Stock-Based Compensation

12 Months Ended

Dec. 28, 2019

Share-based Payment Arrangement [Abstract]



14.	Stock-Based Compensation

The Company has awards and options outstanding under three stock incentive plans: the 2005 Stock Option and Incentive Plan (the "2005 Plan"), the 2015 Stock Option and Incentive Plan (the "2015 Plan") and the 2018 Stock Option and Incentive Plan (the "2018 Plan" and together with 2005 Plan and the 2015 Plan, the "Plans"). The 2018 Plan is the only one of the three plans under which new awards may currently be granted. Under the 2018 Plan, which became effective on May 23, 2018, 1,750,000 shares were initially reserved for issuance in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards, cash-based awards, and dividend equivalent rights. Stock awards returned to the Plans, with the exception of those issued under the 2005 Plan, as a result of their expiration, cancellation or termination are automatically made available for issuance under the 2018 Plan. Eligibility for incentive stock options is limited to those individuals whose employment status would qualify them for the tax treatment associated with incentive stock options in accordance with the Internal Revenue Code. As of December 28, 2019, there were 1,293,482 shares available for future grant under the 2018 Plan. The Company recognized $23.7 million, $25.8 million and $19.8 million of stock-based compensation expense during the fiscal years ended December 28, 2019, December 29, 2018, and December 30, 2017, respectively.

Stock-based compensation breaks down by expense classification as follows (in thousands):



	Fiscal Year Ended
	December 28, 2019		December 29, 2018		December 30, 2017
Cost of revenue	$	1,486	$	1,407	$	1,082
Research and development	9,186		7,494		5,009
Selling and marketing	3,323		2,842		2,571
General and administrative	9,749		14,061		11,089
Total	$	23,744	$	25,804	$	19,751

Stock Options

Options granted under the Plans are exercisable in full at any time subsequent to vesting, generally vest over four years, and expire five years or ten years from the date of grant or, if earlier, 90 days from employee termination. The exercise price of stock options is typically equal to the Company's closing stock price on the date of grant.

As of December 28, 2019, the unamortized compensation costs associated with stock options was $0.4 million with a weighted-average remaining recognition period of 0.61 years.

The following table summarizes stock option activity for fiscal years 2019, 2018 and 2017:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
Outstanding at December 31, 2016	1,088,174		$	32.27
Granted	10,975		57.33
Exercised	(367,267	)	28.79
Canceled	(18,928	)	36.72
Outstanding at December 30, 2017	712,954		$	34.34
Granted	—		—
Exercised	(239,830	)	33.40
Canceled	(10,863	)	46.20
Outstanding at December 29, 2018	462,261		$	34.55
Granted	—		—
Exercised	(127,024	)	32.95
Canceled	(12,329	)	37.03
Outstanding at December 28, 2019	322,908		$	35.08	2.47 years	$5.65 million
Vested and expected to vest at December 28, 2019	322,908		$	35.08	2.47 years	$5.65 million
Exercisable as of December 28, 2019	293,159		$	34.30	2.35 years	$5.32 million

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(1)	The aggregate intrinsic value on the table above represents the difference between the Company's closing stock price on December 28, 2019 of $50.20 and the exercise price of the underlying in-the-money option.

During fiscal years 2019, 2018, and 2017, the total intrinsic value of stock options exercised was $8.9 million, $14.9 million, and $21.8 million, respectively.

Time-based Restricted Stock Units

Time-based restricted stock units entitle the holder to a specific number of shares of common stock upon vesting, typically over a four year period. As of December 28, 2019, the unamortized compensation costs associated with restricted stock units was $49.2 million with a weighted-average remaining recognition period of 2.53 years.

The following table summarizes the time-based restricted stock unit activity for fiscal years 2019, 2018 and 2017:



	Number of Shares Underlying Restricted Stock		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	935,179		$	35.07
Granted	396,164		72.63
Vested	(351,543	)	33.73
Forfeited	(41,347	)	39.52
Outstanding at December 30, 2017	938,453		$	51.24
Granted	307,614		81.55
Vested	(351,816	)	47.30
Forfeited	(38,362	)	60.62
Outstanding at December 29, 2018	855,889		$	63.32
Granted	407,325		79.91
Vested	(358,119	)	54.89
Forfeited	(85,863	)	76.85
Outstanding at December 28, 2019	819,232		$	73.83

The aggregate intrinsic value of outstanding time-based restricted stock units at December 28, 2019 was $42.8 million based on the Company's closing stock price on December 28, 2019 of $50.20, with a weighted average remaining contractual term of 1.52 years.

Performance-Based Restricted Stock Units

The Company grants performance-based restricted stock units ("PSUs") to certain of its employees. The PSUs have performance metrics based on financial performance of the Company measured at the end of a three year performance period. For the 2017 grant year, the performance metric for these awards is based on revenue, operating income and/or operating income percent, with a threshold requirement for a minimum amount of revenue growth. Starting in 2018, the Company has removed revenue as a performance metric in the PSU plan design and changed the payout metric from three-year cumulative operating income as a percentage of annual revenue to three-year cumulative operating income in dollars. The number of shares actually earned at the end of the three-year period will range from 0% to 200% of the target number of PSUs granted based on the Company’s performance against the performance conditions.

The unamortized fair value as of December 28, 2019 associated with performance based restricted stock units was $1.7 million with a weighted-average remaining recognition period of 1.04 years.

The following table summarizes the performance-based restricted stock unit activity for fiscal years 2019, 2018 and 2017:



	Number of Shares Underlying PSU		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	163,911		$	35.03
Granted	105,650		57.33
Vested	(24,792	)	43.35
Forfeited	(2,708	)	39.71
Outstanding at December 30, 2017	242,061		$	43.97
Granted	91,538		68.41
Vested	(56,259	)	34.30
Forfeited	(3,221	)	45.71
Outstanding at December 29, 2018	274,119		$	54.10
Granted	70,827		122.20
Vested	(78,943	)	33.33
Forfeited	(49,772	)	78.29
Outstanding at December 28, 2019	216,231		$	78.42

The aggregate intrinsic value of outstanding PSUs was $11.3 million based on the Company's closing stock price on December 28, 2019 of $50.20 with a weighted average remaining contractual term of 1.04 years.

Employee Stock Purchase Plan

In May 2017, the Company’s stockholders approved the 2017 Employee Stock Purchase Plan ("ESPP"). Eligible employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods beginning November 15 and May 15 of each year. An employee’s payroll deductions under the ESPP are limited to 15% of the employee’s compensation, up to $4,000 each period, for the purchase of common stock not to exceed 1,000 shares per offering period. As of December 28, 2019, there were 570,962 shares reserved for future issuance under the ESPP. The Company recognized $1.1 million, $1.0 million, and $0.1 million of stock-based compensation expense during the fiscal years ended December 28, 2019, December 29, 2018, and December 30, 2017, respectively.