STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2013 |
STOCKHOLDERS' EQUITY | 10. STOCKHOLDERS’ EQUITY |
Initial Public Offering |
In March 2012, the Company completed its initial public offering of its Class A common stock to the public (the “IPO”) whereby 8,172,500 shares of Class A common stock were sold by the Company (inclusive of 1,072,500 shares of Class A common stock from the full exercise of the overallotment option of shares granted to the underwriters) and 50,000 shares of Class A common stock were sold by a selling stockholder, The Yelp Foundation. The public offering price of the shares sold in the offering was $15.00 per share. The Company did not receive any proceeds from the sales of shares by the selling stockholder. The total gross proceeds from the offering to the Company were $122.6 million. After deducting underwriters’ discounts and commissions and offering expenses, the aggregate net proceeds received by the Company totaled approximately $111.4 million. Immediately prior to the closing of the IPO, all shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into 35,816,772 shares of Class B common stock. As a result, following the IPO, the Company has two classes of common stock outstanding: Class A common stock (one vote per share) and Class B common stock (ten votes per share). |
The following table presents the shares authorized and issued and outstanding as of the periods presented (in thousands, except share data): |
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| | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | |
| | Shares | | | Shares | | | Shares | | | Shares | |
Authorized | Issued and | Authorized | Issued and |
| Outstanding | | Outstanding |
Stockholders’ equity: | | | | | | | | | | | | | | | | |
Class A common stock, $0.000001 par value | | | 200,000,000 | | | | 53,573,297 | | | | 200,000,000 | | | | 23,380,283 | |
Class B common stock, $0.000001 par value | | | 100,000,000 | | | | 12,400,324 | | | | 100,000,000 | | | | 40,124,986 | |
Common stock, $0.000001 par value | | | 200,000,000 | | | | — | | | | 200,000,000 | | | | — | |
Undesignated Preferred Stock | | | 10,000,000 | | | | — | | | | 10,000,000 | | | | — | |
Equity Incentive Plans |
The Company has outstanding awards under three equity incentive plans: the Amended and Restated 2005 Equity Incentive Plan (the “2005 Plan”), the 2011 Equity Incentive Plan (the “2011 Plan”) and the 2012 Equity Incentive Plan, as amended (the “2012 Plan”). In July 2011, the Company terminated the 2005 Plan and provided that no further stock awards were to be granted under the 2005 Plan. All outstanding stock awards under the 2005 Plan will continue to be governed by their existing terms. Upon the effectiveness of the underwriting agreement in connection with the IPO, all shares that were reserved under the 2011 Plan but not issued were assumed by the 2012 Plan. No further awards will be granted pursuant to the 2011 Plan. All outstanding stock awards under the 2011 Plan will continue to be governed by their existing terms. Under the 2012 Plan, the Company has the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance units and/or performance shares. Additionally, the 2012 Plan provides for the grant of performance cash awards to employees, directors and consultants. |
Restricted Stock Awards and Restricted Stock Units |
The Company began granting RSAs to its employees in July 2011. In March 2012, the Company began granting RSUs. The cost of the RSAs and RSUs are determined using the fair value of the Company’s common stock on the date of grant. Stock-based compensation expense is amortized on a straight-line basis over the requisite service period. RSAs and RSUs generally vest over a four-year period with 25% vesting at the end of one year and the remaining vesting quarterly or annually thereafter. |
The Company granted zero RSAs and 120,438 RSUs during the three months ended September 30, 2013, and zero RSAs and 184,563 RSUs during the nine months ended September 30, 2013. The Company recorded stock-based compensation expense related to RSAs and RSUs of approximately $0.7 million and $0.1 million for the three months ended September 30, 2013 and 2012, respectively, and $1.7 million and $0.3 million for the nine months ended September 30, 2013 and 2012, respectively. As of September 30, 2013, the Company had approximately $10.2 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to RSAs and RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.50 years. |
Stock Options |
Stock options granted under the 2012 Plan will be granted at a price per share not less than the fair value at date of grant. Options granted to date generally vest either over a four-year period with 25% vesting at the end of one year and the remaining vesting monthly thereafter or over a four-year period with 10% vesting over the first year, 20% vesting over the second year, 30% vesting over the third year and 40% vesting over the fourth year. Options granted generally are exercisable for up to 10 years. A summary of stock option activity for the nine months ended September 30, 2013, is as follows: |
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| | Options Outstanding | | | | | | | |
| | Number of | | | Weighted- | | | Weighted- | | | Aggregate | |
Shares | Average | Average | Intrinsic |
| Exercise | Remaining | Value |
| Price | Contractual | (in thousands) |
| | Term (in | |
| | years) | |
Outstanding – January 1 , 2013 | | | 10,113,176 | | | $ | 10 | | | | 7.89 | | | $ | 96,992 | |
Granted | | | 4,224,002 | | | | 28.06 | | | | | | | | | |
Exercised | | | (2,212,811 | ) | | | 4.38 | | | | | | | | | |
Canceled | | | (669,709 | ) | | | 19.7 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Outstanding – September 30, 2013 | | | 11,454,658 | | | $ | 17.18 | | | | 8.35 | | | $ | 561,268 | |
| | | | | | | | | | | | | | | | |
Options vested and expected to vest as of September 30, 2013 | | | 11,111,350 | | | $ | 16.97 | | | | 8.33 | | | $ | 546,790 | |
| | | | | | | | | | | | | | | | |
Options vested and exercisable as of September 30, 2013 | | | 3,772,662 | | | $ | 8.53 | | | | 7.29 | | | $ | 217,501 | |
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Aggregate intrinsic value represents the difference between the closing price of the Company’s Class A common stock on the New York Stock Exchange on September 30, 2013 of $66.18 and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was approximately $30.7 million and $22.5 million for the three months ended September 30, 2013 and 2012, respectively, and $65.5 million and $25.1 million for the nine months ended September 30, 2013 and 2012, respectively. The weighted-average grant date fair value of options granted was $30.36 and $13.09 per share for the three months ended September 30, 2013 and 2012, respectively, and $15.86 and $10.72 per share for the nine months ended September 30, 2013 and 2012, respectively. |
As of September 30, 2013, total unrecognized compensation costs, adjusted for estimated forfeitures, related to unvested stock options was approximately $79.9 million, which is expected to be recognized over a weighted-average time period of 2.93 years. |
Employee Stock Purchase Plan |
Concurrent with the effectiveness of the underwriting agreement in connection with the IPO on March 1, 2012, the Company’s 2012 Employee Stock Purchase Plan (the “ESPP”) became effective. The ESPP allows eligible employees to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations during designated offering periods. At the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s Class A common stock on the first trading day of the offering period or on the last day of the offering period. The Company initiated an offering under the ESPP on June 3, 2013 with an offering end date of November 29, 2013. There were no shares purchased by employees under the ESPP for the three and nine months ended September 30, 2013. The Company recognized $0.3 million and $0.4 million of stock-based compensation related to the ESPP in the three and nine months ended September 30, 2013, respectively. |
Stock-Based Compensation |
The following table summarizes the effects of stock-based compensation related to stock-based awards in the condensed consolidated statements of operations during the periods presented (in thousands): |
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| | Three Months Ended | | | Nine Months Ended | |
September 30, | September 30, |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Stock-based compensation effects in loss before income taxes: | | | | | | | | | | | | | | | | |
Cost of revenue | | $ | 104 | | | $ | 27 | | | $ | 281 | | | $ | 85 | |
Sales and marketing | | | 2,660 | | | | 1,152 | | | | 6,930 | | | | 3,171 | |
Product development | | | 1,709 | | | | 466 | | | | 3,565 | | | | 1,009 | |
General and administrative | | | 2,542 | | | | 689 | | | | 6,557 | | | | 7,356 | |
Restructuring and integration | | | — | | | | — | | | | 555 | | | | — | |
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Total stock-based compensation | | $ | 7,015 | | | $ | 2,334 | | | $ | 17,888 | | | $ | 11,621 | |
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During the three and nine months ended September 30, 2013, the Company recognized zero and $0.6 million of stock-based compensation, respectively, related to the acceleration of vesting of RSUs associated with the Qype restructuring plan described in Note 3. During the three and nine months ended September 30, 2012, the Company recognized zero and $5.5 million of stock-based compensation, respectively, related to the acceleration of vesting of stock options held by two executive officers related to the completion of the IPO, included in general and administrative expense. The Company capitalized stock-based compensation as website development costs of $152,000 and $72,000 in the three months ended September 30, 2013 and 2012, respectively, and $383,000 and $209,000 in the nine months ended September 30, 2013 and 2012, respectively. |