Stock-based compensation

6 Months Ended

Mar. 28, 2020

Share-based Payment Arrangement [Abstract]

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 Company's initial public offering ("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 would 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 closing stock price on the trading day immediately prior to 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 option holder performs services for the Company, the options generally vest over 48 months, with cliff vesting after one year and generally vest on a monthly or quarterly 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	Aggregate Intrinsic Value
					(In years)	(In thousands)
Outstanding at September 29, 2019	37,155,568		$	11.39	6.3	$	94,288
Granted	—
Exercised	(2,186,674	)
Forfeited	(892,262	)
Outstanding at March 28, 2020	34,076,632		$	11.67	5.9	$	34,439
At March 28, 2020
Options exercisable	26,650,301		$	10.94	5.4	$	34,439
Options vested and expected to vest	33,117,267		$	11.59	5.9	$	34,439

As of March 28, 2020 and September 28, 2019, the Company had $29.9 million and $43.9 million, respectively, of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 1.7 and 2.0 years, respectively.

Restricted stock units

Pursuant to the 2018 Plan, the Company issues RSUs to employees and directors. The fair value of RSUs is based on the Company's closing stock price on the trading day immediately preceding 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		Aggregate Intrinsic Value
					(In thousands)
Unvested at September 29, 2019	6,716,786		$	11.40	$	90,744
Granted	1,572,617
Vested	(923,636	)
Forfeited	(382,429	)
Unvested at March 28, 2020	6,983,338		$	11.99	$	60,196
At March 28, 2020
Units expected to vest	5,648,433		$	12.00	$	48,689

As of March 28, 2020 and September 28, 2019, the Company had $62.6 million and $55.6 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 3.1 and 3.4 years, respectively.

Stock-based compensation

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



	Three Months Ended				Six Months Ended
	March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019
(In thousands)
Cost of revenue	$	278	$	218	$	561	$	403
Research and development	5,427		4,284		10,543		7,888
Sales and marketing	3,407		3,128		6,948		5,809
General and administrative	4,282		3,456		8,546		6,018
Total stock-based compensation expense	$	13,394	$	11,086	$	26,598	$	20,118