Stock-Based Compensation Plans | Stock-Based Compensation Plans Equity Incentive Programs In 2005, the Company established its 2005 Stock Option Plan (the “2005 Plan”), covering employees, directors and consultants of the Company. Under the terms of the 2005 Plan, incentive and nonqualified stock option and stock purchase rights could be granted. In September 2011, upon the adoption of the Company's 2011 Equity Incentive Plan (the "2011 Plan") the Company ceased granting options under the 2005 Plan. The 2011 Plan serves as the successor equity incentive plan to the Company's 2005 Plan and started with 89,234 shares of common stock available for issuance plus any shares of common stock issued pursuant to the 2005 Plan or subject to awards granted under the 2005 Plan that are forfeited, repurchased, returned or otherwise become available for issuance in accordance with the terms of the 2005 Plan. In addition, this plan reserve automatically increases on January 1 and each subsequent anniversary through January 1, 2021, by an amount equal to the smaller of five percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the Company's Board of Directors. The 2011 Plan provides for granting awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Options granted under the 2011 Plan may be either ISOs or NSOs. ISOs may be granted only to the Company's employees. Any person who is not an employee of the Company on the effective date of the grant of an option may be granted only a NSO. Options under the 2011 Plan may be granted for periods of up to ten years and generally vest over a period of four years . The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an option granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant. In April 2012, the Company's Board of Directors approved the 2012 Stock Plan ("2012 Plan") that became effective upon approval by the stockholders of the Company on June 15, 2012. The purpose of the 2012 Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2012 Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, cash-based awards, other stock-based awards, and deferred compensation awards. The 2012 Plan started with 1,500,000 shares of common stock available for issuance and there are no provisions in the 2012 Plan to increase the shares available for issuance. Options granted under the 2012 Plan may be either ISOs or NSOs. ISOs may be granted only to the Company's employees. Any person who is not an employee of the Company on the effective date of the grant of an option may be granted only a NSO. Options under the 2012 Plan may be granted for periods of up to ten years and generally vest over a period of four years . The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an option granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant. Share-Based Awards Available for Grant A summary of share-based awards available for grant is as follows: Years Ended December 31, 2015 December 31, 2014 December 31, 2013 Balance at beginning of fiscal year 2,685,209 1,086,737 1,103,836 Additional shares reserved 1,000,000 1,851,794 1,200,000 Options granted (45,622 ) (255,000 ) (568,987 ) Restricted stock units granted (593,003 ) (508,729 ) (1,205,200 ) Options canceled 37,520 41,681 307,738 Restricted stock units canceled 174,094 157,358 163,689 Restricted stock unit withheld for tax 259,107 311,368 85,661 Balance at end of fiscal year 3,517,305 2,685,209 1,086,737 Stock Option Awards A summary of the stock option activity is as follows: Options Outstanding Number of Weighted- Weighted-Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value (in thousands) Balance, December 31, 2012 4,128,334 4 $ 4.96 Options granted 568,987 6.60 Options exercised (791,198 ) 3.34 Options canceled (307,738 ) 7.36 Balance, December 31, 2013 3,598,385 $ 5.36 Options granted 255,000 18.42 Options exercised (569,283 ) 4.89 Options canceled (41,681 ) 5.50 Balance, December 31, 2014 3,242,421 $ 6.47 Options granted 45,622 34.65 Options exercised (608,931 ) 6.79 Options canceled (37,520 ) 8.55 Balance, December 31, 2015 2,641,592 $ 6.86 6.81 $ 57,532 Vested and expected to vest, December 31, 2015 2,620,217 $ 6.80 6.81 $ 57,187 Vested and Exercisable, December 31, 2015 2,127,228 $ 6.22 6.72 $ 47,457 The following table summarizes information about stock options outstanding as of December 31, 2015 : Options Outstanding Exercise Price Stock Options Outstanding Weighted-Average Remaining Contractual Life (in Years) Options Exercisable $0.55-4.60 278,755 6.6 185,111 4.62-4.62 90,000 6.9 55,625 5.04-5.04 1,431,092 6.6 1,252,213 5.06-6.34 295,572 6.9 242,576 6.38-10.20 287,135 6.5 240,224 11.30-17.44 56,229 7.4 32,267 17.48-17.48 90,000 8.4 90,000 20.88-20.88 47,187 8.1 20,105 21.00-21.00 20,000 8.2 9,167 $34.65-34.65 45,622 9.1 — 2,641,592 2,127,288 Restricted Stock Activity Activity related to restricted stock units and awards is set forth below: Number of Units and Awards Weighted- Balance, December 31, 2012 1,157,450 $ 5.38 Restricted stock units granted 1,205,200 5.57 Restricted stock units released (292,265 ) 5.35 Restricted stock units canceled (163,689 ) 4.31 Balance, December 31, 2013 1,906,696 $ 5.60 Restricted stock units granted 508,729 19.99 Restricted stock units released (724,986 ) 6.03 Restricted stock units canceled (157,358 ) 6.50 Balance, December 31, 2014 1,533,081 $ 10.08 Restricted stock units granted 593,003 31.96 Restricted stock units released (639,339 ) 10.76 Restricted stock units canceled (174,094 ) 14.16 Balance, December 31, 2015 1,312,651 $ 19.09 During the years ended December 31, 2015 , 2014 and 2013 , the Company withheld 259,107 , 311,368 and 85,661 shares, respectively, based upon the Company's closing stock price on the vesting date to settle the employee's minimum statutory obligation for the applicable income and other employment taxes. 2011 Employee Stock Purchase Plan In September 2011, the Company's Board of Directors approved the 2011 Employee Stock Purchase Plan (“2011 ESPP”) that became effective upon the completion of the IPO. The 2011 ESPP is designed to enable eligible employees to purchase shares of the Company's common stock at a discount. Each offering period consists of one six-month purchase period. The purchase price for shares of common stock under the 2011 ESPP is 85% of the of lesser of the fair market value of the Company's common stock on the first day of the applicable offering period or the purchase date. There were 470,018 shares of the Company's common stock initially reserved for future purchase under its 2011 ESPP. On the first day of each year, beginning January 1, 2012 and through and including January 1, 2021, the maximum aggregate number of shares of common stock that may be issued under the 2011 ESPP will be increased by a number of shares equal to the smallest of a) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or b) an amount determined by the Company's Board of Directors. During 2014, the number of shares of the Company's common stock reserved for future purchase under the 2011 ESPP was increased by 370,358 shares. During 2015, there were no additional shares of the Company's common stock reserved for future purchase under the 2011 ESPP. The employee stock purchase plan offering periods will commence on or about the first trading days of December and June of each year and end on or about the last trading days of the next May and November, respectively. During the year ended December 31, 2015 , employees purchased 108,552 shares under the 2011 ESPP at a weighted average exercise price of $22.96 . As of December 31, 2015 , there were 456,835 shares of the Company's common stock available for future purchase under its 2011 ESPP. Stock-Based Compensation Expense Stock-based compensation related to all of the Company's stock-based awards and employee stock purchases was recorded as an expense or a reduction to revenue and allocated as follows (in thousands): Year Ended December 31, 2015 2014 2013 Revenue $ 205 $ 833 $ — Cost of revenue 744 443 248 Research and development 1,619 1,073 1,645 Sales and marketing 5,129 2,917 1,783 General and administrative 5,522 4,117 2,984 Total stock-based compensation $ 13,219 $ 9,383 $ 6,660 Stock-based compensation expense includes charges related to performance based stock options and restricted stock units granted to certain executives. Stock-based compensation expense related to performance based stock options and restricted stock units was $2.5 million , $1.6 million and $1.0 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. Stock-based compensation expense for the year ended December 31, 2013 includes $0.7 million in modification charges incurred in connection with the severance packages to the Company's former executives. There were no such charges for the years ended December 31, 2015 and 2014 . Stock-based compensation for the year ended December 31, 2015 and December 31, 2014 includes $0.2 million and $0.8 million , respectively, recorded as a reduction to revenue related to payments to customers for services. Of the total amount recorded as a reduction to revenue, $0.4 million is related to an out-of-period adjustment related to the fiscal year ended December 31, 2014 . As of December 31, 2015 , the total unrecognized compensation cost related to outstanding stock options, awards and employee stock purchases was $19.4 million , which is expected to be recognized over a weighted-average remaining period of 2.6 years . Stock-Based Compensation Associated with Awards to Employees The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The valuation model for stock compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term (weighted-average period of time that the options granted are expected to be outstanding); volatility of the Company's common stock, an assumed-risk-free interest rate and the estimated forfeitures of unvested stock options. The fair value of employee stock options was estimated using the following weighted-average assumptions: Year Ended December 31, 2015 2014 2013 Expected term (in years) 4.8 4.4 4.8 Expected volatility 63 % 43 % 51 % Risk-free interest rate 1.29 % 1.25 % 1.02 % Expected dividend yield 0 % 0 % 0 % Expected Term . Subsequent to the Company's initial public offering of its common stock, or IPO in 2011, and through 2014, the expected term used was based on expected term of a group of similar entities, referred to as its “peer group.” In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size. In 2015, the Company modified its approach by including its own historical data along with the expected term of the identified peer group companies. The Company will continue to apply this methodology until a sufficient amount of historical information regarding its own expected term becomes available. Volatility . Subsequent to the IPO and through 2014, the Company continued to estimate its volatility based on the volatility of a group of similar entities, referred to as its "peer group". In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size. In 2015, the Company modified its approach by including its own common stock trading history along with the volatility of the identified peer group companies. The expected stock price volatility is estimated using a combination of historical and peer group volatility to derive the expected volatility assumption. The Company believes the blended volatility is more representative of future stock price trends over the expected life of the options rather than just using historical or peer group volatility. The Company will continue to apply this methodology until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. Risk-Free Interest Rate . The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. Dividend Yield . The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model. Forfeitures. The Company is required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and record stock based compensation expense only for those awards that are expected to vest. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised. During the years ended December 31, 2015 , 2014 and 2013 , the Company granted 45,622 , 255,000 and 543,987 stock options, respectively, to employees with a weighted-average grant date fair value of $18.19 , $6.77 and $6.75 per share, respectively. The aggregate intrinsic value of options exercised was $2.8 million , $3.2 million and $6.8 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company's common stock at the date of exercise. The total fair value of shares vested was $2.7 million , $4.3 million and $4.9 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. During the years ended December 31, 2015 , 2014 and 2013 , the Company granted 593,003 , 508,729 and 1,180,200 restricted stock units and restricted awards, respectively, to employees. The weighted-average grant date fair value as of the respective grant date of restricted stock units and restricted stock awards was $32.05 , $19.99 and $5.62 for the years ended December 31, 2015 , 2014 and 2013 , respectively. The fair value as of the respective vesting dates of restricted stock units and restricted stock awards was $6.4 million , $4.3 million and $1.4 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. There was no capitalized stock-based compensation cost during the years ended December 31, 2015 , 2014 and 2013 . The Company recognized stock-based compensation tax benefits of $1.3 million and $0.1 million during the years ended December 31, 2015 and December 31, 2014 , respectively. There was no recognized stock-based compensation tax benefits during the year ended December 31, 2013 . Stock-Based Compensation for Non-employees Stock-based compensation expense related to stock-based awards to non-employees is recognized as the stock-based awards are earned, generally through the provision of services. The Company believes that the fair value of the stock-based awards is more reliably measurable than the fair value of the services received. The fair value of the granted stock-based awards is calculated at each reporting date using the Black-Scholes option pricing model. During each of the years ended December 31, 2015 , 2014 and 2013 , the Company granted stock-based awards to non-employees which vest over 0.5 to 2.0 years . Stock-based compensation expense related to non-employee grants was $0.4 million , $0.6 million and $0.5 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, of which $0.2 million and $0.8 million for an arrangement with a non-employee customer has been recorded as a reduction of revenue in the statement of operations during the years ended December 31, 2015 and December 31, 2014 , respectively. Included in the 2014 amount is $0.4 million of expense related to the year ended December 31, 2013 . Performance-Based Restricted Stock Units (PRSUs) From time to time, the Company will issue performance-based stock options and restricted stock units to senior executives. During the years ended December 31, 2015, 2014 and 2013, the Company granted 64,938 , 40,000 and 40,000 performance-based restricted stock units, respectively, to certain senior executives, which are accounted for as equity awards. The number of units that ultimately vest depends on achieving certain performance criteria and can range from 0% to 100% of the number of units granted. The performance criteria are specific to the roles of each of the executives and are set by the Compensation Committee of the Board of Directors. The performance-based restricted stock units have no dividend or voting rights during the performance period. Each of the performance-based restricted stock units represents the contingent right to receive one share of the Company's common stock if the vesting conditions are satisfied. Compensation expense related to these grants is based on the grant date fair value of the award. Total stock-based compensation related to performance-based restricted awards was $2.5 million , $0.8 million and $0.2 million in the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015 , 34,938 PRSUs were outstanding. |