Stock-based Compensation

9 Months Ended

Jul. 03, 2021

Share-based Payment Arrangement [Abstract]

2018 Equity Incentive Plan

In July 2018, the Board adopted the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan became effective in connection with the Company's initial public offering ("IPO"). The number of shares reserved for issuance under the 2018 Plan increase automatically on January 1 of each year beginning in 2019 and continuing through 2028 by a number of shares of common stock equal to the lesser of (x) 5% of the total outstanding shares of the Company’s common stock and common stock equivalents as of the immediately preceding December 31 (rounded to the nearest whole share) and (y) a number of shares determined by the Company's board of directors (the "Board").

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, on a monthly or quarterly basis, with certain options subject to an initial annual cliff vest, 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 October 3, 2020	28,422,940	$	12.03	5.6	$	99,053
Granted	—	—
Exercised	(11,992,137)	10.97
Forfeited	(441,379)	14.37
Outstanding at July 3, 2021	15,989,424	$	12.76	5.3	$	370,365
At July 3, 2021
Options exercisable	13,737,886	$	12.46	5.0	$	322,318
Options vested and expected to vest	15,777,683	$	12.74	5.3	$	365,799

As of July 3, 2021 and October 3, 2020, the Company had $8.3 million and $16.9 million, respectively, of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 1.1 and 1.5 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 RSU activity is as follows:


	Number of Units	Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value
				(In thousands)
Outstanding at October 3, 2020	11,647,951	$	10.50	$	180,543
Granted	2,742,382
Released	(3,204,542)
Forfeited	(892,050)
Outstanding at July 3, 2021	10,293,741	$	12.26	$	369,751

As of July 3, 2021 and October 3, 2020, the Company had $97.2 million and $92.4 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 2.7 and 3.0 years, respectively.

Performance stock units ("PSU")

Pursuant to the 2018 Plan, the Company has issued and may issue certain PSUs that vest on the satisfaction of service and performance conditions. The Company estimates the fair value of PSUs on the grant date and recognizes compensation expense in the period it becomes probable that performance conditions will be achieved. On a quarterly basis, the Company re-evaluates the assumption of the probability that performance conditions will be satisfied and revises its estimates as appropriate as new or updated information becomes available. The summary of the Company’s PSU activity is as follows:


	Number of Units	Weighted-Average Grant Date Fair Value		Aggregate Intrinsic Value
				(In thousands)
Outstanding at October 3, 2020	—	$	—	$	—
Granted	158,521
Vested	—
Forfeited	—
Outstanding at July 3, 2021	158,521	$	22.81	$	5,694

As of July 3, 2021, the Company had $4.3 million of unrecognized stock-based compensation expense related to PSUs, which is expected to be recognized over a weighted-average period of 1.4 years.

Stock-based compensation

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


	Three Months Ended				Nine Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
(In thousands)
Cost of revenue	$	248	$	306	$	723	$	866
Research and development	6,125		6,154		19,067		16,697
Sales and marketing	3,277		3,710		10,317		10,658
General and administrative	5,897		4,871		16,648		13,417
Total stock-based compensation expense	$	15,547	$	15,041	$	46,755	$	41,638