Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation and Employee Benefit Plans

v3.19.1
Stock-Based Compensation and Employee Benefit Plans
 3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation and Employee Benefit Plans
Stock-Based Compensation and Employee Benefit Plans
Employee Stock-Based Benefit Plans
At March 31, 2019, the Company had stock-based compensation awards outstanding under the following plans: the 2004 Stock Plan, the 2010 Equity Incentive Plan, as amended, or 2010 Plan, the 2010 Employee Stock Purchase Plan, or ESPP, and plans under which equity incentive awards were assumed in connection with the acquisitions of Entropic in 2015 and Exar Corporation in 2017. Refer to the Company’s Annual Report for a summary of the Company's stock-based compensation and equity plans as of December 31, 2018. There have been no material changes to the terms of the Company's equity incentive plans during the three months ended March 31, 2019. All current stock awards are issued under the 2010 Plan and ESPP.
As of March 31, 2019, the number of shares of common stock available for future issuance under the 2010 Plan and awards outstanding under the 2004 Plan was 14,636,122 shares and 416,007 shares, respectively. As of March 31, 2019, the number of shares of common stock available for future issuance under the ESPP was 3,000,253 shares.
Stock-Based Compensation
The Company recognizes stock-based compensation in the consolidated statements of operations, based on the department to which the related employee reports, as follows:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in thousands)
Cost of net revenue
$
130

 
$
106

Research and development
4,213

 
4,374

Selling, general and administrative
3,404

 
3,993

 
$
7,747

 
$
8,473


The total unrecognized compensation cost related to unvested restricted stock units and restricted stock awards as of March 31, 2019 was $46.3 million, and the weighted average period over which these equity awards are expected to vest is 2.49 years. The total unrecognized compensation cost related to unvested stock options as of March 31, 2019 was $3.7 million, and the weighted average period over which these equity awards are expected to vest is 2.71 years.
Restricted Stock Units and Restricted Stock Awards
The Company calculates the fair value of restricted stock units based on the fair market value of the Company's common stock on the grant date. Stock based compensation is recognized over the vesting period using the straight-line method.
A summary of the Company’s restricted stock unit and restricted stock award activity is as follows:
 
Number of Shares
(in thousands)
 
Weighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 2018
3,263

 
$
20.23

  Granted
367

 
23.51

  Vested
(636
)
 
20.83

  Canceled
(99
)
 
21.00

Outstanding at March 31, 2019
2,895

 
20.49


Employee Stock Purchase Rights and Stock Options
The Company uses the Black-Scholes valuation model to calculate the grant-date fair value of employee stock purchase rights and stock options. Stock based compensation expense is recognized over the vesting period using the straight-line method.
Employee Stock Purchase Rights
During the three months ended March 31, 2019, there were no shares of common stock purchased under the ESPP.
The fair values of employee stock purchase rights were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions:
 
Three Months Ended March 31,
 
2019
 
2018
Weighted-average grant date fair value per share
$
5.01

 
$
6.51

Risk-free interest rate
2.51
%
 
1.39
%
Dividend yield
—
%
 
—
%
Expected life (in years)
0.50

 
0.50

Volatility
38.82
%
 
36.97
%

The risk-free interest rate assumption was based on rates for United States (U.S.) Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term is the duration of the offering period for each grant date. In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company's daily closing stock prices.
Stock Options
A summary of the Company’s stock options activity is as follows:
 
Number of Options
(in thousands)
 
Weighted-Average Exercise Price
 
Weighted-Average Contractual Term (in years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018
2,659

 
$
10.27

 
 
 
 
Exercised
(609
)
 
7.08

 
 
 
 
Canceled
(7
)
 
20.50

 
 
 
 
Outstanding at March 31, 2019
2,043

 
$
11.19

 
2.43
 
$
29,376

Vested and expected to vest at March 31, 2019
2,020

 
$
11.11

 
2.39
 
$
29,206

Exercisable at March 31, 2019
1,602

 
$
9.41

 
1.50
 
$
25,893


No stock options were granted by the Company during the three months ended March 31, 2019.

The intrinsic value of stock options exercised was $9.8 million and $2.1 million in the three months ended March 31, 2019 and 2018, respectively.

Cash received from exercise of stock options was $2.6 million and $1.0 million during the three months ended March 31, 2019 and 2018, respectively.

The tax benefit from stock options exercised was $9.0 million and $2.1 million during the three months ended March 31, 2019 and 2018, respectively.
Employee Incentive Bonus
The Company settles a majority of bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company's common stock as determined in trading on the New York Stock Exchange on a date approved by the Board of Directors. In connection with the Company's bonus programs, in February 2019, the Company issued 0.3 million freely-tradable shares of the Company's common stock in settlement of bonus awards to employees, including executives, for the 2018 performance period. At March 31, 2019, the Company has an accrual of $2.4 million for bonus awards for employees for year-to-date achievement in the 2019 performance period. The Company's compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.