Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2015 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | 5. Stock-Based Compensation |
Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include stock option grants and restricted stock awards. |
Stock-based compensation expense related to internal labor is capitalized to patent costs and software based on direct labor hours charged to capitalized patent costs and software. |
Determining Fair Value |
Stock Options |
Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model. The Company amortizes the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods. |
Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures. Stock options granted generally vest over three to four years for employee grants and one to two years for director grants, and have contractual terms of ten years. |
Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award. |
Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award. |
Expected Dividend Yield. The expected dividend yield is derived by the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date. |
There were no stock options granted during the three-month periods ended March 31, 2015 and 2014. |
The Company records stock-based compensation expense for stock option awards only for those awards that are expected to vest. |
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Restricted Stock |
The fair value of restricted stock awarded is based on the fair market value of the Company’s common stock on the date of the grant (measurement date), and is recognized over the vesting period using the straight-line method. |
The Company records stock-based compensation expense for restricted stock awards only for those awards that are expected to vest. |
Stock-based Compensation |
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| | Three | | | Three | | | | | | | | | |
Months | Months | | | | | | | | |
Ended | Ended | | | | | | | | |
March 31, | March 31, | | | | | | | | |
2015 | 2014 | | | | | | | | |
Stock-based compensation: | | | | | | | | | | | | | | | | |
Cost of revenue | | $ | 185 | | | $ | 142 | | | | | | | | | |
Sales and marketing | | | 159 | | | | 142 | | | | | | | | | |
Research, development and engineering | | | 287 | | | | 356 | | | | | | | | | |
General and administrative | | | 518 | | | | 550 | | | | | | | | | |
Intellectual property | | | 68 | | | | 69 | | | | | | | | | |
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Stock-based compensation expense | | | 1,217 | | | | 1,259 | | | | | | | | | |
Capitalized to patent costs and software | | | 37 | | | | 45 | | | | | | | | | |
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Total stock-based compensation | | $ | 1,254 | | | $ | 1,304 | | | | | | | | | |
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The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including stock options and restricted stock: |
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| | As of | | | As of | | | | | | | | | |
March 31, | December 31, | | | | | | | | |
2015 | 2014 | | | | | | | | |
Total unrecognized compensation costs | | $ | 12,411 | | | $ | 11,206 | | | | | | | | | |
Total unrecognized compensation costs will be adjusted for any future changes in estimated forfeitures. |
The Company expects to recognize the unrecognized compensation costs as of March 31, 2015 for stock options and restricted stock over weighted average periods through March 2019 as follows: |
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| | Stock | | | Restricted | | | | | | | | | |
Options | Stock | | | | | | | | |
Weighted average period | | | 0.0 years | | | | 1.6 years | | | | | | | | | |
Stock Option Activity |
As of March 31, 2015, under all of the Company’s stock-based compensation plans, equity awards to purchase an additional 1,411 shares were authorized for future grants under the plans. The Company issues new shares upon option exercises. The following table reconciles the outstanding balance of stock options: |
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Three-months ended March 31, 2015: | | Options | | | Weighted | | | Weighted | | | Aggregate | |
Average | Average | Intrinsic |
Exercise | Grant Date | Value |
Price | Fair Value | |
Outstanding at December 31, 2014 | | | 601 | | | $ | 16.97 | | | $ | 8.42 | | | | | |
Options granted | | | — | | | | — | | | | — | | | | | |
Options exercised | | | (45 | ) | | | 19.45 | | | | 8.66 | | | | | |
Options canceled or expired | | | — | | | | — | | | | — | | | | | |
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Outstanding at March 31, 2015 | | | 556 | | | $ | 16.76 | | | $ | 8.4 | | | $ | 4,055 | |
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Exercisable at March 31, 2015 | | | 556 | | | $ | 16.76 | | | | | | | $ | 4,055 | |
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The aggregate intrinsic value is based on the closing price of $21.95 per share of Digimarc common stock on March 31, 2015, which would have been received by the optionees had all of the options with exercise prices less than $21.95 per share been exercised on that date. |
Restricted Stock Activity |
The following table reconciles the unvested balance of restricted stock: |
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Three-months ended March 31, 2015: | | Number of | | | Weighted | | | | | | | | | |
Shares | Average | | | | | | | | |
| Grant Date | | | | | | | | |
| Fair Value | | | | | | | | |
Unvested balance, December 31, 2014 | | | 502 | | | $ | 23.09 | | | | | | | | | |
Granted | | | 90 | | | $ | 28.66 | | | | | | | | | |
Vested | | | (42 | ) | | $ | 23.14 | | | | | | | | | |
Canceled | | | (5 | ) | | $ | 27.01 | | | | | | | | | |
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Unvested balance, March 31, 2015 | | | 545 | | | $ | 23.97 | | | | | | | | | |
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The fair value of all restricted stock awards that vested during the three-months ended March 31, 2015 and 2014 was $1,213 and $1,367, respectively. |