Equity Incentive Plans and Stock-Based Compensation | Equity Incentive Plans and Stock-Based Compensation Equity Incentive Plans 2014 Equity Incentive Plan Our 2014 Equity Incentive Plan (the "2014 Plan") was adopted by our Board of Directors and approved by our stockholders in March 2014. The 2014 Plan provides for the granting of stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants. In addition, effective as of June 10, 2015, our Board of Directors adopted and our stockholders approved an amendment and restatement of our 2014 Plan, which increased the number of shares available for issuance under the 2014 Plan by the number of shares available from the 2008 Stock Plan (the "2008 Plan") that were or may in the future be canceled or otherwise forfeited or repurchased by us after March 20, 2014. A maximum of 8,310,566 shares may become available from the 2008 Plan for issuance under the 2014 Plan. As of December 31, 2015 , we had 3,364,304 shares available for future grant. Annually, the shares authorized for the 2014 Plan will increase by the least of (i) 8,000,000 shares, (ii) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year, or (iii) such other amount as determined by our Board of Directors. On January 1, 2016, the number of shares in the 2014 Plan was increased by 4,851,535 shares, which consisted of 3,211,211 shares, representing 5% of the prior year end’s common stock outstanding and 1,640,324 shares for awards under our 2008 Plan that had been canceled, forfeited or repurchased by us between March 21, 2014 and December 31, 2015. During the nine months ended September 30, 2016 , we granted 672,000 stock options and 4,272,388 stock awards under the 2014 Plan to our employees, directors and consultants. As of September 30, 2016 , we had 4,312,753 shares available for future grant, excluding shares eligible to be added from the 2008 Plan as a result of awards that have been canceled, forfeited or repurchased by us after December 31, 2015. As of September 30, 2016 , 243,546 shares of our common stock had been added to the 2014 Plan share reserve which represents awards under our 2008 Plan that have been canceled, forfeited or repurchased by us during the nine months ended September 30, 2016 . 2014 Employee Stock Purchase Plan The 2014 Employee Stock Purchase Plan (the "2014 Purchase Plan") was adopted by our Board of Directors and approved by our stockholders in March 2014. As of December 31, 2015 , we had 542,030 shares available for future purchase. Under the provisions of the 2014 Purchase Plan, on the first day of each fiscal year, starting with January 1, 2015, the number of shares in the reserve will increase by the lesser of (i) 3,500,000 shares, (ii) 1% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (iii) such other amount as determined by our Board of Directors or other committee administering the 2014 Purchase Plan. On January 1, 2016, the common shares reserved for future purchase was increased by 642,242 shares in accordance with the provisions of the 2014 Purchase Plan. In June 2016, our Board of Directors adopted, and our stockholders approved an amendment to our 2014 Purchase Plan which removed the automatic annual share increase and increased the number of shares available for issuance under the 2014 Purchase Plan by 4,000,000 shares. Stock-Based Compensation The following tables summarize the allocation of the stock-based compensation expense (in thousands): Three Months Ended Nine Months Ended 2016 2015 2016 2015 Stock-based compensation by type of award: Stock options $ 1,028 $ 1,347 $ 3,209 $ 4,326 Stock awards 3,231 2,412 9,614 6,477 Employee stock purchase rights 329 849 246 2,443 $ 4,588 $ 4,608 $ 13,069 $ 13,246 Stock-based compensation by category of expense: Cost of revenue $ 332 $ 428 $ 921 $ 1,241 Sales and marketing 1,760 2,093 5,577 6,032 Research and development 1,730 1,489 4,251 4,347 General and administrative 766 598 2,320 1,626 $ 4,588 $ 4,608 $ 13,069 $ 13,246 __________________________________________ (1) Our 2014 Purchase Plan provides twenty-four month offering periods which consist of four six-month purchase periods. We record periodic stock-based compensation expense based on estimated contributions determined at the beginning of each offering period and record purchase adjustments for the difference between the estimated and actual contributions at the end of each purchase period. For the purchase period ended on May 20, 2016, the actual contributions were significantly lower than the estimated contributions due to lower stock price which caused more employees to reach the maximum purchase contribution limit. As of September 30, 2016 , we had $30.9 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested stock-based awards which will be recognized over a weighted average period of 2.6 years. Determination of Fair Value We use the Black-Scholes option pricing model to determine the grant date fair value of stock options and stock purchases and generally recognize stock-based compensation expense on a straight-line basis over the requisite service period. The determination of the fair value on the date of grant is affected by the estimated underlying common stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates, and expected dividends. The fair value of the stock options and employee stock purchases were determined using the Black-Scholes option pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine. • Expected Term . We estimate the expected life of options based on an analysis of our historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option. The expected term for the 2014 Purchase Plan is based on the term of the purchase period. • Risk-Free Interest Rate . The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected terms of stock options and shares to be issued under the 2014 Purchase Plan. • Expected Volatility . Due to the limited trading history of our own common stock, we determined the share price volatility factor based on a combination of the historical volatility of our own common stock and the historical volatility of our peer group. • Dividend Rate . The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so. The grant date fair value of RSUs that have time or performance based vesting conditions contingent upon meeting financial and operational targets are equal to the closing market price of our common stock on the grant date. We estimate the grant date fair value of RSUs that have market based vesting conditions using the Monte Carlo simulation method. Stock Options The following tables summarize our stock option activities and related information (in thousands, except for years and per share amounts): Number of Shares Underlying Outstanding Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding as of December 31, 2015 9,291 $ 4.78 Granted 672 $ 5.52 Exercised (1,191 ) $ 4.17 Canceled (1) (562 ) $ 6.20 Outstanding as of September 30, 2016 8,210 $ 4.83 6.4 $ 48,821 Vested and expected to vest as of September 30, 2016 8,063 $ 4.82 6.4 $ 47,985 Vested and exercisable as of September 30, 2016 5,590 $ 4.50 5.7 $ 35,114 __________________________________________ (1) Common shares granted under the 2008 Plan and canceled after March 20, 2014 are reallocated to the 2014 Plan’s share reserve as they become available for issuance under the 2014 Plan. During the nine months ended September 30, 2016, 244 of the canceled stock options were reallocated to the 2014 Plan. As of September 30, 2016 , the aggregate intrinsic value represents the excess of the closing price of our common stock of $10.69 over the exercise price of the outstanding in-the-money options. Nine Months Ended 2016 2015 Fair value of options granted $ 1,603 $ 869 Weighted-average fair value of options granted $ 2.38 $ 2.13 Intrinsic value of options exercised $ 5,003 $ 1,535 We did not grant stock options during the three months ended September 30, 2016 and 2015 . The estimated grant-date fair value of our stock options issued to employees was calculated using the Black-Scholes option-pricing model, based on the following assumptions: Nine Months Ended 2016 2015 Expected term (in years) 4.9 4.8 Risk-free interest rate 1.42% 1.60% Volatility 49% 50% Dividend rate —% —% Stock Awards We have granted time-based stock awards ("RSUs") to our employees, directors and consultants and performance-based stock awards ("PSUs") and market performance-based stock awards ("MSUs") to certain company executives. The following table summarizes our stock award activities (in thousands): RSUs PSUs MSUs Total Outstanding as of December 31, 2015 2,872 — 580 3,452 Granted 3,725 547 — 4,272 Released (915 ) — — (915 ) Canceled (734 ) (29 ) — (763 ) Outstanding as of September 30, 2016 4,948 518 580 6,046 In February 2016, we granted 547,000 PSUs with certain financial and operational targets. These PSUs are also subject to service condition vesting requirements with 25% of the eligible PSUs scheduled to vest on each of the first, second, third and fourth year anniversary of the PSU grant date. We granted MSUs covering 540,000 shares and 40,000 shares of our common stock to certain executives during 2014 and 2015, all of which were outstanding as of September 30, 2016 . These MSUs will vest if the closing price of our common stock remains above certain predetermined target prices for 20 consecutive trading days within a 4 -year period following the award’s grant date, subject to continued service by the award holder. The aggregate intrinsic value is the amount that would have been received by the unit holders had all RSUs been vested and released on September 30, 2016 . This amount will fluctuate based on the fair market value of our stock. As of September 30, 2016 , the aggregated intrinsic value for RSUs, MSUs and PSUs was $64.6 million with a weighted-average remaining service period of 2.8 years. Employee Stock Purchase Plan Employees purchased 552,554 shares at an average price of $3.88 and 542,102 shares at an average price of $3.45 for the nine months ended September 30, 2016 and 2015 , respectively. As of September 30, 2016 , 4,317,184 shares were available for future issuance under the 2014 Purchase Plan. The intrinsic value of shares purchased during the nine months ended September 30, 2016 and 2015 was $1.3 million and $1.4 million , respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. We did not grant employee stock purchase rights during the three months ended September 30, 2016 and 2015 . The fair value of the employee stock purchase rights granted was estimated at the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions: Nine Months Ended September 30, 2016 2015 Expected term (in years) 1.3 1.2 Risk-free interest rate 0.65% 0.32% Expected volatility 42.6% 39.6% Dividend rate —% —% Stock Repurchase Program On October 27, 2016, we announced that our board of directors authorized a share repurchase program for up to $20.0 million of our common stock over the next 12 months. Under the repurchase authorization, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. The repurchase authorization may be commenced, suspended or discontinued at any time at our discretion. |