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STOCK-BASED COMPENSATION AND STOCKHOLDERS' EQUITY

12 Months Ended

Mar. 31, 2021

STOCK-BASED COMPENSATION AND STOCKHOLDERS' EQUITY

2006 Stock Plan

In May 2006, the Company's board of directors approved the 2006 Stock Plan ("2006 Plan"). The Company's stockholders subsequently adopted the 2006 Plan in September 2006, which became effective in October 2006. The Company reserved 7.0 million shares of the Company's common stock for issuance under this plan. The 2006 Plan provides for granting incentive stock options to employees and non-statutory stock options to employees, directors or consultants. The stock option price of incentive stock options granted may not be less than the fair market value on the effective date of the grant. Other types of options and awards under the 2006 Plan may be granted at any price approved by the administrator, which generally will be the compensation committee of the board of directors. Options generally vest over four years and expire ten years after grant. In 2009, the 2006 Plan was amended to provide for the granting of stock purchase rights. The 2006 Plan expired in May 2016. As of March 31, 2021, there were no shares available for future grants under the 2006 Plan.

2012 Equity Incentive Plan

In June 2012, the Company's board of directors approved the 2012 Equity Incentive Plan ("2012 Plan"). The Company's stockholders subsequently adopted the 2012 Plan in July 2012, which became effective in August 2012. The Company reserved 4.1 million shares of the Company's common stock for issuance under this plan. In August 2014, 2016, 2018 and 2019, the 2012 Plan was amended to allow for an additional 6.8 million shares, 4.5 million shares, 16.3 million shares, and 12.0 million shares reserved for issuance, respectively. The 2012 Plan provides for granting incentive stock options to employees and non-statutory stock options to employees, directors or consultants, and granting of stock appreciation rights, restricted stock, restricted stock units and performance units, qualified performance-based awards, and stock grants. The stock option price of incentive stock options granted may not be less than the fair market value on the effective date of the grant. Other types of options and awards under the 2012 Plan may be granted at any price approved by the administrator, which generally will be the compensation committee of the board of directors. Options, restricted stock, and restricted stock units generally vest over three or four years and expire ten years after grant. The 2012 Plan expires in June 2029. As of March 31, 2021, 12.9 million shares remained available under the 2012 Plan.

2013 New Employee Inducement Incentive Plan

In September 2013, the Company's board of directors approved the 2013 New Employee Inducement Incentive Plan ("2013 Plan"). The Company reserved 1.0 million shares of the Company's common stock for issuance under this plan. In November 2014, the 2013 Plan was amended to allow for an additional 1.2 million shares reserved for issuance. In July 2015, the 2013 Plan was amended to allow for an additional 1.2 million shares reserved for issuance. In connection with its approval of the August 2016 amendments to the 2012 Plan, the Board of Directors has approved the suspension of future grants under the 2013 Plan, which became effective immediately upon stockholder approval of the proposed 2012 Plan amendments in August 2016. In addition, the 2013 Plan was amended to reduce the number of shares reserved for issuance under the 2013 Plan to the number of shares that are then subject to outstanding awards under the 2013 Plan, leaving no shares available for future grant. The 2013 Plan provided for granting non-statutory stock options, stock appreciation rights, restricted stock, restricted stock and performance units, and stock grants solely to newly hired employees as a material inducement to accepting employment with the Company. Options were granted at market value on the grant date under the 2013 Plan, unless determined otherwise at the time of grant by the administrator, which generally will be the compensation committee of the board of directors. Grants generally vest over four years and expire ten years after grant.

2017 New Employee Inducement Incentive Plan

In October 2017, the Company's board of directors approved the 2017 New Employee Inducement Incentive Plan ("2017 Plan"). The Company reserved 1.0 million shares of the Company's common stock for issuance under this plan. In January 2018, the 2017 Plan was amended to allow for an additional 1.5 million shares to be reserved for issuance. In December 2020, the 2017 Plan was further amended to allow for an additional 1.4 million shares to be reserved. The 2017 Plan provides for granting non-statutory stock options, stock appreciation rights, restricted stock, and performance units and stock grants solely to newly hired employees as a material inducement to accepting employment with the Company. Options are granted at market value on the grant date under the 2017 Plan, unless determined otherwise at the time of grant by the administrator, which generally will be the compensation committee of the board of directors. Grants generally vest over three years and expire ten years after grant. As of March 31, 2021, 1.1 million shares remained available under the 2017 plan.

Stock-Based Compensation

The following table presents stock-based compensation expense:


	Years Ended March 31,
	2021		2020		2019
Cost of service revenue	$	8,811	$	5,330	$	3,752
Cost of other revenue	4,384		3,051		1,775
Research and development	31,641		19,712		12,313
Sales and marketing	33,869		20,205		11,951
General and administrative	28,933		22,580		14,717
Total	$	107,638	$	70,878	$	44,508

Stock Options

The following table presents the stock option activity during the years ended March 31, 2021, 2020, and 2019 (shares in thousands):


	Number of Shares	Weighted Average Exercise Price Per Share
Outstanding at March 31, 2018	3,998	$	8.93
Granted	237	21.65
Exercised	(760)	7.70
Canceled/Forfeited	(361)	15.41
Outstanding at March 31, 2019	3,114	9.45

Exercised	(785)	8.77
Canceled/Forfeited	(55)	17.01
Outstanding at March 31, 2020	2,274	9.50

Exercised	(426)	8.67
Canceled/Forfeited	(35)	22.05
Outstanding at March 31, 2021	1,813	9.46

Vested and expected to vest March 31, 2021	1,809	9.43
Exercisable at March 31, 2021	1,751	$	9.09

The total intrinsic value of options exercised in the years ended March 31, 2021, 2020, and 2019, was $8.0 million, $10.1 million and $10.0 million, respectively.

As of March 31, 2021, there was $0.4 million of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of approximately 1.1 years.

The Company did not grant any stock options during fiscal years 2021 or 2020.

The fair value of each of the Company's option grants has been estimated on the date of grant using the Black-Scholes pricing model with the following assumptions:


	Years Ended March 31,
	2021	2020	2019
Expected volatility	—%	—%	41%

Risk-free interest rate	—	—	2.5% to 3.0%
Weighted average expected term (in years)	0	0	4.5 years
Weighted average fair value of options granted	$—	$—	$8.19

Stock Purchase Rights

The following table presents the stock purchase rights' activity during the years ended March 31, 2021, 2020, and 2019 (shares in thousands):


	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in Years)
Balance at March 31, 2018	4,975	$	8.10	1.09

Vested and released	(4,625)	7.88
Forfeited	(350)	7.88
Balance at March 31, 2019, 2020, and 2021	—	$	—

There were no activities related to stock purchase rights during the years ended March 31, 2021 and 2020.

As of March 31, 2021, there was no unrecognized compensation cost related to stock purchase rights.

Restricted Stock Units

The following table presents the RSU activity during the years ended March 31, 2021, 2020, and 2019 (shares in thousands):


	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in Years)
Balance at March 31, 2018	5,006	$	13.05
Granted	5,061	19.80
Vested and released	(1,899)	12.69
Forfeited	(1,332)	16.62
Balance at March 31, 2019	6,836	17.45		2.38
Granted	5,592	20.50
Vested and released	(2,771)	16.87
Forfeited	(1,545)	19.13
Balance at March 31, 2020	8,112	19.43		1.96
Granted	6,256	18.73
Vested and released	(4,579)	18.90
Forfeited	(1,143)	18.96
Balance at March 31, 2021	8,646	$	19.27	1.85

As of March 31, 2021, there was $118.9 million of total unrecognized compensation cost related to RSUs.

During fiscal 2021, the Company offered its employees an opportunity to receive a portion of their future cash salary for the year in shares of the Company's common stock, which resulted in the release of approximately 203,000 shares during the year.

Performance Stock Units

PSUs are issued to a group of executives with vesting that is contingent on both market performance and continued service. The PSUs generally vest over periods ranging from one to three years based on Total Shareholder Return ("TSR"), as measured relative to specified market indices during the period from grant date through vesting date. A 2x multiplier will be applied for each percentage point of positive or negative relative TSR, such that the number of shares of common stock earned will increase or decrease by 2% of the target number of shares, subject to a maximum of 200% of the target number of shares. In the event that the Company’s relative TSR performance is less than negative 30%, relative to the specified index, no shares will be earned for the applicable performance period. All PSU awards vest 100% at the end of the respective performance periods.

The following table presents the PSU activity during the years ended March 31, 2021, 2020, and 2019 (shares in thousands):


	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in Years)
Balance at March 31, 2018	924	$	15.95
Granted	474	19.52
Granted for performance achievement1	192	19.52
Vested and released	(506)	13.47
Forfeited	(100)	19.94
Balance at March 31, 2019	984	19.23		1.39
Granted	293	21.40
Granted for performance achievement1	547	21.40
Vested and released	(673)	17.61
Forfeited	(72)	17.52
Balance at March 31, 2020	1,079	22.05		1.40
Granted	1,013	29.00
Granted for performance achievement1	43	29.00
Vested and released	(350)	19.05
Forfeited	(209)	22.38
Balance at March 31, 2021	1,576	$	27.33	1.24

1 Represents additional PSUs awarded as a result of the achievement of performance goals above the performance targets established at grant.

As of March 31, 2021, there was $24.4 million of total unrecognized compensation cost related to PSUs.

The PSUs granted during fiscal 2021 were valued for compensation expense purposes at $29.07 per weighted average share as determined by Monte Carlo simulations using volatility factors ranging from 55.66% to 60.68% and risk-free rates ranging from 0.15% to 0.18%.

1996 Employee Stock Purchase Plan

The Company's Amended & Restated 1996 Stock Purchase Plan ("Employee Stock Purchase Plan") was adopted in June 1996 and became effective upon the closing of the Company's initial public offering in July 1997. In May 2006, the Company's board of directors approved a ten-year extension of the Employee Stock Purchase Plan. Stockholders approved a ten-year extension of the Employee Stock Purchase Plan at the 2006 Annual Meeting of Stockholders held September 18, 2006. The Board of Directors approved a second ten-year extension in May 2017. Stockholders approved the second ten-year extension in August 2017. As a result of these extensions, the Employee Stock Purchase Plan is effective until August 2027. During fiscal 2021, 2020 and 2019, approximately 0.7 million, 0.6 million and 0.5 million shares, respectively, were issued under the Employee Stock Purchase Plan.

The Employee Stock Purchase Plan permits eligible employees to purchase common stock through payroll deductions at a price equal to 85% of the fair market value of the common stock at the beginning of each one-year offering period or the end of each six month purchase period, whichever is lower. When the Employee Stock Purchase Plan was reinstated in fiscal 2005, the offering period was reduced from two years to one year. Commencing with the purchase period beginning in August 2020, the contribution amount may not exceed 20% of an employee's base compensation, including commissions and standard incentive cash bonuses, but not including non-standard bonuses and overtime wages. Prior to the August 2020 purchase period, the contribution amount was limited to 10% of an employee's base compensation, including commissions, but not including bonuses and overtime wages. In the event of a merger of the Company with or into another corporation or the sale of all or substantially all of the assets of the Company, the Employee Stock Purchase Plan provides that a new exercise date will be set for each purchase right under the plan which exercise date will occur before the date of the merger or asset sale.

As of March 31, 2021, there was approximately $2.5 million of unrecognized compensation cost related to employee stock purchases. This cost is expected to be recognized over a weighted average period of 0.4 years.

The estimated fair value of stock purchase rights granted under the Employee Stock Purchase Plan was estimated using the Black-Scholes pricing model with the following weighted-average assumptions:


	Years Ended March 31,
	2021	2020	2019
Expected volatility	84%	32%	41%
Expected dividend yield	—	—	—
Risk-free interest rate	0.11%	1.79%	2.43%
Weighted average expected term (in years)	0.7 years	0.7 years	0.8 years
Weighted average fair value of rights granted	$8.00	$5.66	$5.74

Stock Repurchases

In May 2017, the Company's board of directors authorized the Company to purchase $25.0 million of its common stock from time to time under the 2017 Repurchase Plan ("Repurchase Plan"). There were no repurchases under the Repurchase Plan in fiscal 2021. The Repurchase Plan expires when the maximum purchase amount is reached, or upon the earlier revocation or termination by the board of directors. The remaining amount available under the Repurchase Plan at March 31, 2021 was approximately $7.1 million.