Stock-Based Compensation | 8. 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”). 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 option was estimated on the date of grant for the period presented using the following assumptions: Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Expected life (in years) 6.08 6.08 2.5 – 6.08 5.50 – 6.08 Risk-free interest rate 1.22% 1.67% 0.68% – 1.34% 1.67% – 1.89% Volatility 55% 60% 55% – 70% 55% – 60% Dividend yield — — — — The weighted-average grant-date fair value of options granted was $6.87 and $5.34 per share during the three months ended September 30, 2016 and 2015, respectively, and $5.25 and $5.57 per share during the nine months ended September 30, 2016 and 2015, respectively. Restricted Stock Units The fair value of RSUs equals the market value of the Company’s common stock on the date of the grant. The RSUs are excluded from issued and outstanding shares until they are vested. A summary of the Company’s stock option and RSU award activity under the 2013 Plan is as follows: RSUs Outstanding Options Outstanding Shares Available for Grant Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in Balance as of December 31, 2015 2,889,301 6,786,446 $ 13.14 8,469,666 $ 7.62 5.91 $ 19,231 Increase in shares authorized 3,279,811 Options granted (2,197,432 ) 2,197,432 $ 8.99 Options exercised — (1,898,237 ) $ 4.78 $ 11,935 Options canceled or expired 581,550 (581,550 ) $ 8.98 RSUs granted (2,778,817 ) 2,778,817 $ 10.34 RSUs vested — (2,124,767 ) $ 12.28 RSUs canceled or expired 1,423,989 (1,423,989 ) $ 12.04 Balance as of September 30, 2016 3,198,402 6,016,507 $ 11.92 8,187,311 $ 8.55 6.21 $ 50,249 Vested and expected to vest as of September 30, 2016 7,619,564 $ 8.33 6.04 $ 48,236 Vested and exercisable as of September 30, 2016 5,443,565 $ 7.40 4.96 $ 40,130 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 options which vested was $0.9 million and $0.8 million during the three months ended September 30, 2016 and 2015, respectively, and $2.4 million and $3.0 million during the nine months ended September 30, 2016 and 2015, respectively. Employee Stock Purchase Plan Eligible employees can enroll and elect to contribute up to 15% of their base compensation through payroll withholdings in each offering period which is six months in duration, subject to certain limitations. 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 September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Expected life (in years) 0.50 0.50 0.50 0.50 Risk-free interest rate 0.38% 0.08% 0.38% 0.08% Volatility 74% 63% 74% 63% Dividend yield — — — — As of September 30, 2016, a total of 460,502 shares of common stock were issued under the 2013 Employee Stock Purchase Plan (“ESPP”). As of September 30, 2016, a total of 1,539,498 shares are available for issuance under the ESPP. Stock-based Compensation Expense The following table sets forth the total stock-based compensation expense resulting from stock options, RSUs and ESPP included in the Company’s condensed consolidated statements of operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Cost of revenues $ 467 $ 419 $ 1,457 $ 1,301 Sales and marketing 1,155 2,723 4,279 9,097 Research and development 1,837 2,411 5,728 7,460 General and administrative 3,269 2,521 10,183 7,655 Total stock-based compensation expense $ 6,728 $ 8,074 $ 21,647 $ 25,513 During nine months ended September 30, 2016, the Company recorded $1.0 million of stock-based compensation expense on account of modification of stock options and RSUs granted to a former employee pursuant to transitioning from an employee to a special advisor consulting arrangement. Under the original terms of the grant agreements, the unvested options and RSUs would be forfeited upon termination. The transition arrangement extended the period over which the vested awards can be exercised and allows for continued vesting of unvested options and RSUs subject to the former employee continuing to provide services in accordance with the special advisor consulting arrangement. The expense is included in general and administrative expense in the Company’s condensed consolidated statement of operations. 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. As of September 30, 2016, there was $52.2 million of unrecognized stock-based compensation expense (net of estimated forfeitures), of which $9.2 million is related to stock options and ESPP shares and $43.0 million is related to RSUs. The total unrecognized stock-based compensation expense related to stock options and ESPP as of September 30, 2016 will be amortized over a weighted-average period of 2.71 years. The total unrecognized stock-based compensation expense related to RSUs as of September 30, 2016 will be amortized over a weighted-average period of 2.65 years. |