SHARE-BASED COMPENSATION

6 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

The following is a summary of share-based compensation expense including restricted stock units granted pursuant to the Company's 2007 Equity Incentive Plan, as amended (Amended 2007 Plan), and employee stock purchases made under the Company's 2011 Employee Stock Purchase Plan, as amended, (ESPP) based on estimated fair values within the applicable cost and expense lines identified below (in thousands):



	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of product revenue	$	345	$	544	$	612	$	813
Cost of service revenue	1,842		1,845		3,309		3,175
Research and development	4,820		5,414		8,639		9,565
Sales and marketing	5,288		6,043		9,423		10,402
General and administrative	3,562		3,572		6,617		6,428
	$	15,857	$	17,418	$	28,600	$	30,383

On September 12, 2019, the Company’s stockholders approved the 2019 Equity Incentive Plan (2019 Plan), which replaced the Company’s Amended 2007 Plan. The 2019 Plan permits the granting of incentive and nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively referred to as “share-based awards.” Periodically, the Company grants share-based awards to employees and officers of the Company and its subsidiaries. The Company accounts for these share-based awards in accordance with GAAP, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made to its employees and directors. Share-based award grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company’s common stock. Such value is recognized as a cost of revenue or an operating expense over the corresponding vesting period. At September 12, 2019, there was a total of 6,794,651 shares reserved for issuance under the 2019 Plan, which consists of 5,500,000 new shares plus 1,294,651 shares that remained available for grant under the Amended 2007 Plan as of the September 12, 2019, the effective date of the 2019 Plan.

The aggregate number of shares available for issuance under the 2019 Plan will increase by 2.76 shares for each share: (i) subject to an award granted under the Amended 2007 Plan or 2019 Plan that are not issued because such award expires or otherwise terminates without all of the shares covered by such award having been issued; (ii) any shares subject to an award under the Amended 2007 Plan or 2019 Plan that are not issued because such award is settled in cash; (iii) any shares issued pursuant to an award granted under the Amended 2007 Plan or 2019 Plan that are forfeited back to or repurchased by the Company because of failure to vest; and (iv) any shares that are reacquired or withheld by the Company to satisfy tax withholdings obligation in connection with common stock issued pursuant to restricted stock, restricted stock units, performance stock awards, or other stock award under the Amended 2007 Plan and 2019 Plan. Furthermore, the share reserve

under the 2019 Plan is reduced by one share for each share of common stock issued pursuant to a stock option or stock appreciation right and 2.76 shares for each share of common stock issued pursuant to restricted stock, restricted stock units, performance stock awards, or other stock awards granted under the 2019 Plan on or after September 12, 2019. At September 30, 2019, there were 6,965,972 shares of common stock available for grant under the 2019 Plan.

The 2019 Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee operates under guidelines established by the Board of Directors. The Compensation Committee has the authority to select the employees and consultants to whom awards are granted (except for directors and executive officers) and determine the terms of each award, including the number of shares of common stock subject to the award.

Share-based awards generally vest over four years. The exercise price of incentive stock options shall not be less than 100% of the fair market value of the common stock at the date of grant (110% for incentive stock options granted to holders of more than 10% of the voting stock of NetScout). The term of stock options granted cannot exceed seven years (five years for incentive stock options granted to holders of more than 10% of the voting stock of NetScout).

Employee Stock Purchase Plan – The Company maintains the ESPP for all eligible employees as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2019. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through the last day of February each year. During the six months ended September 30, 2019, employees purchased 297,635 shares under the ESPP and the value per share was $22.15.