Compensation Paid in Stock | 3 Months Ended |
Mar. 31, 2014 |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ' |
Compensation Paid in Stock | ' |
9 | Compensation paid in stock | | | | | | | | | | | | | | | |
2005 Stock Plan |
We granted options under our 2005 Stock Incentive Plan (the “2005 Plan”) until September 2012 when the 2005 Plan was terminated. Since the date of the plan termination, no more stock options or awards were issued under the plan; however, the stock options issued prior to the plan termination continue to be outstanding. Under the terms of the 2005 Plan, we had the ability to grant incentive (“ISO”) and nonstatutory (“NSO”) stock options, restricted stock awards (“RSA”) and restricted stock units (“RSU”). The options were granted at a price per share not less than 100% of the fair market value per share at the grant date. Options granted under the 2005 Plan generally vest at a rate of 25% after the first year and then at 1/36 of the remaining shares each month thereafter and expire 10 years from the grant date. Certain options vest monthly over two to four years. |
2012 Equity Incentive Plan |
Effective September 19, 2012, our board of directors adopted, and our stockholders approved, a 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan provides for the grant of ISOs, NSOs, RSAs, RSUs, stock appreciation rights, performance units, and performance shares to our employees, directors, and consultants. Upon adoption of the 2012 Plan, a total of 2,370,000 shares of common stock were reserved for issuance plus up to 1,000,000 shares from the expiration or termination of awards under the 2005 Plan. The shares available are increased at the beginning of each fiscal year by the lesser of (i) 2,100,000 shares, (ii) 4% of outstanding common stock on the last day of the immediately preceding fiscal year, or (iii) such number determined by our board of directors. On January 1, 2014 and 2013 the shares available for grant under the 2012 Plan were automatically increased by 1,463,303 and 1,102,112 shares, respectively. On June 5, 2013, the stockholders approved a 2,000,000 share increase to the 2012 Plan. Under the 2012 Plan, both the ISOs and NSOs are granted at a price per share not less than 100% of the fair market value per share of the underlying stock at the grant date. The board of directors determines the vesting period for each option award on the grant date, and the options generally expire 10 years from the grant date or such shorter term as may be determined by the board of directors. The RSUs are granted for zero purchase price. |
Market Leader 2004 Equity Incentive Plan |
In connection with our acquisition of Market Leader and pursuant to the Merger Agreement between us and Market Leader, we assumed Market Leader’s 2004 Equity Incentive Plan (“2004 Plan”), including all outstanding shares of restricted stock, all outstanding stock appreciation rights, all outstanding options and all shares available for future issuance under the 2004 Plan, and all of such securities became issuable for shares of our common stock. We may make equity-based awards, to the extent permissible by applicable law and NYSE rules, under the terms of the 2004 Plan to issue the reserved but unissued shares under the 2004 Plan and the shares that would otherwise be returned to the 2004 Plan due to (i) awards that lapse, expire, terminate, or are canceled prior to the issuance of shares thereunder or (ii) shares of common stock that are issued under the 2004 Plan and thereafter are forfeited to or otherwise reacquired by us. |
As of the date we assumed the 2004 Plan, a total of 283,522 shares of common stock were available for issuance. The shares available were increased on January 1, 2014 by 202,770 shares under the automatic annual increase provisions of the 2004 Plan. |
We did not assume House Value’s 1999 Stock Incentive Plan (the “1999 Plan”). However, pursuant to the Merger Agreement we have assumed all outstanding shares of restricted stock, all outstanding stock appreciation rights and all outstanding options issued under the 1999 Plan. These equity awards will continue to be outstanding and will be governed by the provisions of the 1999 Plan. |
The total shares of common stock available for grant under our 2012 Plan and 2004 Plan were 3,159,568 and 2,059,599 as of March 31, 2014 and December 31, 2013, respectively. |
Stock Option Activity |
Stock option activity for the three months ended March 31, 2014 under the 2005 Plan, 2012 Plan, 1999 Plan, and 2004 Plan was as follows: |
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| | Stock | | | Weighted | | | Weighted | | | Aggregate | |
Options | Average | Average | Intrinsic |
Outstanding | Exercise Price | Remaining | Value |
| | Contractual | |
| | Life (Years) | |
| | | | | | | | | | | (In thousands) | |
Balance—January1, 2014 | | | 3,088,449 | | | $ | 13.9 | | | | 7.42 | | | $ | 68,131 | |
Granted | | | 131,080 | | | | 32.65 | | | | | | | | | |
Canceled | | | (44,601 | ) | | | 11.17 | | | | | | | | | |
Exercised | | | (206,006 | ) | | | 8.17 | | | | | | | | | |
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Balance—March 31, 2014 | | | 2,968,922 | | | $ | 15.16 | | | | 7.42 | | | $ | 56,428 | |
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Options exercisable—March 31, 2014 | | | 1,473,977 | | | $ | 9.94 | | | | 6.36 | | | $ | 35,458 | |
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Options vested and expected to vest—March 31, 2014 | | | 2,884,299 | | | $ | 14.91 | | | | 7.38 | | | $ | 55,522 | |
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The options exercisable as of March 31, 2014 included options that were exercisable prior to vesting. The weighted average grant date fair value of options granted during the three months ended March 31, 2014 and 2013 was $14.87 and $12.63, respectively. |
Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The aggregate intrinsic value of options exercised was $4.9 million and $11.4 million, for the three months ended March 31, 2014 and 2013, respectively. |
The total estimated grant date fair value of employee options vested during the three months ended March 31, 2014 and 2013 was $2.1 million and $756,000, respectively. As of March 31, 2014, total unrecognized compensation cost related to non-vested stock options granted to employees was $12.6 million, net of estimated forfeitures of $1.3 million. These costs will be amortized on a straight-line basis over a weighted average vesting period of 2.38 years. |
Restricted Stock Units Activity |
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| | RSUs | | | Weighted | | | Weighted | | | Aggregate | |
Outstanding | Average | Average | Intrinsic |
| Grant Date | Remaining | Value |
| Fair Value | Contractual | |
| | Life (Years) | |
| | | | | | | | | | | (in thousands) | |
Unvested —January 1, 2014 | | | 1,660,589 | | | $ | 35.28 | | | | 1.94 | | | $ | 58,569 | |
Granted | | | 597,083 | | | | 30.7 | | | | | | | | | |
Canceled | | | (51,856 | ) | | | 35.19 | | | | | | | | | |
Released | | | (173,206 | ) | | | 31.6 | | | | | | | | | |
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Unvested—March 31, 2014 | | | 2,032,610 | | | $ | 27.22 | | | | 1.9 | | | $ | 67,483 | |
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Restricted stock units expected to vest—March 31, 2014 | | | 1,798,404 | | | $ | 34.29 | | | | 1.82 | | | $ | 59,707 | |
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As of March 31, 2014 total unrecognized compensation cost related to the unvested RSUs granted to employees was $51.0 million, net of estimated forfeitures of $5.7 million, respectively. This cost will be amortized on a straight-line basis over a weighted average vesting period of 3.02 years. |
In the three months ended June 30, 2013 and September 30, 2013 we granted 2,105,000 stock unit awards in relation to the Market Leader acquisition, of which 1,576,250 were performance based awards and 528,750 were time based awards. The performance based awards were contingent upon closing of the acquisition of Market Leader referred to in Note 1 above, achievement of certain performance metrics, including comparative market-based returns, and the employees’ continued service relationship with us. The time based awards were contingent upon closing of the acquisition of Market Leader referred to in Note 1 above and the employees’ continued service relationship with us. On August 20, 2013 the first contingency was resolved when we closed the acquisition of Market Leader. Hence, the time-based awards were classified as restricted stock units and included in the RSU table above. The performance-based awards are summarized in the table below. |
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| | PSUs | | | Weighted | | | Weighted | | | Aggregate | |
Outstanding | Average | Average | Intrinsic |
| Grant Date | Remaining | Value |
| fair Value | Contractual | |
| | Life (Years) | |
| | | | | | | | | | | (in thousands) | |
Unvested—December 31, 2013 | | | 1,576,250 | | | $ | 22.84 | | | | 3 | | | $ | 55,594 | |
Granted | | | — | | | | | | | | | | | | | |
Canceled | | | (15,000 | ) | | | | | | | | | | | | |
Released | | | — | | | | | | | | | | | | | |
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Unvested—March 31, 2014 | | | 1,561,250 | | | $ | 22.89 | | | | 2.76 | | | $ | 51,834 | |
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Restricted stock units expected to vest—March 31, 2014 | | | 1,484,567 | | | $ | 22.92 | | | | 2.75 | | | $ | 49,288 | |
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We estimated the fair value of the performance based awards with market-based conditions using a Monte Carlo simulation model. Total compensation cost recorded related to performance-based awards in the three months ended March 31, 2014 was $2.8 million. |
As of March 31, 2014 total unrecognized compensation cost related to the unvested performance based awards was $27.3 million, net of estimated forfeitures of $1.4 million, respectively. This cost will be amortized on a straight-line basis over a weighted average vesting period of 2.76 years. |
Summary of Assumptions |
The fair value of employee stock option awards was estimated on the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions: |
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| | Three Months Ended March 31, | | | | | | | | | | | | |
| | 2014 | | 2013 | | | | | | | | | | | | |
Expected term (in years) | | 5.4 | | 5.4 | | | | | | | | | | | | |
Expected volatility | | 49% | | 52% | | | | | | | | | | | | |
Risk-free interest rate | | 1.7% | | 0.9% | | | | | | | | | | | | |
Dividend rate | | 0% | | 0% | | | | | | | | | | | | |
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The fair value of performance based awards with market based condition was estimated using the Monte Carlo simulation model with the following weighted average assumptions: |
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| | As of May 29, | | As of August 29, | | | | | | | | | | | | |
2013 | 2013 | | | | | | | | | | | | |
Stock price | | $30.31 | | $41.67 | | | | | | | | | | | | |
Simulation period | | 2.93 years | | 2.68 years | | | | | | | | | | | | |
Risk free rate | | 0.47% | | 0.65% | | | | | | | | | | | | |
Volatility | | 52.60% | | 52.60% | | | | | | | | | | | | |
Dividend yield | | 0% | | 0% | | | | | | | | | | | | |
Cost of equity | | 12.60% | | 12.30% | | | | | | | | | | | | |
Stock Appreciation Rights Activity |
We measure the fair value of stock appreciation rights similar to stock options. Additionally, we classify stock appreciation rights that may be settled in cash as a liability and remeasure it at fair value at the end of each reporting period. Any changes in fair value as a result of this remeasurement are recorded as cumulative compensation cost. Compensation expense related to stock appreciation rights is recognized over the vesting period using the straight-line method reduced for estimated forfeitures. We recognized $114,000 as compensation expense in the three months ended March 31, 2014 related to the stock appreciation rights. Stock appreciation rights activity is summarized in the following table: |
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| | Stock | | | Weighted | | | Weighted | | | Aggregate | |
Appreciation | Average | Average | Intrinsic |
Rights | Exercise Price | Remaining | Value |
Outstanding | | Contractual | |
| | Life (Years) | |
| | | | | | | | | | | (In thousands) | |
Balance—January 1, 2014 | | | 127,544 | | | $ | 11.83 | | | | 3.08 | | | $ | 2,990 | |
Granted | | | — | | | | — | | | | | | | | | |
Canceled | | | (3,259 | ) | | | — | | | | | | | | | |
Exercised | | | — | | | | — | | | | | | | | | |
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Balance—March 31, 2014 | | | 124,285 | | | $ | 11.72 | | | | 2.83 | | | $ | 2,670 | |
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Exercisable—March 31, 2014 | | | 39,548 | | | $ | 11.18 | | | | 2.78 | | | $ | 871 | |
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Vested and expected to vest—March 31, 2014 | | | 116,828 | | | $ | 11.66 | | | | 2.82 | | | $ | 2,516 | |
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The aggregate intrinsic value of stock appreciation rights exercised was $1.1 million for the three months ended March 31, 2014. The total estimated grant date fair value of employee stock appreciation rights vested during the three months ended March 31, 2014 was $412,000. As of March 31, 2014 total unrecognized compensation cost related to non-vested stock appreciation rights granted to employees was $2.2 million, net of estimated forfeitures of $82,000. These costs will be amortized on a straight-line basis over a weighted average vesting period of 1.71 years. |
There were no stock appreciation rights issued or outstanding in the three months ended March 31, 2013. |
The value of each employee stock appreciation right was estimated at the end of the reporting period using the Black-Scholes options pricing model with the following weighted average assumptions: |
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| | Three Months | | | | | | | | | | | | | | |
Ended March 31, | | | | | | | | | | | | | | |
2014 | | | | | | | | | | | | | | |
Estimated term (in years) | | 1.41 | | | | | | | | | | | | | | |
Risk-free interest rate | | 0.29% | | | | | | | | | | | | | | |
Expected volatility | | 35% | | | | | | | | | | | | | | |
Expected dividend yield | | 0% | | | | | | | | | | | | | | |
Our stock appreciation rights typically vest on a graded basis over either a two or four year period and typically expire the earlier of five years from the date of grant or ninety days following termination of employment. |
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Compensation Paid in Stock |
We recorded compensation expense for the stock based awards granted to employees and other compensation paid in stock as follows (in thousands): |
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| | Three Months Ended March 31, | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | |
Compensation paid in stock related to vesting of stock based awards: | | | | | | | | | | | | | | | | |
Cost of revenue | | $ | 426 | | | $ | 41 | | | | | | | | | |
Technology and development | | | 1,844 | | | | 411 | | | | | | | | | |
Sales and marketing | | | 3,493 | | | | 337 | | | | | | | | | |
General and administrative | | | 4,125 | | | | 603 | | | | | | | | | |
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Total compensation paid in stock | | | 9,888 | | | | 1,392 | | | | | | | | | |
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Other compensation paid in stock | | | — | | | | — | | | | | | | | | |
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Total compensation paid in stock | | $ | 9,888 | | | $ | 1,392 | | | | | | | | | |
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We capitalized compensation paid in stock of $295,000 and $113,000 as product development costs during the three months ended March 31, 2014 and 2013, respectively. |