Stock-Based Compensation | 9 Months Ended |
Mar. 31, 2015 |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | 12. Stock-based compensation |
|
Stock option and restricted stock activity |
|
Options |
|
The following table summarizes stock option activity for the nine months ended March 31, 2015 and 2014: |
|
| | | | | | | |
| | | | Weighted | | Weighted | |
| | | Weighted | Average | | Average | |
| | | average | Remaining | Aggregate | Grant | |
| | | exercise | Contractual | Intrinsic | Date Fair | |
| Number of | | price | Term | Value | Value | |
| shares | | ($) | (in years) | ($'000) | ($) | |
| |
Outstanding – June 30, 2014 | 2,710,392 | | 14.16 | 5.38 | 3,909 | | |
Granted under Plan: August | | | | | | | |
2014 | 464,410 | | 11.23 | 10 | 2,113 | 4.55 | |
Exercised | (748,633 | ) | 8.64 | | 3,750 | | |
Outstanding – March 31, | | | | | | | |
2015 | 2,426,169 | | 15.3 | 4.99 | 4,570 | | |
| |
Outstanding – June 30, 2013 | 2,648,583 | | 15.15 | 5.98 | 313 | | |
Granted under Plan: August | | | | | | | |
2013 | 224,896 | | 7.35 | 10 | 568 | 2.53 | |
Exercised | (10,000 | ) | 8.75 | | 12 | | |
Forfeited | (136,420 | ) | 23.51 | | | | |
Outstanding – March 31, | | | | | | | |
2014 | 2,727,059 | | 14.12 | 5.63 | 2,290 | | |
|
|
The fair value of each option is estimated on the date of grant using the Cox Ross Rubinstein binomial model that uses the assumptions noted in the following table. The estimated expected volatility is calculated based on the Company's 250 day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were granted options with similar terms. The Company has estimated no forfeitures for options awarded in August 2013 and 2014, respectively. |
|
|
|
|
|
The table below presents the range of assumptions used to value options granted during the nine months ended March 31, 2015 and 2014: |
|
| | | | | | | |
| Nine months ended | | | | |
| March 31, | | | | |
| 2015 | | 2014 | | | | |
Expected volatility | 60 | % | 50 | % | | | |
Expected dividends | 0 | % | 0 | % | | | |
Expected life (in years) | 3 | | 3 | | | | |
Risk-free rate | 1 | % | 0.9 | % | | | |
|
|
There were no forfeitures during the three and nine months ended March 31, 2015. During the three and nine months ended March 31, 2014, terminated employees forfeited 136,420 stock options. |
|
The following table presents stock options vested and expecting to vest as of March 31, 2015: |
|
| | | | | | | |
| | | Weighted | | | | |
| | Weighted | Average | | | | |
| | average | Remaining | Aggregate | | | |
| | exercise | Contractual | Intrinsic | | | |
| Number of | price | Term | Value | | | |
| shares | ($) | (in years) | ($'000) | | | |
Vested and expecting to vest | | | | | | | |
– March 31, 2015 | 2,426,169 | 15.3 | 4.99 | 4,570 | | | |
|
|
These options have an exercise price range of $7.35 to $24.46. |
|
The following table presents stock options that are exercisable as of March 31, 2015: |
|
| | | | | | | |
| | | Weighted | | | | |
| | Weighted | Average | | | | |
| | average | Remaining | Aggregate | | | |
| | exercise | Contractual | Intrinsic | | | |
| Number of | price | Term | Value | | | |
| shares | ($) | (in years) | ($'000) | | | |
Exercisable – March 31, 2015 | 1,668,163 | 17.71 | 3.24 | 1,775 | | | |
|
|
No stock options became exercisable during the three months ended March 31, 2015 and 2014, respectively. During the nine months ended March 31, 2015 and 2014, respectively, 330,967 and 358,333 stock options became exercisable. During the three months ended March 31, 2015, the Company received approximately $0.8 million from 60,000 stock options exercised. During the nine months ended March 31, 2015, the Company received approximately $1.8 million from 176,395 stock options exercised. The remaining 572,238 stock options were exercised through recipients delivering 336,584 shares of the Company's common stock to the Company on September 9, 2014, to settle the exercise price due. During the three and nine months ended March 31, 2014, the Company received approximately $0.1 million from 10,000 stock options exercised. The Company issues new shares to satisfy stock option exercises. |
|
|
|
|
|
Restricted stock |
|
The following table summarizes restricted stock activity for the nine months ended March 31, 2015 and 2014: |
|
| | | | | | | |
| | | Weighted | | | | |
| Number of | | Average | | | | |
| Shares of | | Grant Date | | | | |
| Restricted | | Fair Value | | | | |
| Stock | | ($'000) | | | | |
Non-vested – June 30, 2014 | 385,778 | | 3,534 | | | | |
Granted – August 2014 | 141,707 | | 581 | | | | |
Granted – November 2014 | 71,530 | | 229 | | | | |
Vested – August 2014 | (74,152 | ) | 828 | | | | |
Vested – February 2015 | (183,334 | ) | 2,400 | | | | |
Non-vested – March 31, 2015 | 341,529 | | 1,759 | | | | |
| | | | |
Non-vested – June 30, 2013 | 405,226 | | 4,393 | | | | |
Granted – August 2013 | 187,963 | | 1,382 | | | | |
Vested – August 2013 | (16,907 | ) | 161 | | | | |
Vested – February 2014 | (183,333 | ) | 1,742 | | | | |
Forfeitures – October 2013 | (7,171 | ) | 84 | | | | |
Non-vested – March 31, 2014 | 385,778 | | 3,534 | | | | |
|
|
The August 2014 grants comprise 127,626 and 14,081 shares of restricted stock awarded to employees and non-employee directors, respectively. All of the November 2014 grants were awarded to employees. The 127,626 and 71,530 shares of restricted stock will vest in full only on the date, if any, the following conditions are satisfied: (1) the closing price of the Company's common stock equals or exceeds $19.41 (subject to appropriate adjustment for any stock split or stock dividend) for a period of 30 consecutive trading days during a measurement period commencing on the date that the Company files its Annual Report on Form 10-K for the fiscal year ended 2017 and ending on December 31, 2017 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The $19.41 price target represents a 20% increase, compounded annually, in the price of the Company's common stock on Nasdaq over the $11.23 closing price on August 27, 2014. |
|
The 127,626 and 71,530 shares of restricted stock are effectively forward starting knock-in barrier options with a strike price of zero. The fair value of these shares of restricted stock was calculated utilizing an adjusted Monte Carlo simulation discounted cash flow model which was developed for the purpose of the valuation of these shares. For each simulated share price path, the market share price condition was evaluated to determine whether or not the shares would vest under that simulation. The "adjustment" to the Monte Carlo simulation model incorporates a "jump diffusion" process to the standard Geometric Brownian Motion simulation, in order to capture the discontinuous share price jumps observed in the Company's share price movements on stock exchanges on which it is listed. Therefore, the simulated share price paths capture the idiosyncrasies of the observed Company share price movements. |
|
In scenarios where the shares do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share price on vesting date. The value of the grant is the average of the discounted vested values. The Company used an expected volatility of 76.01%, an expected life of approximately three years, a risk-free rate of 1.27% and no future dividends in its calculation of the fair value of the 127,626 shares of restricted stock. The Company used an expected volatility of 63.73%, an expected life of approximately three years, a risk-free rate of 1.21% and no future dividends in its calculation of the fair value of the 71,530 shares of restricted stock. Estimated expected volatility was calculated based on the Company's 30 day VWAP share price using the exponentially weighted moving average of returns. |
|
The fair value of restricted stock vesting during the three months ended March 31, 2015 and 2014, respectively, was $2.4 million and $1.7 million. The fair value of restricted stock vesting during the nine months ended March 31, 2015 and 2014, respectively, was $3.2 million and $1.9 million. The fair value of restricted stock is based on the closing price of the Company's stock quoted on The Nasdaq Global Select Market on the date of grant. |
|
|
|
|
|
Stock-based compensation charge and unrecognized compensation cost |
|
The Company has recorded a stock-based compensation charge of $0.7 million and $0.9 million, respectively, during the three months ended March 31, 2015 and 2014, which comprised: |
|
| | | | | | | |
| | | Allocated to cost | | | | |
| | | of goods sold, IT | | Allocated to | | |
| | | processing, | | selling, general | | |
| | Total | servicing and | | and | | |
| | charge | support | | administration | | |
Three months ended March 31, 2015 | | | | | | | |
Stock-based compensation charge | $ | 731 | $- | $ | 731 | | |
Total – three months ended March 31, 2015 | $ | 731 | $- | $ | 731 | | |
| | |
Three months ended March 31, 2014 | | | | | | | |
Stock-based compensation charge | $ | 922 | $- | $ | 922 | | |
Total – three months ended March 31, 2014 | $ | 922 | $- | $ | 922 | | |
|
|
The Company has recorded a stock-based compensation charge of $2.7 million and $2.8 million, respectively, during the nine months ended March 31, 2015 and 2014, which comprised: |
|
| | | | | | | |
| | | | Allocated to cost | | | |
| | | | of goods sold, IT | | Allocated to | |
| | | | processing, | | selling, general | |
| | Total | | servicing and | | and | |
| | charge | | support | | administration | |
Nine months ended March 31, 2015 | | | | | | | |
Stock-based compensation charge | $ | 2,682 | | $- | $ | 2,682 | |
Total –Nine months ended March 31, 2015 | $ | 2,682 | | $- | $ | 2,682 | |
|
Nine months ended March 31, 2014 | | | | | | | |
Stock-based compensation charge | $ | 2,826 | | $- | $ | 2,826 | |
Reversal of stock compensation charge related to | | | | | | | |
restricted stock forfeited | | (6 | ) | - | | (6 | ) |
Total –nine months ended March 31, 2014 | $ | 2,820 | | $- | $ | 2,820 | |
|
|
The stock-based compensation charges have been allocated to selling, general and administration based on the allocation of the cash compensation paid to the employees. |
|
As of March 31, 2015, the total unrecognized compensation cost related to stock options was approximately $2.1 million, which the Company expects to recognize over approximately three years. As of March 31, 2015, the total unrecognized compensation cost related to restricted stock awards was approximately $1.3 million, which the Company expects to recognize over approximately two years. |
|
As of March 31, 2015 and June 30, 2014, respectively, the Company has recorded a deferred tax asset of approximately $1.3 million and $1.6 million related to the stock-based compensation charge recognized related to employees and directors of Net1 as it is able to deduct the grant date fair value for taxation purposes in the United States. |
|