STOCK INCENTIVE PLANS AND SHARE-BASED COMPENSATION |
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| STOCK INCENTIVE PLANS AND SHARE-BASED COMPENSATION |
Amended and Restated 2012 Long-Term Incentive Plan
The Company has a stockholder-approved 2012 Long-Term Incentive Plan (the “Plan”) which has 6.3 million shares authorized for issuance of new shares at March 31, 2020. There were 2.7 million stock options, performance shares and restricted shares outstanding, and 3.6 million shares available for future issuance under the Plan as of March 31, 2020.
In February 2018, the Company enacted a deferral of release of all vested restricted stock units and performance share units granted prior to February 2018. The deferral of release impacted only pre-February 2018 restricted stock units and performance share units and was intended to prevent the release of unregistered shares to grantees. During the deferral period, a grantee retained the legal right to the awards they had vested in, but the Company deferred the release of the underlying shares until it could become current with its SEC reporting requirements. The Company ended the deferral of release in February 2019. The deferral of release and its removal were both modifications to the awards; however, the impact of the modifications were not material and no incremental compensation expense was recorded. All employees with outstanding stock-based awards were impacted by the modifications.
Stock options under the Plan are granted at prices determined by the Board of Directors, but at not less than the fair market value of our common stock on the date of grant. The majority of performance share units, restricted stock units and stock options granted to employees vest over three to four years. Stock options, performance shares and restricted stock grants to non-employee directors typically vest over one year. The term of each stock option under the plan will not exceed seven years. Stock options, performance share units and restricted stock units granted under the Plan are subject to forfeiture if employment terminates. The Company accounts for all forfeitures of stock-based awards when they occur.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan (the "ESPP") has 9.7 million shares authorized at March 31, 2020. The plan enables eligible employees to purchase shares of our common stock at a discount. Purchases will be accomplished through participation in discrete offering periods. On each purchase date, eligible employees will purchase our common stock at a price per share equal to 85% of the lesser of (i) the fair market value of our common stock on the first trading day of the offering period, and (ii) the fair market value of our common stock on the purchase date.
We have reserved shares of common stock for future issuance under our ESPP as follows:
The Company uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to determine the fair value for stock options, shares forecasted to be issued pursuant to our ESPP, and warrants. This requires the use of assumptions about expected life, stock price, volatility, risk-free interest rates and expected dividends.
Expected Life—The expected term was based on historical experience with similar awards, giving consideration to the contractual terms, exercise patterns and post-vesting forfeitures.
Volatility—The expected stock price volatility for our common stock was based on the historical volatility of our common stock over the most recent period corresponding with the estimated expected life of the award.
Risk-Free Rate—The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.
Dividend Yield—We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used.
The weighted-average grant date fair value and the assumptions used in calculating fair values of shares forecasted to be issued pursuant to our ESPP are as follows:
Other Stock Incentive Plans
In addition to the Plan, we have other stock incentive plans which are mostly inactive for future share grant purposes, including plans assumed in acquisitions, under which stock options, stock appreciation rights, stock purchase rights, restricted stock awards and long-term performance awards to employees, consultants, officers and affiliates were authorized (“Other Plans”). On April 1, 2019, we granted 0.3 million shares as an inducement to employment of our Chief Revenue Officer, half of which are time-based and the other half performance-based. The shares have the same vesting and market performance conditions as the performance stock units we granted in 2020. As of March 31, 2020, there were 0.25 million shares outstanding pertaining to this grant.
Performance Stock Units
The Company granted 1.5 million, 0.7 million and 0.5 million of performance share units with market conditions (“Market PSUs”) in fiscal 2020, 2019, and 2018, respectively. The number of Market PSUs issued is dependent on Quantum’s common stock achieving certain average closing stock price targets as of specified dates. Market PSUs vest one to three years after the issuance date based on the stock price targets achieved and are contingent upon continued service of the holder of the award during this period. The estimated fair value of these Market PSUs is determined at the issuance date using a Monte Carlo simulation model.
Assumptions used in the Monte Carlo model to calculate fair values of market PSU’s during each fiscal period are as follows:
The Company granted 0.3 million, 0.0 million and 0.4 million of performance share units with financial performance conditions (“Performance PSUs”) in the fiscal years ended March 31, 2020, 2019 and 2018, respectively. Performance PSUs become eligible for vesting based on the Company achieving certain financial performance targets through the end of the fiscal year when the performance PSUs were granted, and are contingent upon continued service of the holder of the award during this period. Performance PSUs are valued at the market closing share price on the date of grant and compensation expense for Performance PSUs is recognized when it is probable that the performance conditions will be achieved. Compensation expense recognized related to Performance PSUs is reversed if the Company determines that it is no longer probable that the performance conditions will be achieved.
The following table summarizes activity for Market PSUs and Performance PSUs for the year ended March 31, 2020:
As of March 31, 2020, there was $4.9 million of total unrecognized stock-based compensation related to Market PSUs, which is expected to be recognized over a weighted-average period of 1.23 years. As of March 31, 2020, there was no unrecognized stock-based compensation related to Performance PSUs. The total fair value of shares vested during fiscal years ended March 31, 2020, 2019, and 2018 was $0.6 million, $0.1 million, and $0.7 million, respectively.
Restricted Stock Units
The Company granted 0.6 million, 1.0 million, and 1.5 million of service-based restricted stock units (“RSUs”) in the fiscal years ended March 31, 2020, 2019 and 2018, respectively, which generally vest ratably over a three-year service period. RSUs are valued at the market closing share price on the date of grant and compensation expense for RSUs is recognized ratably over the applicable vesting period.
The following table summarizes activity for restricted stock units for the year ended March 31, 2020:
As of March 31, 2020, there was $1.4 million of total unrecognized stock-based compensation related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.03 years. The total fair value of RSUs vested during fiscal years ended March 31, 2020, 2019, and 2018 was $4.0 million, $5.1 million, and $4.8 million, respectively.
Compensation Expense
The following table details the Company's stock-based compensation, net of forfeitures:
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