Stockholders' Equity

3 Months Ended

Apr. 03, 2021

Stockholders' Equity Note [Abstract]

Stockholders’ Equity

2019 Equity Incentive Award Plan

Employees and consultants of the Company, its subsidiaries and affiliates, as well as members of the Company’s Board of Directors, are eligible to receive awards under the 2019 Equity Incentive Award Plan (“the 2019 Plan”). The 2019 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash-based awards and dividend equivalents to eligible individuals. As of April 3, 2021, there were 3.6 million shares available for issuance under the 2019 Plan.

Stock Options

During the three months ended April 3, 2021, stock option awards exercisable for up to an aggregate of 0.1 million shares of common stock were granted with a grant date exercise price of $33.20 per share. These stock option awards vest 25% on the first anniversary of the vesting commencement date and on a quarterly basis thereafter over an additional three years.

In February 2021, performance-based stock option awards exercisable for up to an aggregate of 0.7 million shares of common stock were granted to certain Company executives with a grant date exercise price of $36.74 per share. The actual number of shares earned is contingent upon achievement of annual corporate financial targets for bookings and non-GAAP net income for 2021 (collectively, the “2021 Performance Targets”) during the one-year performance period. These performance-based stock option awards will vest, subject to certification by the Compensation Committee of the Company’s Board of Directors upon the achievement of the 2021 Performance Targets, as to 25% of the shares of common stock earned on the one year anniversary of the date of grant, and as to the remaining 75% of the shares of common stock earned, in substantially equal quarterly installments over the subsequent 36 months, subject to the executive’s continuous service with the Company through the respective vesting dates. If the non-GAAP net income target is achieved below 80% of target or the bookings target is achieved below 90% of target, no shares would be awarded, and the performance-based stock option awards would be forfeited in full. If both targets are achieved at the minimum threshold of 80% of target for non-GAAP net income and 90% of target for bookings, then the shares are awarded at 50% of the granted shares, with an increasing percentage of shares awarded above the minimum

thresholds up to 100% of the granted shares if both targets are achieved at 100% or more of target. The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of April 3, 2021, and stock-based compensation expense of $1.0 million was recognized for the three months ended April 3, 2021.

During the three months ended April 3, 2021, 0.5 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $9.36 per share. As of April 3, 2021, unrecognized stock-based compensation expense of $26.1 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.5 years.

Employee Stock Purchase Plans

The Company maintains two employee stock purchase plans - the Amended and Restated Employee Stock Purchase Plan (the “ESPP”) and the Amended and Restated 2017 Nonqualified Employee Stock Purchase Plan (the “NQ ESPP”).

The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation subject to certain Internal Revenue Code limitations. In addition, no participant may purchase more than 2,000 shares of common stock in each offering period.

The offering periods under the ESPP are two six-month offering periods from August 15th through February 14th and February 15th through August 14th of each year. The price of common stock purchased under the ESPP is 85% of the lower of the fair market value of the common stock on the commencement date and the end date of each six-month offering period. As of April 3, 2021, there were 2.4 million shares available for issuance under the ESPP. During the three months ended April 3, 2021, 0.2 million shares were purchased under the ESPP. As of April 3, 2021, unrecognized stock-based compensation expense of $0.8 million related to the ESPP is expected to be recognized over a remaining service period of 0.4 years.

The NQ ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 25% of their eligible compensation. Eligible employees have the right to (a) purchase the maximum number of whole shares of common stock that can be purchased with the elected payroll deductions during each offering period for which the employee is enrolled at a purchase price equal to the closing price of the Company’s common stock on the last day of such offering period and (b) receive an equal number of shares of the Company’s common stock that are subject to a risk of forfeiture in the event the employee terminates employment within the one year period immediately following the purchase date. The NQ ESPP provides two six-month offering periods from November 15th through May 14th and May 15th through November 14th of each year. As of April 3, 2021, there were 2.3 million shares available for issuance under the NQ ESPP with a maximum of 0.5 million shares allocated per purchase period. As of April 3, 2021, unrecognized stock-based compensation expense of $4.3 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.0 year.

Stock-Based Compensation

The following table summarizes stock-based compensation expense (in thousands):


	Three Months Ended
	April 3, 2021		March 28, 2020
Cost of revenue:
Products	$	162	$	107
Services	150		115
Sales and marketing	1,447		956
Research and development	1,583		1,010
General and administrative	1,829		796
	$	5,171	$	2,984