| Stock-based Compensation | 3. Stock-based Compensation
Stock Plans
The Company’s board of directors (“Board”)
adopted the 2013 Equity Incentive Plan (“2013 Plan”) in
February 2013, and the stockholders approved the 2013 Plan in March
2013. The 2013 Plan became effective on March 18, 2013 and
will terminate in February 2023. The 2013 Plan serves as the
successor equity compensation plan to the 2010 Equity Incentive
Plan (“2010 Plan”). The 2013 Plan was approved with a
reserve of 8.0 million shares, which consists of
2.5 million shares of the Company’s common stock
reserved for future issuance under the 2013 Plan and shares of
common stock previously reserved but unissued under the 2010 Plan.
In addition, any shares of common stock subject to outstanding
awards under the 2010 Plan and 2000 Stock Plan (“2000
Plan”) that are issuable upon the exercise of options that
expire without having been exercised in full, are forfeited or
repurchased by the Company at the original purchase price or are
used to pay the exercise price or withholding obligations related
to any award will be available for future grant and issuance under
the 2013 Plan. Additionally, the 2013 Plan provides for automatic
increases in the number of shares available for issuance under it
on October 1 of each of the first four calendar years during
the term of the 2013 Plan by the lesser of 5% of the number of
shares of common stock issued and outstanding on each
September 30 immediately prior to the date of increase or the
number determined by our board of directors. No further grants will
be made under the 2010 Plan, and the balances under the 2010 Plan
have been transferred to the 2013 Plan. The 2013 Plan provides for
the grant of incentive stock options, nonqualified stock options,
restricted stock awards, stock appreciation rights, performance
stock awards, restricted stock units and stock bonuses. Awards
generally vest over three to four years and expire ten years from
the date of grant.
Employee Stock Purchase Plan
The 2013 Employee Stock Purchase Plan (“ESPP”) became
effective on March 19, 2013. The ESPP allows eligible
employees to purchase shares of the Company’s common stock at
a discount through payroll deductions of up to 15% of their
eligible compensation, at not less than 85% of the fair market
value, as defined in the ESPP, subject to any plan limitations.
Except for the initial offering period, the ESPP provides for
six-month offering periods, starting on February 20 and
August 20 of each year.
The following table presents the weighted-average assumptions used
to estimate the fair value of the ESPP during the periods
presented:
Three Months Ended June 30,
Nine Months Ended June 30,
2015 2014 2015 2014
Risk-free interest rate
—
— 0.06%-0.07% 0.08 %
Dividend yield
—
—
—
—
Volatility
—
— 33%-37% 30 %
Expected term (in years)
—
— 0.50 0.50
Restricted Stock Awards Issued to Certain Employees in
Connection with the LeapFrogRx Acquisition
In January 2012, the Company issued 200,000 shares of common stock,
which vested based on future continued employment, to certain
employees of LeapFrogRx in connection with the acquisition of
LeapFrogRx. Of these shares, 36,818 shares were forfeited and all
the remaining shares were fully vested through the period ended
March 31, 2014. The total fair value of restricted stock
awards vested during the nine months ended June 30, 2014 was
$0.1 million.
Performance-based Restricted Stock Units
On December 6, 2013, the Compensation Committee of the
Board approved initial grants of an aggregate of 280,000
performance-based restricted stock units to three of the
Company’s senior officers, including the Chief Executive
Officer and the Chief Financial Officer. Under the terms of
these grants, the actual number of shares released could be 0% to
250% of the initial grant based on the Company’s total
shareholder return (“TSR”) relative to the TSR of the
Russell 3000 index (Index) over a three-year period. In any of
the three years, no shares will be released if the TSR of the
Company’s common stock is below the 30th percentile relative
to the Index; 100% of the initial grant will be released if the
Company’s TSR is at the 50th percentile relative to the
Index; and 250% of the initial grant will be released if the
Company’s TSR is over the 90th percentile relative to the
Index. These grants vest as to one-third on each annual
anniversary of November 22, 2013, with a
“catch-up” provision such that shares not earned in a
prior year may be earned in a subsequent year subject to the
Company’s TSR achieving a certain level relative to the Index
and exceeding the prior year’s TSR. These grants have a
ten-year term, subject to their earlier termination upon certain
events including the awardee’s termination of employment. As
of June 30, 2015, approximately 43,000 of performance based
restricted stock units were forfeited and 195,000 shares were
released based on the Company’s TSR relative to the
Index.
The fair value of these grants with a market condition is
recognized using the graded-vesting attribution method over the
requisite service period. The Company used the Monte-Carlo
simulation model to calculate the fair value of these awards on the
grant date. The Monte-Carlo simulation model takes into
account the same input assumptions as the Black-Scholes model;
however, it also further incorporates into the fair value
determination the possibility that the performance criteria may not
be satisfied.
The grant date fair values of these awards were determined using
the following assumptions:
Risk-free interest rate 0.63 %
Dividend yield
—
Volatility 39 %
On March 9, 2015, the Compensation Committee of the Board of
Directors granted an aggregate of 348,700 performance-based
restricted stock units to members of the Company’s executive
team, including the Chief Executive Officer and the Chief Financial
Officer. Under the terms of these grants, the actual number of
shares that will vest and be released will range from 0% to 250% of
the grant based on the performance of the Company’s TSR
relative to the TSR of the Index over a three-year period. No
shares will vest and be released in the first year. In any of the
two remaining years, no shares will vest and be released if the TSR
of the Company’s common stock is below the 30th percentile
relative to the Index; 100% of the grant will vest and be released
if the Company’s TSR is at the 50th percentile relative to
the Index; and 250% of the grant will vest and be released if the
Company’s TSR is over the 90th percentile relative to the
Index. These grants vest over a three-year period with 50%
vesting on each of the second and the third annual anniversary of
the vesting commencing date of February 15, 2015. In addition,
these grants have a “catch-up” provision such that if
the Company’s TSR relative to the Index for the three-year
period exceeds that of the two-year period, additional shares for
the two-year period will vest and be released based on the
three-year achievement level. These grants have a ten-year term,
subject to their earlier termination upon certain events including
the awardee’s termination of employment. During nine months
ended June 30, 2015, none of performance-based restricted
stock units were forfeited and no shares were released based on the
Company’s TSR relative to the Index.
The fair value of these grants with a market condition is
recognized using the graded-vesting attribution method over the
requisite service period. The Company used the Monte-Carlo
simulation model to calculate the fair value of these awards on the
grant date. The Monte-Carlo simulation model takes into
account the same input assumptions as the Black-Scholes model;
however, it also further incorporates into the fair value
determination the possibility that the performance criteria may not
be satisfied.
The grant date fair values of these awards were determined using
the following assumptions:
Risk-free interest rate 1.10 %
Dividend yield
—
Volatility 32 %
Activities of Stock Options, Restricted Stock Units and
Restricted Stock Awards
Outstanding Awards
Shares Number Weighted Number of Weighted
(in thousands, except exercise price and grant date fair value)
Balance at September 30, 2014 (1) 3,044 1,881 $ 7.07 2,265 $ 12.46
Increase in shares reserved 1,254
—
—
—
—
Granted (1) (1,344 )
—
— 1,344 11.30
Exercised/released (1)
— (271 ) 4.32 (921 ) 11.22
Forfeited 586 (159 ) 12.01 (427 ) 11.73
Expired 157 (157 ) 12.28
—
—
Balance at June 30, 2015 (1) 3,697 1,294 $ 6.40 2,261 $ 12.41
(1) Includes shares issuable as
performance-based restricted stock units
Stock-based compensation is included in the results of operations
as follows:
Three Months Ended June 30,
Nine Months Ended June 30,
2015
2014
2015
2014
(in
thousands)
Cost of revenues:
License and implementation $ 189 $ 206 $ 493 $ 752
SaaS and maintenance 208 167 584 576
Total stock-based compensation in cost of revenue 397 373 1,077 1,328
Operating expenses:
Research and development 353 310 947 972
Sales and marketing 899 721 2,273 1,931
General and administrative 1,087 1,258 3,115 3,219
Total stock-based compensation in operating expense 2,339 2,289 6,335 6,122
Stock-based compensation in operating loss 2,736 2,662 7,412 7,450
Stock-based compensation capitalized as software
development cost
—
— 109
—
Total stock-based compensation expenses $ 2,736 $ 2,662 $ 7,521 $ 7,450 |
