Stockholders' Equity | 3 Months Ended |
Mar. 31, 2015 |
Stockholders' Equity | |
Stockholders' Equity | |
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6. Stockholders’ Equity |
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Common Stock—As of December 31, 2014 and March 31, 2015, the number of authorized shares of common stock, par value $0.0001 per share, was 150,000,000, of which 38,621,169 and 38,967,058 were issued and outstanding, respectively. |
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During the three months ended March 31, 2015, the Company issued 87,117 shares of its common stock to certain of its employees under the provisions of the Company’s 2011 Stock Incentive Plan (the “2011 Plan”) in the form of stock awards, as well as additional shares of common stock upon the exercise of stock options and the vesting of restricted stock units as described below. For the three months ended March 31, 2015, the recorded stock-based compensation expenses of $1.3 million related to common stock issuances to certain of its employees and members of its board of directors. |
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In November 2014, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $30 million of its outstanding common stock on the open market or in privately negotiated transactions. The $30 million includes $2.3 million of unused funds from a previous $20 million share repurchase program announced in 2012. During the three months ended March 31, 2015, the Company repurchased 174,276 shares of common stock at an average price per share, including broker commissions, of $11.48, for an aggregate purchase price of $2.0 million. |
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Preferred Stock—As of December 31, 2014 and March 31, 2015, the number of authorized shares of preferred stock, par value $0.0001 per share, was 5,000,000, of which 0 were issued and outstanding. |
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Common Stock Warrants— On March 22, 2011, the Company issued a warrant to purchase up to 1,282,789 shares of its common stock to Dell Products, L.P. (“Dell”) in connection with the entry of the Company and Dell into a 49-month strategic relationship agreement. Under the terms of the warrant, the 1,282,789 shares of common stock were eligible to become exercisable upon the achievement of certain annual recurring revenue thresholds over the 49-month period that ended on December 31, 2014. The warrant was exercisable at $5.987 per share. As of December 31, 2014, the vesting term of the warrant expired with Dell earning no warrant shares. |
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A summary of activity with respect to warrants to purchase common stock during the three months ended March 31, 2015 is presented below: |
| | Common | | | | | |
| | Stock | | | | | |
| | Warrants | | | | | |
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Outstanding at beginning of the year | | 10,000 | | | | | |
Exercised | | — | | | | | |
Issued | | — | | | | | |
Cancelled | | — | | | | | |
Outstanding at end of the period | | 10,000 | | | | | |
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Weighted average exercise price | | $ | 14.02 | | | | | |
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Stock Options—As of March 31, 2015, the Company had five stock-based compensation plans, the Employee Stock Option/Stock Issuance Plan (the “Employee Plan”), the Executive Stock Option/Stock Issuance Plan (the “Executive Plan”), the 2005 Stock Incentive Plan (the “2005 Plan”), the Traq Amended and Restated 1999 Stock Plan (the “1999 Plan”) and the 2011 Plan. In connection with the Company’s initial public offering, the Company’s board of directors determined that no future stock awards would be made under the Employee Plan, the Executive Plan, the 2005 Plan and the 1999 Plan. The 2011 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock-based awards. |
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Under the provisions of the Employee Plan, the Executive Plan, the 2005 Plan, the 1999 Plan and the 2011 Plan (the “Plans”), the exercise price of each option is determined by the Company’s board of directors or by a committee appointed by the board of directors. Under the 2011 Plan, the exercise price of all stock options must not be less than the fair market value of a share of common stock on the date of grant. The period over which options vest and become exercisable, as well as the term of the options, is determined by the board of directors or the committee appointed by the board of directors. The options generally vest over 4 years and expire 10 years after the date of the grant. |
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For the three months ended March 31, 2014 and 2015, the Company recorded stock-based compensation expense of $1.8 million and $1.3 million, respectively, related to stock options. |
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As of March 31, 2015, there was $5.0 million of total unrecognized stock-based compensation cost, net of estimated forfeitures, related to stock options. This amount will be amortized on a straight-line basis over the requisite service period related to the stock option grants. |
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A summary of the status of stock options issued pursuant to the Plans during the three months ended March 31, 2015 is presented below: |
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Options | | Number of Shares | | Weighted | | Weighted | |
Average | Average |
Exercise | Contractual |
Price | Life (years) |
Outstanding at beginning of the year | | 5,603,892 | | $ | 9.04 | | | |
Granted | | — | | $ | — | | | |
Forfeited | | (42,936 | ) | $ | 14.88 | | | |
Exercised | | (182,296 | ) | $ | 3.71 | | | |
Outstanding at end of the period | | 5,378,660 | | $ | 9.17 | | 5.7 | |
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Exercisable at end of the period | | 4,745,345 | | $ | 8.4 | | 5.5 | |
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Available for future grants at March 31, 2015 | | 199,460 | | | | | |
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The intrinsic values of options outstanding, vested and exercised during the three months ended March 31, 2015 were as follows: |
| | Number of | | Intrinsic | | | |
| | Options | | Value | | | |
Outstanding | | 5,378,660 | | $ | 29,349,006 | | | |
Vested | | 4,745,345 | | $ | 29,203,572 | | | |
Exercised | | 182,296 | | $ | 1,548,874 | | | |
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During the three months ended March 31, 2015, employees and former employees of the Company exercised options to purchase a total of 182,296 shares of common stock at exercise prices ranging from $0.25 to $12.56 per share. Proceeds from the stock option exercises totaled $0.7 million. |
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Restricted Stock Units—During the three months ended March 31, 2015, the Company issued 795,900 restricted stock units to certain employees under the provisions of the 2011 Plan, of which 172,000 were performance-based restricted stock units and 250,752 restricted stock units vested resulting in an equal number of shares of common stock being issued. The grants of restricted stock units made during the three months ended March 31, 2015 had an aggregate value of $9.7 million. The value of a restricted stock unit award is determined based on the closing price of the Company’s common stock on the date of grant. A restricted stock unit award entitles the holder to receive shares of the Company’s common stock as the award vests. The restricted stock units vest over periods that range from three months to three years. The performance-based restricted stock units are granted upon achievement of a specified financial metric. Granted performance-based restricted stock units vest over time, with 20% vesting on the first anniversary of the grant date of February 19, 2015 and 20% each subsequent quarter until fully vested on the second anniversary of the grant date. Stock-based compensation expense is amortized on a straight-line basis over the vesting period. |
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For the three months ended March 31, 2014 and 2015, the Company recorded stock-based compensation expenses of $0.7 million and $2.4 million, respectively, related to restricted stock units. |
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As of March 31, 2015, there was $21.1 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units. This amount will be amortized on a straight-line basis over the requisite service period related to the restricted unit grants. |
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A summary of the status of restricted stock units issued pursuant to the Plans during the three months ended March 31, 2015 is presented below: |
Restricted Stock Units | | Number of Shares | | Weighted | | | |
Average Fair | | |
Value | | |
Outstanding at beginning of the year | | 1,172,505 | | $ | 17.36 | | | |
Granted | | 795,900 | | $ | 12.24 | | | |
Forfeited | | (15,361 | ) | $ | 15.35 | | | |
Vested | | (250,752 | ) | $ | 16.94 | | | |
Outstanding at end of the period | | 1,702,292 | | $ | 15.05 | | | |
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In accordance with ASC 718, Share Based Payment (“ASC 718”), total compensation expense for stock-based compensation awards was $4.2 million and $5.0 million for the three months ended March 31, 2014 and 2015, respectively, which is included on the accompanying condensed consolidated statements of operations as follows (in thousands): |
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| | Three Months Ended | | |
| | March 31, | | |
| | 2014 | | 2015 | | |
Cost of goods sold | | $ | 1,488 | | $ | 910 | | |
Sales and marketing expenses | | 1,256 | | 1,367 | | |
General and administrative expenses | | 1,035 | | 2,066 | | |
Research and development | | 418 | | 681 | | |
Total stock-based employee compensation | | $ | 4,197 | | $ | 5,024 | | |
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Stock-based compensation expense for equity awards outstanding as of March 31, 2015 will be recognized over the following periods as follows (in thousands): |
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Years Ending December 31, | | | | | | | |
April 1, 2015 to December 31, 2015 | | $ | 12,226 | | | | | |
2016 | | 10,028 | | | | | |
2017 | | 3,604 | | | | | |
2018 | | 385 | | | | | |
| | $ | 26,243 | | | | | |
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Stock-based compensation costs for stock options are generally based on the fair value calculated from the Black-Scholes valuation model on the date of grant. The Black-Scholes valuation model requires the Company to estimate key assumptions such as expected volatility, expected terms, risk-free interest rates and dividend yields. The Company determined the assumptions in the Black-Scholes valuation model as follows: expected volatility is a combination of the Company’s competitors’ historical volatility; expected term is calculated using the “simplified” method prescribed in ASC 718; and the risk free rate is based on the U.S. Treasury yield on 5 and 7-year instruments in effect at the time of grant. A dividend yield is not used, as the Company has never paid cash dividends and does not currently intend to pay cash dividends. The Company periodically reviews the assumptions and modifies the assumptions accordingly. |
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As part of the requirements of ASC 718, the Company is required to estimate potential forfeitures of stock option and restricted stock unit grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to be recognized in future periods. The fair values of stock option and restricted stock unit grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is shown in the operating activities section of the statement of cash flows. |
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