Stockholder's Equity and Stock Based Compensation | 9 Months Ended |
Sep. 30, 2014 |
Stockholder's Equity and Stock Based Compensation | ' |
Stockholder's Equity and Stock Based Compensation | ' |
9. Stockholder’s Equity and Stock Based Compensation |
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Common Stock Authorized and Outstanding |
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As of September 30, 2014, the Company was authorized to issue 1,000,000,000 common shares with a par value of $0.0001 per share and 20,000,000 convertible preferred shares with a par value of $0.0001 per share. As of September 30, 2014, the Company had approximately 41.1 million shares of common stock issued and outstanding. |
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Summary of Stock Option Activity |
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A summary of the Company’s stock option activity under all stock option plans and related information for nine months ended September 30, 2014 is as follows: |
| | OPTIONS OUTSTANDING | |
| | Shares | | Number of | | Weighted- | | Weighted- | | Aggregate | |
Available | Stock | Average | Average | Intrinsic |
for Grant (in | Options | Exercise | Remaining | Value |
thousands) | Outstanding (in | Price | Contractual | (in thousands) |
| thousands) | | Life (Years) | |
| | | | | | | | | | | |
Balance as of December 31, 2013 | | 3,486 | | 6,343 | | $ | 5.33 | | 7.98 | | $ | 201,305 | |
Additional shares authorized | | 1,962 | | — | | | | | | | |
Granted | | (870 | ) | 870 | | 39.04 | | | | | |
Exercised | | — | | (1,342 | ) | 3.51 | | | | | |
Repurchased | | 83 | | — | | 26.11 | | | | | |
RSUs granted, net of cancellations/forfeitures | | (1,454 | ) | — | | | | | | | |
Cancelled/forfeited | | 342 | | (342 | ) | 10.67 | | | | | |
Balance as of September 30, 2014 | | 3,549 | | 5,529 | | 10.75 | | 7.71 | | 125,437 | |
| | | | | | | | | | | |
Exercisable as of September 30, 2014 | | | | 4,511 | | 5.13 | | 7.43 | | 122,536 | |
Vested and expected to vest as of September 30, 2014 | | | | 5,094 | | $ | 10.23 | | 7.64 | | $ | 117,751 | |
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The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing price of $32.30 as of September 30, 2014 for options that were in-the-money as of that date. |
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Option awards generally vest over a four year period, with 25% vesting after one year from date of grant and monthly thereafter. Stock options granted under our 2006 Plan provided employee option holders with an early exercise provision, where in the event of termination any unvested shares purchased are subject to repurchase by the Company at the original purchase price. This right of repurchase lapses as the option vests. Options exercisable as of September 30, 2014 include options that are exercisable prior to vesting. |
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The weighted average grant date fair value of options granted and the total intrinsic value of options exercised were as follows (in thousands, except weighted average grant date fair value): |
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| | Nine Months | | | | | | | |
| | Ended September 30, | | | | | | | |
| | 2014 | | 2013 | | | | | | | |
Weighted average grant date fair value | | $ | 20.79 | | $ | 4.44 | | | | | | | |
Total intrinsic value of options exercised | | $ | 42,103 | | $ | 13,568 | | | | | | | |
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The total estimated grant date fair value of options vested during the nine months ended September 30, 2014 was approximately $3.8 million. |
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Determining Fair Value of Stock Options |
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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model. The following assumptions were used to estimate the fair value of options granted to employees: |
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| | Three Months | | Nine Months | | | | | |
Ended September 30, | Ended September 30, | | | | |
| | 2014 | | 2013 | | 2014 | | 2013 | | | | | |
Expected term (in years) | | (A) | | (A) | | 6 | | 6 | | | | | |
Risk-free interest rate | | (A) | | (A) | | 1.84% - 1.97% | | 0.86% - 1.375% | | | | | |
Expected volatility | | (A) | | (A) | | 49% - 56% | | 57% - 58% | | | | | |
Expected dividend rate | | (A) | | (A) | | 0% | | 0% | | | | | |
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| (A) | | No options of the Company were granted during the three months ended September 30, 2014 and 2013, respectively. | | | | | | | | | | |
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Restricted Stock Units |
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A summary of the Company’s Restricted Stock Units (RSUs) activity and related information for the nine months ended September 30, 2014 are as follows: |
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| | Number of | | Weighted Average | | Aggregate | | | | | |
RSUs | Grant Date | Intrinsic | | | | |
(in thousands) | Fair Value | Value | | | | |
| | (in thousands) | | | | |
Balance as of December 31, 2013 | | 582 | | $ | 22.57 | | $ | 21,579 | | | | | |
RSUs Granted | | 1,575 | | 34.89 | | | | | | | |
RSUs Vested | | (188 | ) | 11.7 | | | | | | | |
RSUs Cancelled/Forfeited | | (121 | ) | 37.07 | | | | | | | |
Balance as of September 30, 2014 | | 1,848 | | $ | 32.3 | | $ | 59,690 | | | | | |
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RSUs granted during the nine months ended September 30, 2014 are subject to a time-based vesting condition that ranges from 3 to 4 years. |
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The aggregate intrinsic value of RSUs outstanding at September 30, 2014 was determined using the Company’s closing stock price of $32.30 per share as of September 30, 2014. |
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The weighted average grant date fair value of RSUs granted and the total intrinsic value of RSUs that vested during the periods presented were as follows (in thousands, except weighted average grant date fair value): |
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| | Nine Months | | | | | | | |
| | Ended September 30, | | | | | | | |
| | 2014 | | 2013 | | | | | | | |
Weighted average grant date fair value | | $ | 34.89 | | $ | 25.88 | | | | | | | |
Total intrinsic value of vested RSUs | | $ | 5,705 | | $ | 2,429 | | | | | | | |
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Employee Stock Purchase Plan |
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The assumptions used to value employee stock purchase rights under the Black-Scholes model during the three and nine months ended September 30, 2014 and 2013 were as follows: |
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| | Three Months | | Nine Months | | | | | |
Ended September 30, | Ended September 30, | | | | |
| | 2014 | | 2013 | | 2014 | | 2013 | | | | | |
Expected term (in months) | | 6 | | 9 | | 9-Jun | | 9 | | | | | |
Risk-free interest rate | | 0.05% - 0.08% | | 0.11% | | 0.05% - 0.11% | | 0.11% | | | | | |
Expected volatility | | 41% - 43% | | 42% | | 41% - 43% | | 42% | | | | | |
Expected dividend rate | | 0% | | 0% | | 0% | | 0% | | | | | |
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For the nine months ended September 30, 2014, the Company recorded stock-based compensation expense relating to the employee stock purchase plan (ESPP) of approximately $1.5 million. |
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During the first nine months of fiscal 2014, the Company issued approximately 0.4 million shares of common stock under the ESPP with an average purchase price of $14.56 per share. |
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Stock Compensation Expense |
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The stock-based compensation expense included in operating results was allocated as follows (in thousands): |
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| | Three Months | | Nine Months | |
Ended September 30, | Ended September 30, |
| | 2014 | | 2013 | | 2014 | | 2013 | |
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Cost of subscription and support revenue | | $ | 399 | | $ | 140 | | $ | 1,202 | | $ | 317 | |
Cost of professional services and other revenue | | 699 | | 198 | | 1,756 | | 445 | |
Research and development | | 1,364 | | 458 | | 3,616 | | 1,605 | |
Sales and marketing | | 2,145 | | 553 | | 6,019 | | 1,646 | |
General and administrative | | 1,908 | | 674 | | 4,840 | | 1,627 | |
Total stock-based compensation expense | | $ | 6,515 | | $ | 2,023 | | $ | 17,433 | | $ | 5,640 | |
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As of September 30, 2014, total unrecognized compensation cost related to unvested awards not yet recognized under all equity compensation plans, adjusted for estimate forfeitures, was as follows: |
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| | September 30, 2014 | | | | | | | | |
| | Unrecognized | | Average Expected | | | | | | | | |
Expense | Recognition Period | | | | | | | |
| | (in thousands) | | (in years) | | | | | | | | |
Stock options | | $ | 19,654 | | 2.27 | | | | | | | | |
Restricted stock units | | 41,842 | | 3.13 | | | | | | | | |
Employee Stock Purchase Plan | | 678 | | 0.38 | | | | | | | | |
Total unrecognized stock-based compensation expense | | $ | 62,175 | | 2.83 | | | | | | | | |
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