Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2014 |
Stock-Based Compensation | ' |
Note 10. Stock-Based Compensation |
Total stock-based compensation expense recorded for employees and non-employees, is as follows (in thousands): |
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| Three Months Ended | | | | | |
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March 31, | | | | |
| 2014 | | | 2013 | | | | | |
Cost of revenues | $ | 178 | | | $ | 154 | | | | | |
Technology and development | | 2,382 | | | | 1,614 | | | | | |
Sales and marketing | | 1,332 | | | | 1,049 | | | | | |
General and administrative | | 3,038 | | | | 1,333 | | | | | |
Total stock-based compensation expense | $ | 6,930 | | | $ | 4,150 | | | | | |
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We estimate the fair value of each stock option award using the Black-Scholes-Merton option-pricing model, which utilizes the estimated fair value of our common stock and requires the input of subjective assumptions. |
The following table summarizes the key assumptions used to determine the fair value of our stock options granted to employees, officers, and directors: |
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| Three Months Ended | | | | | |
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March 31, | | | | |
| 2014 | | | 2013 | | | | | |
Expected term (years) | | 6.07 | | | | 5.98 | | | | | |
Expected volatility | | 56.83 | % | | | 57.06 | % | | | | |
Dividend yield | | 0 | % | | | 0 | % | | | | |
Risk-free interest rate | | 2.02 | % | | | 1.01 | % | | | | |
Weighted-average grant-date fair value per share | $ | 4.28 | | | $ | 3.1 | | | | | |
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The following key assumptions were used to determine the fair value of our 2013 ESPP which had its first offering period open in November 2013: expected term 0.5 years, expected volatility 45%, dividend yield 0%, risk-free interest rate 0.10% and weighted-average grant-date fair value per share of $3.44 per share. |
We recognize only the portion of the option award granted to employees that is ultimately expected to vest as compensation expense. Estimated forfeitures are determined based on historical data and management’s expectation of exercise behaviors. Forfeiture rates and the resulting compensation expense are revised in subsequent periods if actual forfeitures differ from the estimate. |
No option awards were granted to consultants in the three months ended March 31, 2014 or 2013. Total stock-based compensation expense for consultants was not significant for the three months ended March 31, 2014 or 2013. |
There was no capitalized stock-based compensation as of March 31, 2014 or March 31, 2013. |
Stock Option Activity |
Option activity under our option plans was as follows: |
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| Options Outstanding | |
| Number of | | | Weighted- | | | Aggregate | |
| | |
Options | Average | Intrinsic |
| | |
Outstanding | Exercise | Value |
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| Price per | |
| | |
| Share | |
Balance at December 31, 2013 | | 17,971,969 | | | $ | 8.35 | | | $ | 22,253,373 | |
Granted | | 168,632 | | | $ | 7.85 | | | | | |
Exercised | | (222,607 | ) | | $ | 0.4 | | | | | |
Cancelled | | (319,637 | ) | | $ | 8.26 | | | | | |
Balance at March 31, 2014 | | 17,598,357 | | | $ | 8.45 | | | $ | 8,888,254 | |
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As of March 31, 2014, our total unrecognized compensation expense for stock options granted to employees, officers, directors, and consultants was approximately $35.0 million, which will be recognized over a weighted-average vesting period of approximately 2.5 years. |
Restricted Stock Units (RSUs) Activity |
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| Restricted Stock Units Outstanding | | | | | |
| Number of | | | Weighted Average Grant Date Fair Value | | | | | |
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RSUs | | | | |
| | | | |
Outstanding | | | | |
Balance at December 31, 2013 | | 1,479,898 | | | $ | 10.01 | | | | | |
Granted | | 3,793,507 | | | $ | 6.43 | | | | | |
Released | | (1,282,852 | ) | | $ | 9.84 | | | | | |
Cancelled | | — | | | $ | — | | | | | |
Balance at March 31, 2014 | | 3,990,553 | | | $ | 6.73 | | | | | |
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During the three months ended March 31, 2014, 1,256,209 RSUs granted prior to our IPO vested and were settled for shares of our common stock. Of those shares, we withheld 516,919 shares valued at approximately $3.5 million in satisfaction of tax withholding obligations for employees who elected to net settle, i.e., surrender shares of common stock to satisfy their tax obligations. Payment of taxes related to this net share settlement of RSUs is reflected as a financing activity in our condensed consolidated statements of cash flows. The shares withheld by us as a result of the net settlement are no longer considered issued and outstanding, thereby reducing our shares outstanding used to calculate earnings per share. These shares are returned to the reserves and are available for future issuance under the 2013 Equity Incentive Plan (the 2013 Plan). |
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In February 2014, the Compensation Committee approved a grant of performance-based restricted stock units (PSUs) under the Plan to certain of our executive officers. The PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance goals, including net revenue growth, digital revenue growth and free cash flow during 2014 (the “Performance Period”). Based on the achievement of the performance conditions during the Performance Period, the final settlement of the PSU awards will range between 0 and 150% of the target shares underlying the PSU awards based on a specified objective formula approved by the Compensation Committee. If earned, the PSUs will vest annually over a three year period. |
The target number of shares underlying the PSUs that were granted to certain executive officers during the three months ended March 31, 2014, totaled 1,184,367 shares and had a weighted average grant date fair value of $6.39 per share. As of March 31, 2014, we expect that 100% of the PSUs will vest. |
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As of March 31, 2014, we had a total of approximately $16.1 million of unrecognized compensation costs related to RSUs that is expected to be recognized over the remaining weighted average period of 1.7 years. |