Note 9 - Stockholders' Equity and Stock-based Compensation

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Shareholders' Equity and Share-based Payments [Text Block]

NOTE 9. Stockholders' Equity and Stock-Based Compensation

Equity Incentive Plans

2012 Equity Incentive Plan

Under the 2012 Equity Incentive Plan (the "2012 Plan"), the Company is authorized to grant to eligible participants incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance units and performance shares equivalent to up to 17,662 thousand shares of common stock as of June 30, 2021, including 1,963 thousand shares authorized during the six months ended June 30, 2021. Options may be granted with an exercise price that is at least equal to the fair market value of the Company's stock at the date of grant and are exercisable when vested. As of June 30, 2021, 8,572 thousand shares were available for grant under the 2012 Plan.

2000 Equity Incentive Plan

Under the 2000 Equity Incentive Plan (the "2000 Plan"), the Company was authorized to grant to eligible participants either ISOs or NSOs. The 2000 Plan was terminated in connection with the closing of the Company's initial public offering, and accordingly, no shares are currently available for grant under the 2000 Plan. The 2000 Plan continues to govern outstanding awards granted thereunder.

2021 Employee Stock Purchase Plan

On June 9, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”). A total of 600 thousand shares were authorized for issuance to eligible participating employees upon adoption of the ESPP. The ESPP provides for consecutive 6-month offering periods beginning on or about August 16 and February 16 of each year. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (i) the fair market value of the Company's stock on the first trading day of the offering period or (ii) the fair market value of the Company's stock on the purchase date (i.e., the last trading day of the offering period).

Stock-Based Compensation

The following table shows a summary of the stock-based compensation expense included in the condensed consolidated statements of operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	(in thousands)
Cost of revenues	$	841	$	583	$	1,716	$	1,197
Research and development		2,582		3,253		4,797		6,690
Sales and marketing		1,086		1,513		2,714		3,073
General and administrative		4,044		4,095		37,528		8,481
Total stock-based compensation	$	8,553	$	9,444	$	46,755	$	19,441

As of June 30, 2021, the Company had $14.5 million of total unrecognized stock-based compensation expense related to unvested options which are expected to be recognized over a weighted-average period of 2.7 years, and $53.8 million of unrecognized stock-based compensation expense related to unvested RSUs which are expected to be recognized over a weighted-average period of 2.7 years.

Performance-Based Restricted Stock Units and Stock Options

On April 27, 2021, the compensation committee of the Company's board of directors (Compensation Committee) granted to the Company’s President and Chief Executive Officer an equity award consisting of certain RSUs and a target number of 9,671 performance-based restricted stock units ("PSUs"). The PSUs are scheduled to vest at the end of the three-year performance period from January 2021 through December 2023. The actual number of PSUs eligible to vest range from 0% to 200% of the target number, depending on the level of achievement of goals related to revenue growth and free cash flow per share growth during the performance period. If the Company's President and Chief Executive Officer is terminated (a) by reason of death or disability or (b) by the Company for reasons other than cause or good reason within 12 months following a change in control, then 100% of any unvested portions of the award will vest, with any vesting in connection with terminations due to change in control conditioned upon the effectiveness of a release of claims in favor of the Company.

On  March 19, 2021, the Company’s former Chief Executive Officer, Philippe Courtot, resigned from the Company due to health issues. The Compensation Committee determined that Mr. Courtot’s termination of employment was on account of disability. In accordance with the grant agreements of the equity awards for 2021, 2020 and 2019 for Mr. Courtot, all remaining outstanding RSUs, PSUs and performance stock options under these grants were subject to accelerated vesting and became fully vested at 100% of the target number of awards as of the date of his termination of employment, which consist of 127 thousand RSUs, 44 thousand PSUs and 348 thousand performance stock options. As a result, the Company recognized $27.3 million of stock-based compensation expense due to the accelerated vesting in the condensed consolidated statements of operations during the six months ended  June 30, 2021.

In  February 2021 and  February 2020, 22 thousand shares (representing 200% of target number of awards) and 15 thousand shares (representing 135% of target number of awards) under the equity award for 2019 for Mr. Courtot, vested as a result of the Company achieving the corresponding level of performance goals for fiscal 2020 and 2019, respectively.

Stock Option Activity

A summary of the Company’s stock option activity is as follows:

				Weighted		Weighted Average
	Outstanding			Average		Remaining		Aggregate
	Options			Exercise Price		Contractual Life		Intrinsic Value
		(in thousands)					(Years)		(in thousands)
Balance as of December 31, 2020		2,215		$	59.07		6.5	$	139,121
Granted		205		$	114.62
Exercised		(126	)	$	35.25
Canceled		(62	)	$	99.91
Balance as of June 30, 2021		2,232		$	64.37		5.1	$	85,821
Vested and expected to vest - June 30, 2021		2,080		$	61.38		4.8	$	85,211
Exercisable - June 30, 2021		1,641		$	50.67		3.7	$	82,435

Restricted Stock Unit Activity

A summary of the Company’s RSU activity is as follows:

				Weighted Average
				Grant Date
	Outstanding			Fair Value
	RSUs			Per Share
		(in thousands)
Balance as of December 31, 2020		1,047		$	86.78
Granted		181		$	112.67
Vested		(389	)	$	84.51
Canceled		(117	)	$	83.01
Balance as of June 30, 2021		722		$	95.12
Outstanding and expected to vest - June 30, 2021		633		$	93.74

Share Repurchase Program

On February 5, 2018, the Company's board of directors authorized a $100.0 million two-year share repurchase program, which was announced on February 12, 2018. On each of October 30, 2018,  October 30, 2019, May 7, 2020 and February 10, 2021, the Company announced that its board of directors had authorized an increase of $100.0 million to the share repurchase program, resulting in an aggregate authorization of $500.0 million. Shares may be repurchased from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act of 1934, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act, until February 14, 2022. All share repurchases were made using cash resources.

Repurchased shares are retired and reclassified as authorized and unissued shares of common stock. On retirement of the repurchased shares, common stock is reduced by an amount equal to the number of shares being retired multiplied by the par value. The excess amount that is retired over its par value is first allocated as a reduction to additional paid-in capital based on the initial public offering price of the stock, with the remaining excess to retained earnings.

During the six months ended June 30, 2021, the Company repurchased 585 thousand shares of its common stock for approximately $63.2 million. As of June 30, 2021, approximately $138.6 million remained available for share repurchases pursuant to the Company's share repurchase program.