 |  |  | $ | 12.08 |
Granted | 10 |  |  | $ | 3.90 |
Exercised | (4 | ) |  | $ | 3.03 |
Forfeited / cancelled (2) | (938 | ) |  | $ | 15.88 |
Expired | (159 | ) |  | $ | 12.00 |
Outstanding as of September 29, 2019 | 6,118 |  |  | $ | 11.49 |
Schedule of RSU Activity | NETGEAR’s RSU activity for Arlo employees during the nine months ended September 29, 2019 was as follows:
| Number of shares |  | Weighted Average Grant Date Fair Value Per Share
| (In thousands) |  | (In dollars)
Outstanding as of December 31, 2018 | 522 |  |  | $ | 34.89 |
Vested | (155 | ) |  | $ | 32.44 |
Forfeited | (40 | ) |  | $ | 36.47 |
Outstanding as of September 29, 2019 | 327 |  |  | $ | 35.85 |
Arlo’s RSU activity during the nine months ended September 29, 2019 was as follows:
| Number of shares |  | Weighted Average Grant Date Fair Value Per Share
| (In thousands) |  | (In dollars)
Outstanding as of December 31, 2018 | 3,141 |  |  | $ | 12.22 |
Granted (3) | 6,293 |  |  | $ | 4.83 |
Vested | (1,033 | ) |  | $ | 11.30 |
Forfeited | (368 | ) |  | $ | 8.55 |
Outstanding as of September 29, 2019 | 8,033 |  |  | $ | 6.71 |
(3) | Includes 0.8 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant) and MPSUs (25% of the grant) granted to a group of NEOs during the fiscal quarter ended September 29, 2019. The RSUs will vest in three equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a revenue milestone for the fiscal year ending December 31, 2019 is achieved.
The MPSUs will vest at the end of the three-year period that begins on the MPSU grant date based on performance of the Company's common stock relative to the Benchmark during the three-year period from the grant date. A positive 3.3 x or negative 2.5 x multiplier will be applied to the total shareholder returns (“TSR”), such that the number of shares vested will increase by 3.3% or decrease by 2.5% of the target numbers, for each 1% of positive or negative TSR relative to the Benchmark. In the event the Company's common stock performance is below negative 30% relative to the Benchmark, no shares will be vested. In no event will the number of shares vested exceed 200% of the target for that tranche.
Schedule of Weighted Average Assumptions | The assumptions used in this model to estimate fair value at the grant date are as follows:
| Three Months Ended |  | Nine Months Ended
| September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018
Expected life | 3.0 |  |  | N/A |  | 3.0 |  |  | N/A
Risk-free interest rate | 1.52 | % |  | N/A |  | 1.52 | % |  | N/A
Expected volatility | 65.1 | % |  | N/A |  | 65.1 | % |  | N/A
Dividend yield | — |  |  | N/A |  | — |  |  | N/A
Stock Beta | 0.30 |  |  | N/A |  | 0.30 |  |  | N/A
The following table sets forth the weighted average assumptions used to estimate the fair value of Arlo’s purchase rights granted under Arlo’s ESPP for the three and nine months ended September 29, 2019 and NETGEAR’s options granted and purchase rights granted under NETGEAR’s ESPP to Arlo employees during the three and nine months ended September 30, 2018.
| Three Months Ended |  | Nine Months Ended
| Stock Options |  | ESPP |  | Stock Options |  | ESPP
| September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018
Expected life (in years) | NA |  |  | 4.4 |  |  | 0.5 |  |  | NA |  | 6.3 |  |  | 4.4 |  |  | 0.5 |  |  | 0.5 |
Risk-free interest rate | NA |  |  | 2.79 | % |  | 2.49 | % |  | NA |  | 2.28 | % |  | 2.32 | % |  | 2.49 | % |  | 1.81 | %
Expected volatility | NA |  |  | 33.5 | % |  | 97.6 | % |  | NA |  | 73.0 | % |  | 30.9 | % |  | 97.6 | % |  | 37.1 | %
Dividend yield | — |  |  | — |  |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |
Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, Restricted Stock Awards, and the Employee Stock Purchase Plan | The following tables set forth stock-based compensation expense for Arlo employees and allocated charges deemed attributable to Arlo operations resulting from NETGEAR’s and Arlo’s RSUs, PSUs, MPSUs and stock options, and the purchase rights under the NETGEAR’s ESPP included in the Company’s unaudited condensed consolidated statements of operations during the periods indicated:
| Three Months Ended |  | Nine Months Ended
| September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018
| Total |  | Direct |  | Indirect |  | Total |  | Total |  | Direct |  | Indirect |  | Total
| (In thousands)
Cost of revenue | $ | 467 |  |  | $ | 236 |  |  | $ | — |  |  | $ | 236 |  |  | $ | 1,286 |  |  | $ | 336 |  |  | $ | 583 |  |  | $ | 919 |
Research and development | 1,569 |  |  | 872 |  |  | — |  |  | 872 |  |  | 4,501 |  |  | 2,186 |  |  | 396 |  |  | 2,582 |
Sales and marketing | 791 |  |  | 754 |  |  | — |  |  | 754 |  |  | 2,722 |  |  | 1,239 |  |  | 969 |  |  | 2,208 |
General and administrative | 2,392 |  |  | 1,575 |  |  | — |  |  | 1,575 |  |  | 6,752 |  |  | 1,575 |  |  | 2,100 |  |  | 3,675 |
Total stock-based compensation | $ | 5,219 |  |  | $ | 3,437 |  |  | $ | — |  |  | $ | 3,437 |  |  | $ | 15,261 |  |  | $ | 5,336 |  |  | $ | 4,048 |  |  | $ | 9,384 |

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