Stock-based compensation

In 2003, the Company’s board of directors (the “Board”) established the 2003 Stock Plan (as amended, the “2003 Plan”). In July 2018, the Board adopted the 2018 Equity Incentive Plan (the “2018 Plan”) and ceased granting awards under the 2003 Plan. The 2018 Plan became effective in connection with the IPO. Any remaining shares of common stock available for issuance under the 2003 Plan on the effective date of the 2018 Plan were added to the shares of common stock reserved for issuance under the 2018 Plan as of such date, and additional shares of common stock that become available for issuance under the 2003 Plan in the future will instead become available for issuance under the 2018 Plan, as further discussed in the Annual Report.

Stock options

Pursuant to the 2018 Plan, the Company issues stock options to employees. The fair value of the stock options is based on the Company’s stock price on the date of grant. The option price, number of shares and grant date are determined at the discretion of the Board. For so long as the optionholder performs services for the Company, the options generally vest over 48 months, with cliff vesting after one year and generally vest on a monthly basis thereafter, and are exercisable for a period not to exceed ten years from the date of grant.

The summary of the Company’s stock option activity is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Weighted Average Intrinsic Value
					(in years)	(in thousands)
Outstanding at September 29, 2018	48,504,182		$	10.33	6.6	$	276,959
Granted	976,328
Exercised	(174,453	)
Forfeited	(720,463	)
Outstanding at December 29, 2018	48,585,594		$	10.40	6.4	$	98,745
At December 29, 2018
Options exercisable	32,514,889		$	8.44	5.3	$	98,745
Options vested and expected to vest	45,915,517		$	10.16	6.3	$	98,745

As of December 29, 2018 and September 29, 2018, the Company had $66.2 million and $71.5 million, respectively, of unrecognized stock-based compensation expense which is expected to be recognized over a weighted-average period of 2.5 and 2.6 years, respectively.

Restricted stock units

Pursuant to the 2018 Plan, the Company issues restricted stock units (“RSUs”) to employees. The fair value of RSUs is based on the Company’s stock price on the date of grant. RSUs typically have an initial annual cliff vest and then vest quarterly over the service period, which is generally four years. The summary of the Company’s unvested RSU activity is as follows:



	Number of Units	Weighted Average Grant Date Fair Value		Weighted Average Intrinsic Value
				(in thousands)
Unvested at September 29, 2018	—	$	—	$	—
Granted	579,841
Vested	—
Forfeited	—
Unvested at December 29, 2018	579,841	$	14.91	$	5,619
At December 29, 2018
Units expected to vest	434,360	$	14.92	$	4,209

As of December 29, 2018, the Company had $6.2 million of unrecognized stock-based compensation expense related to their RSUs, which is expected to be recognized over a weighted-average period of 3.9 years.

Stock-based compensation

Total stock-based compensation expense by function category was as follows:



	Three Months Ended
	December 29, 2018		December 30, 2017
(In thousands)
Cost of revenue	$	184	$	56
Research and development	3,604		3,381
Sales and marketing	2,681		3,986
General and administrative	2,563		2,114
Total stock-based compensation expense	$	9,032	$	9,537