Stock-Based Compensation | 7. Stock-Based Compensation The Company has granted non-statutory stock options and restricted stock unit awards to employees, directors and consultants of the Company pursuant to its 2003 Stock Option Plan, as amended (the “2003 Plan”), and 2014 Equity Incentive Plan (the “2014 Plan”), which became effective immediately upon the signing of the underwriting agreement related to the IPO on March 27, 2014. Upon the effectiveness of the 2014 Plan, no additional awards have been or will be granted under the 2003 Plan. The 2014 Plan provides for the grant of stock options, restricted stock units, and other awards based on the Company’s common stock. As of September 30, 2015, 285,753 shares have been reserved for issuance under the 2014 Plan. The number of shares of common stock reserved for issuance under the 2014 Plan is subject to an automatic increase on January 1 of each year through January 1, 2024, by the lesser of (a) 4% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year and (b) a number of shares determined by the Board of Directors. Stock Options The following table summarizes stock option activity for the nine months ended September 30, 2015: Number of options Weighted- average exercise price Weighted- average remaining contractual life (years) Aggregate intrinsic value Outstanding at December 31, 2014 5,893,698 $ 9.94 6.48 $ 29,249 Granted 929,265 12.09 Exercised (268,273 ) 7.35 Cancelled (274,474 ) 12.47 Outstanding at September 30, 2015 6,280,216 $ 10.27 5.57 $ 5,734 Exercisable at September 30, 2015 4,141,403 $ 8.89 4.29 $ 5,505 Proceeds from the exercise of options and the total intrinsic value of the options exercised were $112 and $112, respectively, for the three months ended September 30, 2015, and $745 and $1,129, respectively, for the three months ended September 30, 2014. Proceeds from the exercise of options and the total intrinsic value of the options exercised were $1,881 and $1,388, respectively, for the nine months ended September 30, 2015, and $2,896 and $4,354, respectively, for the nine months ended September 30, 2014. The weighted-average fair value per share at date of grant for options granted was $5.36 and $7.73 during the nine months ended September 30, 2015 and 2014, respectively. The fair value of options granted is estimated on the date of grant using the Black-Scholes option pricing model and recognized in expense over the vesting period of the options using the graded attribution method. The following table presents the weighted-average assumptions used to estimate the fair value of options granted in the nine months ended September 30, 2015 and 2014: 2015 2014 Volatility 43.40 % 49.42 % Expected life (years) 6.25 6.25 Risk-free interest rate 1.73 % 1.92 % Dividend yield — — The expected stock price volatilities are estimated based on historical realized volatilities of comparable publicly traded company stock prices over a period of time commensurate with the expected term of the option award. The expected life represents the period of time for which the options granted are expected to be outstanding. The Company used the simplified method for determining expected life for options qualifying for treatment due to the limited history the Company currently has with option exercise activity. The risk-free interest rate is based on the U.S. Treasury yield curve for periods equal to the expected term of the options on the grant date. Total stock-based compensation expense related to stock options was $1,471 and $2,331 for the three months ended September 30, 2015 and 2014, respectively, and $4,940 and $5,942 for the nine months ended September 30, 2015 and 2014, respectively. At September 30, 2015, there was approximately $5,381 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.32 years. The total fair value of stock options vested during the nine months ended September 30, 2015 and 2014 was $5,183 and $2,800, respectively. Restricted Stock Unit Awards The Company’s restricted stock unit awards (“RSUs”) are agreements to issue shares of the Company’s common stock to employees in the future, upon the satisfaction of certain vesting conditions, which cause them to be subject to risk of forfeiture and restrict the awardholder’s ability to sell or otherwise transfer such RSUs until they vest. Generally, the Company’s RSU grants vest over three years from the grant date subject to continued employment on the applicable vesting dates. The following table summarizes the unvested RSU activity for the nine months ended September 30, 2015: Number of RSUs Weighted Average Grant Date Fair Value Outstanding at December 31, 2014 — $ - Granted (1) 691,538 12.01 Vested (1,923 ) 11.99 Cancelled (24,397 ) 11.99 Outstanding at September 30, 2015 665,218 $ 12.01 (1) RSUs granted during the nine months ended September 30, 2015 includes the grant of 40,000 units of performance-based RSUs that are dependent upon the Company meeting certain performance criteria. Total stock-based compensation expense related to RSUs was $1,343 and $2,867 for the three and nine months ended September 30, 2015, respectively. As RSUs were issued for the first time in March 2015, there was no stock-based compensation expense related to RSUs in 2014. At September 30, 2015, there was approximately $4,611 of unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 1.24 years. 2014 Employee Stock Purchase Plan The 2014 Employee Stock Purchase Plan (“ESPP”), which became effective immediately upon the signing of the underwriting agreement related to the IPO on March 27, 2014, authorized the issuance of 500,000 shares of the Company’s common stock pursuant to purchase rights granted to employees. The number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1 of each calendar year from January 1, 2015 through January 1, 2024 by the least of (a) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (b) 400,000 shares and (c) a number determined by the Board of Directors that is less than (a) and (b). Unless otherwise determined by the Board of Directors, common stock will be purchased for participating employees at a price per share equal to the lower of (a) 85% of the fair market value of a share of the common stock on the first date of an offering, or (b) 85% of the fair market value of a share of the common stock on the date of purchase. Generally, all regular employees may participate in the ESPP and may contribute, through payroll deductions, up to 15% of their earnings toward the purchase of common stock under the ESPP. Under the terms of the ESPP, there are defined limitations as to the amount and value of common stock that can be purchased by each employee. The Company’s second purchase period commenced in November 2014 and ended in May 2015. During the nine months ended September 30, 2015, employees purchased 109,304 shares of common stock pursuant to the ESPP at an exercise price of $10.51. As of September 30, 2015, 567,403 shares of common stock were reserved for future issuance under the ESPP. For the three months ended September 30, 2015 and 2014, charges incurred under the ESPP totaled $158 and $399, respectively. For the nine months ended September 30, 2015 and 2014, charges incurred under the ESPP totaled $409 and $806, respectively. There was $207 of total unrecognized compensation cost related to purchase rights under the ESPP as of September 30, 2015. This cost is expected to be recognized over a weighted average period of less than one year. |