Stock-based Compensation | Stock-based Compensation We currently grant equity-based awards under the Company’s 2016 Omnibus Equity Incentive Plan, or the “2016 Plan”, which became effective concurrent with the completion of the Company’s IPO in November 2016. The 2016 Plan allows the Company to grant up to 4,100,000 shares of Company’s common stock with annual increase on the first day of each fiscal year beginning of January 1, 2018, equal to the lesser of (i) 3,400,000 shares, (ii) five percent of the outstanding shares of the Company’s common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amounts as the board of directors may determine. The 2016 Plan provides for the grant of common stock awards, including incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units, performance units and performance shares to employees, directors, and consultants of the Company. All granted shares that are canceled, forfeited or expired are returned to the 2016 Plan and are available for grant in conjunction with the issuance of new equity awards. Stock options may be granted at an exercise price per share not less than 100% of the fair market value at the date of grant. If a stock option is granted to a 10% stockholder, then the exercise price per share must not be less than 110% of the fair market value per share of common stock on the grant date. Options granted are exercisable over a maximum term of 10 years from the date of grant and generally vest over a period of four years. Total stock-based compensation expense for employees and non-employees recognized in the consolidated statements of operations was as follows: Years Ended December 31, January 1, December 27, (in thousands) Cost of revenue $ 165 $ 33 $ 9 Research and development 5,616 911 302 Sales and marketing 1,763 248 445 General and administrative 3,139 1,898 446 Total stock-based compensation expense $ 10,683 $ 3,090 $ 1,202 The above stock-based compensation expense related to the following equity-based awards: Years Ended December 31, 2017 January 1, 2017 December 27, (in thousands) Stock options $ 3,539 $ 3,090 $ 1,202 RSU awards 5,368 — — ESPP shares 1,776 — — Total stock-based compensation expense $ 10,683 $ 3,090 $ 1,202 Unamortized compensation expense related to unvested stock awards was as follows (in thousands): December 31, 2017 January 1, 2017 Unamortized Expense Average Expected Recognition Period in Years Unamortized Expense Average Expected Recognition Period in Years Stock options $ 9,275 2.8 $ 5,918 3.2 RSU awards 16,272 2.7 — 0 ESPP shares 1,182 0.8 — 0 Total unamortized stock-based compensation expense $ 26,729 $ 5,918 Stock Option Activity The table below summarizes stock option activity under the 2016 Plan: Number of Number of Weighted– Weighted– Aggregate Balances at December 28, 2014 216,749 5,046,448 $ 1.55 7.4 $ 2,391 Granted (weighted–average fair value of $1.18 per share) (875,715 ) 875,715 2.71 Exercised — (121,880 ) — 1.38 Expired, forfeited or canceled 737,941 (737,941 ) 1.38 Balances at December 27, 2015 78,975 5,062,342 1.77 7.4 11,269 Authorized 6,113,092 — RSUs granted (6,950 ) — Granted (weighted–average fair value of $3.65 per share) (2,064,982 ) 2,064,982 8.99 Exercised — (403,769 ) 2.95 Expired, forfeited or canceled 249,931 (249,930 ) 3.14 Balances at January 1, 2017 4,370,066 6,473,625 3.95 7.4 91,840 Granted (weighted–average fair value of $7.91 per share) (703,283 ) 703,283 19.31 Exercised — (1,756,143 ) 1.86 Expired, forfeited or canceled 145,813 (145,813 ) 8.15 Balances at December 31, 2017 3,812,596 5,274,952 6.59 7.2 35,578 Number of Number of Weighted– Weighted– Aggregate Options vested and exercisable-December 31, 2017 2,877,479 3.26 6.1 25,963 Options vested and expected to vest-December 31, 2017 5,312,952 $ 6.60 7.2 $ 35,719 The aggregate intrinsic value of options exercised was $29.0 million , $2.6 million and $0.8 million for the years ended December 31, 2017 , January 1, 2017 and December 27, 2015 , respectively. Upon the exercise of options, the Company issues new common stock from its authorized shares. The aggregate fair value of options vested during the years ended December 31, 2017 , January 1, 2017 and December 27, 2015 was $3 million , $1.8 million , and $1.2 million , respectively. Additional information regarding options outstanding at December 31, 2017 and January 1, 2017 are as follows: December 31, 2017 Options Outstanding Options Vested Exercise Price Number of Shares Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) Weighted- Average Exercise Price Number of Shares Aggregate Intrinsic Value (in thousands) $ 1.00 311,622 3.42 $ 3,490 $ 1.00 311,622 $ 3,490 1.50 1,065,431 4.89 11,400 1.50 1,065,431 11,400 2.00 873,091 6.90 8,906 2.00 606,164 6,183 2.50 134,000 7.35 1,300 2.50 75,620 734 3.00 435,767 7.49 4,009 3.00 199,100 1,832 4.00 64,095 8.09 526 4.00 29,361 241 5.00 75,417 8.26 543 5.00 32,260 232 7.00 11,849 8.40 62 7.00 4,965 26 8.50 1,139,604 8.52 4,217 8.50 408,500 1,511 9.00 307,173 9.00 983 9.00 98,226 314 11.43 186,533 9.96 142 11.43 — — 15.00 50,400 8.74 — 15.00 16,241 — 18.95 103,220 8.94 — 18.95 29,989 — 19.13 5,000 9.41 — 19.13 — — $ 22.18 511,750 9.12 — $ 22.18 — — 5,274,952 7.22 $ 35,578 2,877,479 $ 25,963 January 1, 2017 Options Outstanding Options Vested Exercise Price Number of Shares Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) Weighted- Average Exercise Price Number of Shares Aggregate Intrinsic Value (in thousands) $ 1.00 927,909 4.19 $ 15,895 $ 1.00 927,909 $ 15,895 1.50 1,610,095 5.93 26,776 1.50 1,529,423 25,434 2.00 1,222,233 7.87 19,715 2.00 646,221 10,424 2.50 212,650 7.19 3,324 2.50 108,147 1,690 3.00 559,733 8.04 8,469 3.00 192,458 2,912 4.00 67,975 9.09 960 4.00 10,155 143 5.00 98,100 9.26 1,288 5.00 — — 7.00 53,700 9.40 598 7.00 1,001 11 8.50 1,209,700 9.51 11,649 8.50 152,000 1,464 9.00 325,980 9.57 2,976 9.00 — — 15.00 60,800 9.74 190 15.00 — — $ 18.95 124,750 9.94 — $ 18.95 — — 6,473,625 7.35 $ 91,840 3,567,314 $ 57,973 Stock Options Granted to Employees and Non-Employee Directors Stock-based compensation expense is based on the grant date fair value. The Company recognizes compensation expense for all stock-based awards on a straight-line basis over the requisite service period of the awards, which is generally the option vesting term of four years. The Company uses the Black-Scholes option valuation model, which requires the use of highly subjective assumptions to determine the fair value of stock-based awards. The assumptions used in the Company’s option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. The assumptions and estimates that the Company uses in the Black-Scholes model are as follows: • Fair Value of Common Stock . The Company determines the fair values of the shares of common stock underlying its share–based awards based upon the closing stock price on the date of grant. For all periods prior to the IPO, the fair value of common stock was determined on a periodic basis by the Company’s board of directors, with the assistance of an independent third-party valuation firm. • Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to that of the expected term of the options for each option group. • Expected Term. The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. Because of the limitations on the sale or transfer of the Company’s common stock as a privately held company (up to November 2016), the Company does not believe its historical exercise pattern is indicative of the pattern it will experience as a publicly traded company. The Company has consequently used the Staff Accounting Bulletin 110, or SAB 110, simplified method to calculate the expected term, which is the average of the contractual term and vesting period. The Company plans to continue to use the SAB 110 simplified method until it has sufficient trading history as a publicly traded company. • Volatility. The Company determines the price volatility based on the historical volatilities of industry peers as it has insufficient trading history for its common stock price. Industry peers consist of several public companies in the semiconductor industry with comparable characteristics, including revenue growth, operating model and working capital requirements. The Company intends to continue to consistently apply this process using the same or a similar peer group of public companies until a sufficient amount of historical information regarding the volatility of its own common stock price becomes available, or unless circumstances change such that the identified peer companies are no longer similar, in which case other suitable peer companies whose common stock prices are publicly available would be utilized in the calculation. • Dividend Yield. The expected dividend assumption is based on the Company’s current expectations about its anticipated dividend policy. To date, the Company has not declared any dividends, and therefore the Company has used an expected dividend yield of zero. On January 1, 2017, the Company adopted FASB ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . Under this guidance, the Company elected the option to no longer apply a forfeiture rate to the stock-based compensation expense, but to record forfeitures when they occur. The Company will continue to use judgment in evaluating the assumptions related to the Company’s stock-based compensation on a prospective basis. As the Company continues to accumulate additional data, it may have refinements to its estimates, which could materially impact the Company’s future stock-based compensation expense. The following assumptions were used to calculate the fair value of options granted to employees and non-employee directors during the years indicated: Years Ended December 31, January 1, December 27, Expected term (in years) 6.0 - 6.1 5.5 - 6.6 5.6 - 6.5 Volatility 37% - 39% 39% - 40% 40% - 44% Risk-free interest rate 1.9% - 2.3% 1.1 % - 2.1% 1.5% - 2.0% Expected dividend — — — Options Subject to Repurchase The Company has a right of repurchase with respect to unvested shares issued upon early exercise of options at an amount equal to the lower of (i) the exercise price of each restricted share being repurchased and (ii) the fair market value of such restricted share at the time the Company’s right of repurchase is exercised. The Company’s right to repurchase these shares lapses as to 1/36 of the total number of shares originally granted per month for 36 months . At December 31, 2017 , 38,000 shares remained subject to the Company’s right of repurchase. The shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be issued until those shares vest according to their respective vesting schedules. The cash received in exchange for unvested shares of early exercised stock options is recorded as an early exercise liability on the balance sheets and will be transferred to common stock and additional paid-in capital as such shares vest. Stock-Based Compensation for Non-employees Stock-based compensation expense related to stock awards granted to non-employee is recognized as the awards vest. The Company believes that the fair value of the stock-based awards granted is more reliably measurable than the fair value of the services received. The fair value of stock option awards granted is calculated using the Black-Scholes option valuation model. Stock-based compensation expense related to awards granted to non-employees for the years ended December 31, 2017 , January 1, 2017 and December 27, 2015 was $0.2 million , $0.8 million , and $0.4 million , respectively. The fair values of options and common stock warrants granted to non-employees were calculated using the following assumptions for the periods presented: Years Ended January 1, December 27, Contractual term remaining (in years) 1.6 - 8.3 3.4 - 10.0 Volatility 37% - 53% 36% - 48% Risk-free interest rate 0.6% - 1.7% 0.2% - 2.5% Expected dividend — — Employee Stock Purchase Plan The Company’s 2016 Employee Stock Purchase Plan (the “ESPP”) became effective in November 2016 upon the completion of the Company’s IPO. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 20% of their eligible compensation, subject to any plan limitations. The ESPP generally provides for one year offering periods with purchase periods every six months, and at the end of each purchase period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the purchase period or on the last trading day of the offering period. The Company issued 353,812 shares under the ESPP for the year ended December 31, 2017 and no shares were issued under the ESPP for the year ended January 1, 2017 . Shares authorized for future purchase under the ESPP were 1,646,188 at December 31, 2017 . Compensation expense is calculated using the fair value of the employees' purchase rights under the Black-Scholes model. The following assumptions were used in estimating the fair value of employees' purchase rights under the ESPP: Year Ended December 31, Contractual term remaining (in years) 0.5 - 1.0 Volatility 49% - 66% Risk-free interest rate 1.4 % - 1.6% Expected dividend — Restricted Stock Unit (“RSU”) Awards The Company grants RSUs to employees under the 2016 Plan and which typically vests ratably over a three to four year period, and are converted into shares of the Company’s common stock upon vesting on a one-for-one basis subject to the employee’s continued service to the Company over that period. The fair value of RSUs is determined using the fair value of the Company’s common stock on the date of the grant. Compensation expense is recognized on a straight-line basis over the requisite service period of each grant. Each RSU award granted from the 2016 Plan will reduce the number of shares available for issuance under the 2016 Plan by one share. The table below summarizes RSU activity under the 2016 Plan: Number of Weighted– Aggregate Balances at December 27, 2015 — Granted (weighted–average fair value of $18.95 per share) 6,950 Vested — Forfeited or canceled — Balances at January 1, 2017 6,950 3.9 $ 126 Granted (weighted–average fair value of $17.72 per share) 1,276,940 Vested (125,818 ) Forfeited or canceled (57,545 ) Balances at December 31, 2017 1,100,527 Outstanding and expected to vest at December 31, 2017 1,100,527 9.3 $ 13,426 At December 31, 2017 , unrecognized compensation expense related to unvested RSU awards was approximately $16.3 million . The weighted-average period over which such compensation expense will be recognized is 2.7 years. The Company did not grant any RSUs prior to fiscal year ended December 27, 2015 . |