Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2014 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
STOCK-BASED COMPENSATION | ' |
STOCK-BASED COMPENSATION |
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation — Stock Compensation. For the three and six months ended June 30, 2014 and 2013, the components of stock-based compensation expense are summarized in the following table (in thousands): |
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| Three Months Ended June 30, | | Six Months Ended June 30, | | | |
| 2014 | | 2013 | | 2014 | | 2013 | | | |
Stock options | $ | 1,245 | | | $ | 1,056 | | | $ | 2,459 | | | $ | 2,018 | | | | |
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Restricted stock awards | 3,307 | | | 5,401 | | | 6,476 | | | 8,583 | | | | |
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Performance-based restricted stock units | 3,700 | | | 667 | | | 8,450 | | | 1,728 | | | | |
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Employee stock purchase plan | 378 | | | — | | | 944 | | | — | | | | |
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Total stock-based compensation | $ | 8,630 | | | $ | 7,124 | | | $ | 18,329 | | | $ | 12,329 | | | | |
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Stock Options |
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions: |
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| Three Months Ended June 30, | | Six Months Ended June 30, | | | | | | | |
| 2014 | | 2013 | | 2014 | | 2013 | | | | | | | |
Expected volatility | 44 | % | | 42 | % | | 43 | % | | 42 | % | | | | | | | |
Expected life | 6 years | | | 6 years | | | 6 years | | | 6 years | | | | | | | | |
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Risk-free interest rate | 1.86 | % | | 1.03 | % | | 1.8 | % | | 1.03 | % | | | | | | | |
Dividend yield | — | | | — | | | — | | | — | | | | | | | | |
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The following table summarizes the activity under the stock option plans as of June 30, 2014, and changes during the six months then ended (in thousands, except per share data): |
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| Number of | | Weighted- | | Weighted- | | Aggregate | | | | | | |
Shares | Average | Average | Intrinsic | | | | | | |
| Exercise | Remaining | Value | | | | | | |
| Price | Contractual | | | | | | | |
| | Term | | | | | | | |
| | (years) | | | | | | | |
Outstanding at January 1, 2014 | 2,670 | | | $ | 16 | | | | | | | | | | | |
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Granted | 105 | | | 52.38 | | | | | | | | | | | |
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Exercised | (186 | ) | | 10.11 | | | | | | | | | | | |
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Forfeited | (33 | ) | | 27.88 | | | | | | | | | | | |
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Expired | — | | | — | | | | | | | | | | | |
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Outstanding at June 30, 2014 | 2,556 | | | $ | 17.77 | | | 6.94 | | $ | 66,801 | | | | | | | |
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Exercisable at June 30, 2014 | 1,477 | | | $ | 10.25 | | | 5.88 | | $ | 48,076 | | | | | | | |
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Vested and expected to vest at June 30, 2014 | 2,511 | | | $ | 17.42 | | | 6.91 | | $ | 66,340 | | | | | | | |
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The weighted-average grant-date fair value of stock options granted during the three months ended June 30, 2014 and 2013 was $17.10 and $28.06, respectively. The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2014 and 2013 was $22.64 and $28.06, respectively. The total intrinsic value of stock options exercised during the three months ended June 30, 2014 and 2013 was $1.7 million and $14.0 million, respectively. The total intrinsic value of stock options exercised during the six months ended June 30, 2014 and 2013 was $8.5 million and $18.3 million, respectively. As of June 30, 2014, there was a total of $12.0 million of unrecognized compensation cost related to all non-vested stock options granted, as recorded in accordance with ASC 718. This cost is expected to be recognized over a weighted-average remaining period of 2.38 years. The total fair value of stock options vested during the three months ended June 30, 2014 and 2013 was $1.4 million and $1.0 million, respectively. The total fair value of stock options vested during the six months ended June 30, 2014 and 2013 was $2.1 million and $2.0 million, respectively. |
Restricted Stock Awards |
The following table summarizes the status of the Company’s nonvested RSAs as of June 30, 2014, and changes during the six months then ended (in thousands, except per share data): |
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| Number of | | Weighted- | | | | | | | | | | | | |
Shares | Average | | | | | | | | | | | | |
| Grant-Date | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | |
Nonvested at January 1, 2014 | 1,672 | | | $ | 18.06 | | | | | | | | | | | | | |
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Granted | 318 | | | 52.37 | | | | | | | | | | | | | |
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Vested | (674 | ) | | 14.33 | | | | | | | | | | | | | |
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Forfeited | (41 | ) | | 20.35 | | | | | | | | | | | | | |
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Nonvested at June 30, 2014 | 1,275 | | | $ | 28.51 | | | | | | | | | | | | | |
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As of June 30, 2014, there was a total of $32.4 million of unrecognized compensation cost related to all nonvested RSAs granted, as recorded in accordance with ASC 718. This cost is expected to be recognized over a weighted-average remaining period of 2.44 years. The total fair value of RSAs vested during the three months ended June 30, 2014 and 2013 was $19.8 million and $25.2 million, respectively. The total fair value of RSAs vested during the six months ended June 30, 2014 and 2013 was $28.2 million and $25.5 million, respectively. |
Performance-Based Restricted Stock Units |
During the first quarter of 2014, the Company granted PBRSUs to certain employees including executives. Of the number of PBRSUs granted, which assumes performance at 100% of targeted levels, (1) 149 thousand PBRSUs ("2014 Revenue PBRSUs") have performance conditions based on revenue for the year ending December 31, 2014 relative to the Company's revenue guidance and a minimum profitability condition, vesting annually over three years commencing on the first anniversary of the grant date, with the number of PBRSUs ultimately earned ranging from zero to 200% of the target; and (2) 74 thousand PBRSUs ("2014 TSR PBRSUs") have market conditions based on the Company's total stockholder return ("TSR") relative to that of the NASDAQ Composite Index for the year ending December 31, 2014, vesting annually over three years commencing on the first anniversary of the grant date, with the number of PBRSUs ultimately earned ranging from zero to 200% of the target. The Company also granted an insignificant number of other PBRSUs with performance conditions based on achievement of certain predetermined objectives. |
The fair value of each TSR PBRSU is estimated as of the date of grant based upon evaluation of expected performance relative to the associated market condition using a Monte Carlo valuation model with the following weighted-average assumptions: |
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| 2014 TSR PBRSUs | | 2013 TSR PBRSUs | | | | | | | | | | | | | |
Expected volatility - Medidata | 52 | % | | 39 | % | | | | | | | | | | | | | |
Expected volatility - NASDAQ Composite Index | 13 | % | | 15 | % | | | | | | | | | | | | | |
Expected life | 0.89 years | | | 1.00 year | | | | | | | | | | | | | | |
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Risk-free interest rate | 0.12 | % | | 0.16 | % | | | | | | | | | | | | | |
Dividend yield | — | | | — | | | | | | | | | | | | | | |
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The following table summarizes the status of the Company’s PBRSUs based upon expected performance as of June 30, 2014, and changes during the six months then ended (in thousands, except per share data): |
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| Revenue | | TSR | | Long-Term | | Other | | Total Number of Shares | | Weighted-Average Grant Date Fair Value |
Nonvested at January 1, 2014 | 454 | | | 227 | | | 1,012 | | | 9 | | | 1,702 | | | $ | 29.18 | |
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Granted (based on performance at 100% of targeted levels) | 149 | | | 74 | | | — | | | 5 | | | 228 | | | 54.01 | |
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Adjustment related to expected performance | — | | | — | | | — | | | (5 | ) | | (5 | ) | | 67.01 | |
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Vested | (152 | ) | | (75 | ) | | — | | | — | | | (227 | ) | | 26.33 | |
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Forfeited | (7 | ) | | (4 | ) | | (57 | ) | | — | | | (68 | ) | | 47.58 | |
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Nonvested at June 30, 2014 | 444 | | | 222 | | | 955 | | | 9 | | | 1,630 | | | $ | 32.17 | |
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As of June 30, 2014, there was a total of $33.7 million of unrecognized compensation cost related to all nonvested PBRSUs, as recorded in accordance with ASC 718. This cost is expected to be recognized over a weighted-average remaining period of 1.72 years. There were no PBRSUs vested during the three months ended June 30, 2014 and 2013. The total fair value of PBRSUs vested during the six months ended June 30, 2014 and 2013 was $13.3 million and none, respectively. |
Employee Stock Purchase Plan |
The Company adopted the Amended and Restated 2014 Employee Stock Purchase Plan (the "2014 ESPP"), which became effective as of January 1, 2014 based upon the approval obtained from the Company's stockholders at the 2014 Annual Meeting of Stockholders. The ESPP allows eligible employees to purchase shares of the Company's common stock at a discount though payroll deductions, and consists of a 24-month offering period with four six-month purchase periods in each offering period. Employees purchase shares at the lesser of (1) 85% of the fair market value (“FMV”) per share on the first day of the offering period, or (2) 85% of the FMV per share at the end of the relevant purchase period. As such, the ESPP is considered to be a compensatory plan under ASC 718. A total of 0.3 million shares of common stock is reserved for issuance under the ESPP. |
The fair value of ESPP shares is estimated using the Black-Scholes pricing model with the following weighted-average assumptions: |
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| Three Months Ended June 30, | | Six Months Ended June 30, | | | | | | | |
| 2014 | | 2013 | | 2014 | | 2013 | | | | | | | |
Expected volatility | 49 | % | | — | % | | 49 | % | | — | % | | | | | | | |
Expected life | 1.22 years | | | 0.00 years | | | 1.22 years | | | 0.00 years | | | | | | | | |
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Risk-free interest rate | 0.21 | % | | — | % | | 0.21 | % | | — | % | | | | | | | |
Dividend yield | — | | | — | | | — | | | — | | | | | | | | |
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For the ESPP purchase period ended June 30, 2014 ("First Purchase Period"), 68.0 thousand shares of common stock were purchased at a weighted-average price of $36.39, resulting in cash proceeds of $2.5 million. |
Based upon provisions set forth in the 2014 ESPP, the look-back purchase price for the offering period beginning January 1, 2014 ("First Offering Period") was reset since the FMV per share at the end of the First Purchase Period was lower than the stock price at the first day of the First Offering Period. As a result, the First Offering Period was canceled following the completion of the First Purchase Period and all participants in the First Offering Period have been automatically enrolled into a new 24-month offering period beginning July 1, 2014. Under ASC 718, the reset provision is accounted for as a Plan modification. The fair value of ESPP shares will be revalued based on assumptions on July 1, 2014 with unrecognized compensation cost adjusted accordingly. |
As of June 30, 2014, there was $3.3 million in unrecognized compensation cost related to ESPP shares under the First Offering Period based upon pre-modified assumptions, as recorded in accordance with ASC 718. This cost is expected to be recognized over a weighted-average remaining period of 1.50 years. |