Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program

Equity Incentive Plans

2014 Equity Incentive Plan

The 2014 Equity Incentive Plan (the “2014 Plan”) provides for the granting of stock options, restricted stock awards, restricted stock units (“RSUs”), market performance-based RSUs (“PSUs”), stock appreciation rights, performance units and performance shares to our employees, consultants and members of our board of directors. In June 2015, our board of directors adopted and our stockholders approved an amendment and restatement of the 2014 Plan, which increased the number of shares available for issuance under the 2014 Plan by the number of shares granted under the 2008 Stock Plan (the “2008 Plan”) that were or may in the future be canceled or otherwise forfeited or repurchased after March 20, 2014. As of December 31, 2020, we had 10,725,127 shares available for future grant under the 2014 Plan.

The shares authorized for the 2014 Plan increase annually by the least of (i) 8,000,000 shares, (ii) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year, or (iii) such other amount as determined by our Board of Directors. In November 2020, our Board of Directors determined the current shares authorized under the 2014 Plan were sufficient for the time being and decided not to increase the number of shares authorized in 2021.

To date, the Company has granted stock options, RSUs and PSUs under the 2014 Plan. Stock options expire no more than 10 years from the grant date and generally vest over four years. In the case of an incentive stock option granted to an employee, who at the time of grant, owns stock representing more than 10% of the total combined voting power of all classes of stock, the per share exercise price will be no less than 110% of the fair market value per share on the date of grant, and the incentive stock option will expire no later than five years from the date of grant. For incentive stock options granted to any other employees and nonstatutory stock options granted to employees, consultants, or members of our Board of Directors, the per share exercise price will be no less than 100% of the fair market value per share on the date of grant. RSUs and PSUs generally vest from one to four years.

2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan (the “2014 Purchase Plan”) was suspended effective March 16, 2018 due to the delay of the Form 10-K filing for the year ended December 31, 2017. In October 2018, the Board of Directors approved amending the 2014 Purchase Plan (the “Amended 2014 Purchase Plan”) in order to, among other things, reduce the maximum contribution participants can make under the plan from 15% to 10% of eligible compensation. The Amended 2014 Purchased Plan also reflects revised offering periods, which were changed from 24 months to six months in duration and that begin on or about December 1 and June 1 each year, starting in December 2018. The Amended 2014 Purchase Plan permits eligible employees to purchase shares of our common stock through payroll deductions with up to 10% of their pre-tax eligible earnings subject to certain Internal Revenue Code (“IRC”) limitations. The purchase price of the shares is 85% of the lower of the fair market value of our common stock on the first day of a six-month offering period or the relevant purchase date. In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period.

Employees purchased 581,634 shares at an average price of $5.67 and with an aggregate intrinsic value of $1.0 million during the year ended December 31, 2020, and purchased 662,362 shares at an average price of $5.14 and with an intrinsic value of $0.8 million during the year ended December 31, 2019. During 2018, there were no stock purchases by employees under the Amended 2014 Purchase Plan or the 2014 Purchase Plan. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. As of December 31, 2020, we had 1,821,186 shares available for future issuance under the Amended 2014 Purchase Plan.

Stock-Based Compensation

A summary of our stock-based compensation expense is as follows (in thousands):



	Years Ended December 31,
		2020		2019		2018
Stock-based compensation by type of award:
Stock options		$	209	$	648	$	1,353
Stock awards		10,938		14,882		10,445
Employee stock purchase rights (1)		1,163		999		5,240
Total		$	12,310	$	16,529	$	17,038

Stock-based compensation by category of expense:
Cost of revenue		$	1,357	$	1,500	$	1,602
Sales and marketing		3,018		5,765		5,667
Research and development		4,241		6,039		6,631
General and administrative		3,694		3,225		3,138
Total		$	12,310	$	16,529	$	17,038

(1)Amount for the year ended December 31, 2018 includes $4.1 million of accelerated stock-based compensation expense. In March 2018, as a result of a suspension of the 2014 Purchase Plan due to our non-timely filing status, all unrecognized stock-based compensation expense related to ESPP under the 2014 Purchase Plan was accelerated and recognized within the consolidated statement of operations.

As of December 31, 2020, the Company had $24.4 million of unrecognized stock-based compensation expense related to unvested stock-based awards, including ESPP under our Amended 2014 Purchase Plan, which will be recognized over a weighted-average period of 2.7 years.

Fair Value Determination:

The fair values of stock options and employee stock purchase rights were estimated as of the grant date using the Black-Scholes option-pricing model with the following assumptions:



	Stock Options (1)	Employee Stock Purchase Rights
	Year Ended December 31,	Years Ended December 31,
	2018	2020	2019	2018
Expected term (in years)	4.8	0.5	0.5	0.5
Risk-free interest rate	3.1%	0.1%	2.3%	2.6%
Expected volatility	37%	59%	34%	28%
Dividend rate	—%	—%	—%	—%

(1) The Company did not grant stock options in the years ended December 31, 2020 and 2019.

•Expected Term. We estimate the expected life of options based on an analysis of our historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option. The expected term for the employee stock purchase rights is based on the term of the purchase period.

•Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected terms of stock options and the employee stock purchase rights.

•Expected Volatility. For stock options, due to the limited trading history of our own common stock, we determined the share price volatility factor based on a combination of the historical volatility of our own common stock and the historical volatility of our peer group for the stock options. For employee stock purchase rights, we used the historical volatility of our own common stock.

•Dividend Rate. The expected dividend was assumed to be zero as we have never paid dividends and do not anticipate paying any dividends in the foreseeable future.

Stock Options

The following tables summarize our stock option activities and related information:


	Number of Shares (thousands)	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1) (thousands)
Outstanding as of December 31, 2019	3,702	$	5.57
Granted	—	—
Exercised	(1,298)	4.85
Canceled	(731)	7.15
Outstanding as of December 31, 2020	1,673	$	5.44	2.67	$	7,520
Vested and exercisable as of December 31, 2020	1,673	$	5.44	2.67	$	7,520

(1)The aggregate intrinsic value represents the excess of the closing price of our common stock of $9.86 as of December 31, 2020 over the exercise price of the outstanding in-the-money options.

Following is additional information pertaining to our stock option activities (in thousands, except per share data):



	Years Ended December 31,
	2020		2019		2018
Weighted-average grant date fair value of options granted (per share)	$	—	$	—	$	2.19
Intrinsic value of options exercised (1)	$	2,778	$	1,930	$	2,629

(1)Intrinsic value of options exercised is the difference between the closing price of our common stock at the time of exercise and the exercise price paid.

Stock Awards

The Company has granted RSUs to its employees, consultants and members of its Board of Directors, and PSUs to certain executives and employees. The Company’s PSUs have market performance-based vesting conditions as well as service-based vesting conditions. As of December 31, 2020, there were 3,753,620 RSUs and 1,134,103 PSUs outstanding.

The following table summarizes our stock award activities and related information:



	Number of Shares (thousands)	Weighted-Average Grant Date Fair Value Per Share		Weighted-Average Remaining Vesting Term (years)
Nonvested as of December 31, 2019	6,148	$	6.59
Granted	2,018	6.74
Released	(1,786)	6.79
Canceled	(1,492)	6.56
Nonvested as of December 31, 2020	4,888	$	6.59	2.13

Following is additional information pertaining to our stock award activities (in thousands, except per share data):


	Years Ended December 31,
	2020		2019		2018
Weighted-average grant date fair value of stock awards granted (per share)	$	6.74	$	6.74	$	5.95
Total fair value of stock awards released (vested) during the period	$	12,129	$	12,183	$	9,714

Repurchase Agreement

On May 17, 2020, the Company entered into a Common Stock Repurchase and Option Exchange Agreement (the “Repurchase Agreement”) with Lee Chen, the Company’s founder and its former Chairman, President and Chief Executive Officer. Pursuant to the Repurchase Agreement, the Company repurchased 2.2 million shares of common stock from Mr. Chen for approximately $13.3 million. The common shares repurchased are held in treasury and accounted for under the cost method.

Stock Repurchase Program

On September 17, 2020, the Company’s Board of Directors approved a stock repurchase program of up to $50 million of its common stock over a period of twelve months. During the year ended December 31, 2020, the Company repurchased a total of 2.7 million shares for a total cost of $19.2 million and as of December 31, 2020, the Company had $30.8 million available to repurchase shares under this program. Under the program, repurchased shares are held in treasury at cost. The Company’s stock repurchase program does not obligate us to acquire any specific number of shares. Shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. To date, all repurchases under this program have occurred in the open market.