Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2014 |
Stock-Based Compensation | ' |
9. Stock-based Compensation |
2013 Equity Incentive Plan |
In October 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), which became effective in March 2014 and serves as the successor to the Company’s 2006 Stock Plan (the “2006 Plan”). Pursuant to the 2013 Plan, 4,000,000 shares of common stock were initially reserved for grant, plus (1) any shares that were reserved and available for issuance under the 2006 Plan at the time the 2013 Plan became effective, and (2) any shares that become available upon forfeiture or repurchase by us under the 2006 Plan and 2000 Plan. Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares and units to employees, directors and consultants. |
Stock Options |
The fair value of each stock option is estimated on the date of grant for the periods presented using the Black-Scholes model based on the following assumptions: |
|
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Expected life (in years) | | 6.08 | | | | 6.08 | | | | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | | 2.33% | | | | 1.09% | | | | | | | | | | | | | | | | | | | | | |
Volatility | | 55% | | | | 51% | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
|
The weighted-average grant-date fair value of options granted was $8.60 and $1.80 per share during the three months ended March 31, 2014 and 2013, respectively. |
Restricted Stock Units |
The fair value of RSUs equals the market value of the Company’s common stock on the date of grant. The RSUs have a contractual term of seven years and vest upon the satisfaction of both a service condition and a liquidity-event condition. The service condition is satisfied as to 25% of the RSUs on each of the first four anniversaries of the vesting commencement date. The liquidity-event condition is satisfied upon the earlier of (i) six months after the effective date of the IPO or (ii) March 15 of the calendar year following the year in which the IPO was declared effective; and (iii) the time immediately prior to the consummation of a change in control. The vesting condition that will be satisfied six months following the Company’s IPO does not affect the expense attribution period for the RSUs for which the service condition has been met as of the date of the Company’s IPO. This six-month period is not a substantive service condition and, accordingly, beginning on the effectiveness of the Company’s IPO in March 2014, we recognized a cumulative stock-based compensation expense for the portion of the RSUs that had met the service condition as of the date of the Company’s IPO. |
A summary of the Company’s stock option and RSUs award activity under the Plan is as follows: |
|
| | | | | Options Outstanding | | | RSUs Outstanding | |
| Shares | | | Number of | | | Weighted | | | Weighted | | | Aggregate | | | Number of | | | Weighted | |
| | | | | | |
Available | Shares | Average | Average | Intrinsic | Shares | Average |
| | | | | | |
for Grant | | Exercise | Remaining | Value | | Grant |
| | | | | | |
| | Price | Contractual | (in thousands) | | Date Fair |
| | | | | | |
| | | Term (Years) | | | Value |
Balance as of December 31, 2013 | | 2,035,282 | | | | 12,635,707 | | | $ | 5.87 | | | | 7.02 | | | $ | 68,944 | | | | 4,521,191 | | | $ | 5.59 | |
Increase in shares authorized | | 4,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | |
Options granted | | (46,875 | ) | | | 46,875 | | | | 16 | | | | | | | | | | | | | | | | | |
Options exercised | | — | | | | (1,377,391 | ) | | | 2.12 | | | | | | | | 11,036 | | | | | | | | | |
Options canceled or expired | | 7,600 | | | | (7,600 | ) | | | 9.48 | | | | | | | | | | | | | | | | | |
RSUs granted | | — | | | | | | | | | | | | | | | | | | | | — | | | | — | |
RSUs canceled or expired | | 29,351 | | | | | | | | | | | | | | | | | | | | (29,351 | ) | | | 5.82 | |
Balance as of March 31, 2014 | | 6,025,358 | | | | 11,297,591 | | | | 6.36 | | | | 7.04 | | | | 206,861 | | | | 4,491,840 | | | | 5.59 | |
Vested and expected to vest as of | | | | | | 10,550,838 | | | | 6.08 | | | | 6.93 | | | | 196,126 | | | | | | | | | |
|
March 31, 2014 |
Vested and exercisable as of | | | | | | 6,817,435 | | | | 3.14 | | | | 5.86 | | | | 146,622 | | | | | | | | | |
|
March 31, 2014 |
|
The aggregate intrinsic value disclosed in the table above is based on the difference between the exercise price of the options and the fair value of the Company’s common stock. |
The aggregate total fair value of shares which vested during the three months ended March 31, 2014 and 2013 was $1,005,000 and $1,584,000, respectively. |
Employee Stock Purchase Plan |
The Company’s Board of Directors adopted the 2014 Employee Stock Purchase Plan (“ESPP”), which became effective in March 2014, pursuant to which 1,200,000 shares of common stock have been reserved for future issuance. Eligible employees can enroll and elect to contribute up to 15% of their base compensation through payroll withholdings in each offering period, subject to certain limitations. Each offering period is six months in duration, with the exception of the initial offering period which commenced in March 2014 and ends in November 2014. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date. |
The fair value of the option feature is estimated using the Black-Scholes model for the period presented based on the following assumptions: |
|
| Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | |
31-Mar-14 | | | | | | | | | | | | | | | | | | | | | | | | |
Expected life (in years) | | 0.62 | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | | 0.08% | | | | | | | | | | | | | | | | | | | | | | | | | |
Volatility | | 55% | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | | — | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Stock-based Compensation Expense |
The following table sets forth the total stock-based compensation expense resulting from RSUs, stock options and ESPP included in the Company’s condensed consolidated statements of operations (in thousands): |
|
| Three Months Ended March 31, | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Cost of revenues | $ | 1,577 | | | $ | 86 | | | | | | | | | | | | | | | | | | | | | |
Sales and marketing | | 4,117 | | | | 382 | | | | | | | | | | | | | | | | | | | | | |
Research and development | | 5,510 | | | | 300 | | | | | | | | | | | | | | | | | | | | | |
General and administrative | | 3,388 | | | | 718 | | | | | | | | | | | | | | | | | | | | | |
Total stock-based compensation expense | $ | 14,592 | | | $ | 1,486 | | | | | | | | | | | | | | | | | | | | | |
|
|
As of March 31, 2014, there was $19,195,000 of unrecognized stock-based compensation expense (net of estimated forfeitures), of which $11,310,000 is related to stock options and ESPP shares and $7,885,000 is related to RSUs. The total unrecognized stock-based compensation expense related to stock options and ESPP as of March 31, 2014 will be amortized over a weighted-average period of 2.8 years. The total unrecognized stock-based compensation expense related to RSUs as of March 31, 2014 will be amortized over a weighted-average period of 2.9 years. |
|
The amount of stock-based compensation cost capitalized in property and equipment, net on the accompanying condensed consolidated balance sheets was immaterial for all periods presented. |