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Stock option plan

12 Months Ended

Sep. 30, 2021

12.	Stock option plan

2018 Equity Incentive Plan

On September 26, 2018, the board of directors adopted the 2018 Equity Incentive Plan (the 2018 Plan) as a successor to the 2013 Stock Plan (the 2013 Plan). The maximum aggregate number of shares that may be issued under the 2018 Plan is 6,856,405 shares of the Company’s common stock. The number of shares reserved for issuance under the 2018 Plan will be increased automatically on the first day of each fiscal year, following the fiscal year in which the 2018 Plan became effective, by a number equal to the least of 999,900 shares, 4% of the shares of common stock outstanding at that time, or such number of shares determined by the Company’s board of directors. The common shares issuable under the 2018 Plan were registered pursuant to a registration statement on Form S-8 on November 1, 2018.

On September 1, 2020, the board of directors approved the implementation of a revised annual equity award program for executive officers and senior level employees to be granted as performance-based stock units (PSUs) under the 2018 Plan. The number of PSUs ultimately earned under these awards is calculated based on the achievement of certain total revenue threshold during the fiscal year ending September 30, 2022. The percentage of performance stock units that vest will depend on the board of directors’ determination of total revenue at the end of the performance period and can range from 0% to 150% of the number of units granted. The provisions of the PSU are considered a performance condition, and the effects of that performance condition are not reflected in the grant date fair value of the awards. The Company used the Black-Scholes method to calculate the fair value at the grant date without regard to the vesting condition and will recognize compensation cost for the units that are expected to vest. As of September 30, 2021, the Company determined that 256,665 shares are expected to vest based on the probability of the performance condition that will be achieved under this equity award program. The Company reassesses the probability of the performance condition at each reporting period and adjusts the compensation cost based on the probability assessment. During the year ended September 30, 2021, the Company changed its estimate of the probability of meeting the performance conditions for the PSU grants. The previous estimate was based on data and assumptions that were the best available information at the time. During the third quarter of 2021, the Company obtained new data, previously unavailable, from new, internal forecasts and projections. The new data indicate that the PSU grants are expected to be larger than previously estimated. As a result, the Company has changed its estimate of its PSU stock-based compensation on a prospective basis beginning in the third quarter of 2021. This change resulted in an increase of approximately $0.6 million in stock-based compensation expense for the year ended September 30, 2021. The weighted-average grant date fair value was determined to be $45.18 per share. As of September 30, 2021, the unrecognized compensation costs related to these awards were $5.6 million. The Company expects to recognize those costs over a weighted average period of 1.0 year.

Any shares subject to outstanding awards under the 2013 Plan that are canceled or repurchased subsequent to the 2018 Plan’s effective date are returned to the pool of shares reserved for issuance under the 2018 Plan. Awards granted under the 2018 Plan may be nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance units.

Activity under the equity incentive plans during the year ended September 30, 2021 is as follows:


					Weighted
			Weighted		average
			average		remaining
			exercise		contractual	Aggregate
	Shares	Options	price		term	intrinsic
(In thousands, except per share data)	available	outstanding	per share		(years)	value
Outstanding at September 30, 2020	1,034	3,913	$	24.35	8.1	$	204,365
Additional shares authorized	1,000	—		—
Stock options granted	(175)	175		69.03
Stock options exercised	—	(805)		18.05
Stock options forfeited	151	(151)		39.25
Restricted stock units granted	(436)	—		—
Forfeiture of restricted stock units	61	—		—
Shares withheld for payment of taxes	93	—		—
Outstanding at September 30, 2021	1,728	3,132	$	27.15	7.3	$	251,343
Vested or expected to vest at September 30, 2021		3,132	$	27.15	7.3	$	251,343
Vested and exercisable at September 30, 2021		1,633	$	18.05	6.6	$	145,204

As of September 30, 2021, there was $26.3 million of total unrecognized compensation cost related to non-vested stock options under the equity incentive plans that are expected to be recognized over a weighted average period of 1.6 years. The weighted-average grant date fair value of stock options granted during the year ended September 30, 2021 was $69.03 per share.

2018 Employee Stock Purchase Plan

On September 26, 2018, the board of directors adopted the 2018 Employee Stock Purchase Plan (the 2018 ESPP). A total of 275,225 shares of the Company’s common stock have been reserved for issuance under the 2018 ESPP. The number of shares reserved for issuance under the 2018 ESPP will be increased automatically on the first day of each fiscal year, following the fiscal year in which the 2018 ESPP becomes effective, by a number equal to the least of 249,470 shares, 1% of the shares of common stock outstanding at that time, or such number of shares determined by the Company’s board of directors. The number of shares reserved for issuance as at September 30, 2021 is as follows:


		Shares
(In thousands)		available
Outstanding at September 30, 2020		179
Additional shares authorized		250
Shares issued during the period		(74)
Outstanding at September 30, 2021		355

Subject to any plan limitations, the 2018 ESPP allows eligible service providers (through qualified and non-qualified offerings) to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods are beginning in February and August of each year, except the initial offering period which commenced with the initial public offering in October 2018 and ended on August 20, 2019. The common shares issuable under the 2018 ESPP were registered pursuant to a registration statement on Form S-8 on November 26, 2018.

Unless otherwise determined by the board of directors, the Company’s common stock will be purchased for the accounts of employees participating in the 2018 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period, which for the initial offering period is the price at which shares of the Company’s common stock were first sold to the public, or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period. During the years ended September 30, 2021 and 2020, activity under the 2018 ESPP was immaterial.

Restricted Stock Units

Restricted stock primarily consists of restricted stock unit awards (RSUs) which have been granted to employees. The value of an RSU award is based on the Company’s stock price on the date of grant. The shares underlying the RSU awards are not issued until the RSUs vest. Upon vesting, each RSU converts into one share of the Company’s common stock.

Activity with respect to the Company’s restricted stock units during the year ended September 30, 2021 is as follows:


		Weighted
		average		Weighted
		grant		average
		date fair		remaining	Aggregate
	Number	value per		contractual	Intrinsic
(in thousands, except per share data)	of Shares	share		term (years)	Value
Outstanding at September 30, 2020	569	$	32.96	3.2	$	43,260
Restricted stock units granted	436	$	113.06	—		—
Restricted stock units vested	(237)	$	44.36	—		—
Restricted stock units forfeited	(61)	$	86.60	—		—
Outstanding at September 30, 2021	707	$	73.86	2.7	$	75,629
Expected to vest at September 30, 2021	707	$	73.86	2.7	$	75,629

As of September 30, 2021, there was $47.5 million of total unrecognized compensation cost related to these issuances that is expected to be recognized over a weighted average period of 2.7 years.

Stock-based compensation

Total stock-based compensation expense recognized were as follows:


	Year ended
	September 30,
(in thousands)	2021		2020		2019
Cost of revenues	$	2,678	$	1,290	$	1,345
Research and development		10,166		3,346		2,378
Selling, general and administrative		24,154		12,460		7,447
Total stock-based compensation	$	36,998	$	17,096	$	11,170

The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of a stock option. The Black-Scholes model requires various assumptions, including the fair value of the Company’s common stock, expected term, expected dividend yield and expected volatility.

The expected volatility of the Company’s stock options is estimated from the historical volatility of selected public companies with comparable characteristics to it, including similarity in size and lines of business. The expected term of stock options represents the period that the Company’s stock-options are expected to be outstanding before being exercised. The risk-free interest rate is based on the implied yield currently available on U.S. treasury notes with terms approximately equal to the expected life of the option. The expected dividend rate is zero as the Company currently has no history or expectation of declaring cash dividends on the Company’s common stock.

The fair value of options granted during the years ended September 30, 2021, 2020 and 2019, respectively, were calculated using the weighted average assumptions set forth below:


	Year ended
	September 30,
	2021		2020		2019
Expected term (years)	6.1		6.2		6.4
Expected volatility	64.4	%	62.1	%	60.2	%
Risk-free interest rate	1.0	%	1.3	%	2.7	%
Dividend yield	—	%	—	%	—	%

Weighted average grant date fair value of options granted during the years ended September 30, 2021, 2020 and 2019 were $42.80, $20.76 and $15.06, respectively.

Shares subject to repurchase

The Company has a right of repurchase with respect to unvested shares issued upon early exercise of options at an amount equal to the original exercise price of each unvested share being repurchased. The Company’s right to repurchase these shares lapses pursuant to the vesting schedule of the original grant, which is generally 25% on the first anniversary of the original grant and ratably on a monthly basis over the remaining 36 months. As of September 30, 2021, 2,741 shares remain subject to the Company’s right of repurchase.