Stock-based compensation

9 Months Ended

Jun. 27, 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"). 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 and directors. 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	(3,262,189)	5.43
Forfeited	(2,088,232)	14.00
Outstanding at June 27, 2020	31,805,147	$	11.82	5.8	$	102,403
At June 27, 2020
Options exercisable	25,966,388	$	11.24	5.3	$	98,198
Options vested and expected to vest	31,071,037	$	11.76	5.7	$	101,890

As of June 27, 2020 and September 28, 2019, the Company had $23.5 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 1.6 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	8,863,308
Vested	(1,531,284)
Forfeited	(640,783)
Unvested at June 27, 2020	13,408,027	$	10.45	$	201,120
At June 27, 2020
Units expected to vest	10,772,089	$	10.48	$	161,581

As of June 27, 2020 and September 28, 2019, the Company had $106.2 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 3.3 and 3.4 years, respectively.

Stock-based compensation

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


	Three Months Ended						Nine Months Ended
	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019
(In thousands)
Cost of revenue	$	306	$	298	$	866	$	701
Research and development	6,154		4,904		16,697		12,792
Sales and marketing	3,710		3,608		10,658		9,416
General and administrative	4,871		4,598		13,417		10,616
Total stock-based compensation expense	$	15,041	$	13,408	$	41,638	$	33,525