Stock-Based Compensation

3 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-based awards were granted under the 2020 Omnibus Incentive Plan (the "2020 Plan") beginning January 29, 2020. Prior to that date such awards made in fiscal 2020 were granted under the 2019 Omnibus Incentive Plan (the "2019 Plan"). Upon stockholder approval of the 2020 Plan, we ceased granting awards under the 2019 Plan. Shares subject to awards under the 2019 Plan or any prior plans that are forfeited, canceled, returned to us for failure to satisfy vesting requirements, settled in cash or otherwise terminated without payment also will be available for grant under the 2020 Plan. The authority to grant options under the 2020 Plan and to set other terms and conditions rests with the Compensation Committee of the Board of Directors.

The 2020 Plan authorizes the issuance of up to 1,500,000 common shares in connection with awards of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based full value awards or other stock-based awards. Eligible participants include our employees, our affiliates, non-employee directors of our Company and any consultant or advisor who is a natural person and provides services to us or our affiliates. Options that have been granted under the 2020 Plan typically vest over a four-year period and will expire if unexercised after seven years from the date of grant. Restricted stock unit awards ("RSUs") that have been granted to directors typically vest in one year. RSUs that have been granted to executives and employees typically vest in January over a four-year period. The 2020 Plan is scheduled to expire on January 28, 2030. Options under the 2020 Plan can be granted as either incentive stock options or non-statutory stock options. The exercise price of options and the grant date price of RSUs is determined by our Compensation Committee but will not be less

15. STOCK-BASED COMPENSATION (CONTINUED)

than the fair market value of our common stock based on the closing price as of the date of grant. Upon exercise of options or settlement of vested restricted stock units or performance stock units, we issue new shares of stock. As of December 31, 2020, there were approximately 648,815 shares available for future grants under the 2020 Plan.

Cash received from the exercise of stock options was $3.9 million and $4.2 million for the three months ended December 31, 2020 and December 31, 2019, respectively.

Our equity plans and corresponding forms of award agreements generally have provisions allowing employees to elect to satisfy tax withholding obligations through the delivery of shares. When employees make this election we retain a portion of shares issuable under the award. Tax with withholding obligations otherwise occur by the employee paying cash to us for the withholding. During the three months ended December 31, 2020 and 2019, our employees forfeited 83,928 shares and 88,723 shares, respectively, in order to satisfy respective withholding tax obligations of $1.4 million and $1.6 million.

We sponsor an Employee Stock Purchase Plan as amended and restated as of December 10, 2019, October 29, 2013, December 4, 2009 and November 27, 2006 (the "ESPP"), covering all domestic employees with at least 90 days of continuous service and who are customarily employed at least 20 hours per week. The ESPP allows eligible participants the right to purchase common stock on a quarterly basis at the lower of 85% of the market price at the beginning or end of each three-month offering period. The most recent amendments to the ESPP, ratified by our stockholders on January 29, 2020, increased the total number of shares to 3,425,000 that may be purchased under the plan. ESPP contributions by employees were $0.3 million for both of the three-month periods ended December 31, 2020 and December 31, 2019, respectively. Pursuant to the ESPP, 25,246 and 24,738 common shares were issued to employees during the three months ended December 31, 2020 and December 31, 2019, respectively. Shares are issued under the ESPP from treasury stock. As of December 31, 2020, 686,468 common shares were available for future issuances under the ESPP.

The following table shows stock-based compensation expense that is included in the consolidated results of operations (in thousands):


	Three months ended December 31,
		2020		2019
Cost of sales		$	82	$	64
Sales and marketing		525		431
Research and development		210		294
General and administrative		928		811
Stock-based compensation before income taxes		1,745		1,600
Income tax benefit		(365)		(332)
Stock-based compensation after income taxes		$	1,380	$	1,268

Stock Options

The following table summarizes our stock option activity (in thousands, except per common share amounts):


	Options Outstanding	Weighted Average Exercised Price	Weighted Average Contractual Term (in years)	Aggregate Intrinsic Value (1)
Balance at September 30, 2020	3,393	$12.20
Granted	418	16.91
Exercised	(357)	11.06
Forfeited / Canceled	(69)	14.17
Balance at December 31, 2020	3,385	$12.86	4.2	$	20,433

Exercisable at December 31, 2020	1,983	$11.28	3.1	$	15,103

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $18.90 as of December 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. The intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price.

15. STOCK-BASED COMPENSATION (CONTINUED)

The total intrinsic value of all options exercised during the three months ended December 31, 2020 was $2.2 million and during the three months ended December 31, 2019 was $3.0 million.

The following table shows the weighted average fair value, which was determined based upon the fair value of each option on the grant date utilizing the Black-Scholes option-pricing model and the related assumptions:


	Three months ended December 31,
	2020	2019
Weighted average per option grant date fair value	$7.12	$6.56
Assumptions used for option grants:
Risk free interest rate	0.51% - 0.54%	1.67% - 1.73%
Expected term	6.00 years	6.00 years
Expected volatility	44%	36%
Weighted average volatility	44%	36%
Expected dividend yield	—	—

The fair value of each option award granted during the periods presented was estimated using the Black-Scholes option valuation model that uses the assumptions noted in the above table. Expected volatilities are based on the historical volatility of our stock. We use historical data to estimate option exercise and employee termination information within the valuation model. The expected term of options granted is derived from the vesting period and historical information and represents the period of time that options granted are expected to be outstanding. The risk-free rate used is the zero-coupon U.S. Treasury bond rate in effect at the time of the grant whose maturity equals the expected term of the option.

As of December 31, 2020, the total unrecognized compensation cost related to non-vested stock options was $7.9 million and the related weighted average period over which it is expected to be recognized is approximately 3.1 years.

Non-vested Stock Units

The following table presents a summary of our non-vested restricted stock as of December 31, 2020 and changes during the three months then ended (in thousands, except per common share amounts):


	RSUs
	Number of Awards	Weighted Average Grant Date Fair Value
Nonvested at September 30, 2020	972	$	13.20
Granted	254	$	16.95
Vested	(221)	$	12.93
Canceled	(46)	$	13.16
Nonvested at December 31, 2020	959	$	14.26

As of December 31, 2020, the total unrecognized compensation cost related to non-vested stock units was $12.3 million. The related weighted average period over which this cost is expected to be recognized is approximately 1.8 years.