| Stock Option Plans | 10. STOCK OPTION PLANS
2011 Stock Option and Grant Plan In June 2011, the Company adopted the Hortonworks,
Inc. 2011 Stock Option and Grant Plan (the “2011 Option
Plan”). The 2011 Option Plan allows for grant of incentive
stock options (“ISOs”), nonstatutory stock options
(“NSOs”), restricted common stock and restricted stock
units to employees, officers, directors and consultants of the
Company. The exercise price of an option is determined by the Board
of Directors when the option is granted, and may not be less than
100 percent of the fair market value of the shares on the date of
grant, provided that the exercise price of ISOs granted to a 10
percent stockholder is not less than 110 percent of the fair market
value of the shares on the date of grant. ISOs granted under the
2011 Option Plan generally vest 25 percent after the completion of
12 months of service and the balance in equal monthly
installments over the next 36 months of service, and expire
10 years from the date of grant. ISOs granted to a 10 percent
stockholder expire five years from the date of grant. NSOs vest
according to the specific option agreement, and expire
10 years from the date of grant. In December 2014, in connection with the closing of
the Company’s initial public offering, the 2011 Option Plan
was terminated and shares authorized for issuance under the 2011
Option Plan were cancelled (except for those shares reserved for
issuance upon exercise of outstanding stock options). As of
December 31, 2014, options to purchase 13,605,044 shares of
common stock were outstanding under the 2011 Option Plan pursuant
to their original terms and no shares were available for future
grant.
2014 Stock Option and Incentive Plan The Company’s 2014 Stock Option and Incentive
Plan (the “2014 Option Plan”) was adopted by the
Company’s Board of Directors in September 2014. The 2014
Option Plan was approved by the Company’s stockholders in
November 2014 and became effective immediately prior to the closing
of the Company’s initial public offering. All remaining
shares available in the 2011 Option Plan rolled into the 2014
Option Plan following the consummation of the initial public
offering. The 2014 Option Plan allows the compensation committee to
make equity-based incentive awards to the Company’s officers,
employees, directors and other key persons (including
consultants). The Company has initially reserved 6,000,000 shares
of the Company’s common stock for the issuance of awards
under the 2014 Option Plan, and has 923,732 shares of the
Company’s common stock remaining available for issuance under
the Company’s 2011 Option Plan. The 2014 Option Plan provides
that the number of shares reserved and available for issuance under
the plan will automatically increase each January 1, beginning
on January 1, 2015, by 5 percent of the outstanding number of
shares of the Company’s common stock on the immediately
preceding December 31 or such lesser number of shares as
determined by the Company’s compensation committee. This
number is subject to adjustment in the event of a stock split,
stock dividend or other change in the Company’s
capitalization. As of December 31, 2015, options to purchase
and restricted stock units to convert to a total of 6,944,156
shares of common stock were outstanding under the 2014 Option Plan
pursuant to their original terms. On January 1, 2015, the shares reserved for
issuance increased by 2,136,240, resulting in total shares reserved
for issuance under the 2014 Option Plan of 9,059,972. As of
December 31, 2015, 2,006,015 of such shares remained available
for issuance. A summary of activity under the stock option plans
and related information are as follows:
Options Outstanding
Number of Shares Underlying Outstanding Options Weighted- Average Exercise Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value
(In thousands)
Outstanding—April 30, 2012 2,851,865 $ 0.44 9.61 $ 357
Options granted (weighted average fair value of $0.62) 3,468,050 0.42
Options exercised (363,230 ) 0.34
Options cancelled/forfeited (444,680 ) 0.69
Outstanding—April 30, 2013 5,512,005 $ 1.01 9.15 $ 4,474
Options granted (weighted average fair value of $2.20) 2,986,361 4.76
Options exercised (404,431 ) 0.44
Options cancelled/forfeited (391,662 ) 1.75
Outstanding—December 31, 2013 7,702,273 $ 2.46 8.95 $ 22,990
Options granted (weighted average fair value of $14.31) 7,604,284 12.95
Options exercised (792,548 ) 3.25
Options cancelled/forfeited (560,115 ) 4.66
Outstanding—December 31, 2014 13,953,894 $ 8.04 8.80 $ 264,531
Options granted (weighted average fair value of $23.17) 899,212 23.17
Options exercised (2,063,264 ) 3.21
Options cancelled/forfeited (1,237,355 ) 10.64
Outstanding—December 31, 2015 11,552,487 $ 9.80 7.82 $ 140,873
Vested and expected to vest—December 31, 2015 11,009,509 $ 9.60 7.79 $ 136,393
Exercisable—December 31, 2015 4,945,923 $ 6.19 7.23 $ 77,718
Aggregate intrinsic value represents the difference
between the exercise price of the options to purchase common stock
and the fair value of the Company’s common stock. The
aggregate intrinsic value of options exercised for the years ended
December 31, 2015 and 2014 was $42.9 million and $10.0
million, respectively, for the eight months ended December 31,
2013 and 2012 (unaudited) was $1.5 million and $0.2 million,
respectively, and for the years ended April 30, 2013 and 2012
was $0.4 million and $0.1 million, respectively.
Restricted Stock A summary of information related to restricted
stock for the year ended December 31, 2015 is presented
below:
Number of Number of Weighted- Weighted (*) Aggregate
(In thousands)
Unvested balance—December 31, 2014 672,865 894,107 $ 0.62 $ 13.70 $ 39,607
Granted
— 1,424,946
— $ 23.76
Vested (526,897 ) (1,675,039 ) $ 0.59 $ 22.50
Canceled/forfeited
—
—
—
—
Unvested balance—December 31, 2015 145,968 644,014 $ 0.67 $ 23.76 $ 4,551
(*)
The weighted-average grant-date fair value per share
relates to 132,506 and 1,424,946 shares of restricted stock paid as
part of the acquisitions of XA Secure and Onyara, respectively. As
of December 31, 2015, 132,506 of the XA Secure and 921,643 of
the Onyara shares were vested. See Note 4—“Business
Combinations” for additional information regarding this
transaction. As of December 31, 2015, there was $50.7
million of unrecognized stock-based compensation expense related to
unvested stock options and restricted stock, which is expected to
be recognized over a weighted-average period of 2.49 years. The
fair value of the restricted stock vested during the years
ended December 31, 2015 and 2014 was $11.9 million and
$6.1 million, respectively, for the eight months ended
December 31, 2013 and 2012 (unaudited) was $2.1 million and
approximately $13,000, respectively, and for the years ended
April 30, 2013 and 2012 was $0.3 million and nil,
respectively.
Restricted Stock Units A summary of information related to restricted
stock units (“RSUs”) for the year ended
December 31, 2015 is presented below:
Number of Weighted Average
Unvested balance—December 31, 2014 56,250 $ 16.00
Granted 6,088,119 23.35
Vested (105,352 ) 21.31
Canceled/forfeited (186,398 ) 14.77
Unvested balance—December 31, 2015 5,852,619 $ 23.33
As of December 31, 2015, there was $107.0
million of unrecognized stock-based compensation expense related to
RSUs, which is expected to be recognized over a weighted-average
period of 2.13 years. The fair value of the RSUs vested during the
year ended December 31, 2015 was $2.2 million. There were
no RSUs vested for the year ended December 31, 2014, for the
eight months ended December 31, 2013 and 2012 (unaudited) and
for the years ended April 30, 2013 and 2012.
Determining Fair Value for Employee Grants The Company estimated the fair value of stock
options granted using the Black-Scholes option-pricing model with
weighted-average assumptions as follows:
Years Ended Eight Months Ended Years Ended
2015 2014 2013 2012 2013 2012
(Unaudited)
Expected term (in years) 6.00 5.77 5.70 5.62 5.93 5.01
Risk-free interest rate 1.59 % 1.52 % 1.40 % 1.33 % 0.89 % 1.19 %
Expected volatility 44 % 46 % 47 % 48 % 47 % 46 %
Dividend rate — % — % — % — % — % — % The fair value of each grant of stock options was
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. Fair Value of Common
Stock Since the Company’s initial public offering,
it has used the market closing price of its common stock as
reported on the NASDAQ Global Select Market. Expected Term. Expected Volatility. Risk-Free Interest Rate. Dividend Rate. Forfeiture Rate.
Restricted Stock Purchase Agreements The Company entered into restricted stock purchase
agreements with certain founders and employees for the issuance of
restricted common stock in exchange for services. Under the terms
of the restricted stock purchase agreements, the Company has the
right to repurchase any unvested shares at the original issue price
(ranging from $0.18 per share to $4.76 per share) in the event of
termination of service. These repurchase rights lapse over the
vesting term, which varies by agreement. The restricted stock was purchased in exchange for
promissory notes (“Notes”) that, prior to repayment in
October 2014, accrued interest at rates ranging from 0.89 to 2.89
percent annually, with interest payable annually. The principal,
along with any unpaid accrued interest, was payable upon the
earlier of certain corporate transactions including an initial
public offering, the termination of services, or nine to ten years
from the date of the promissory notes. The Company had recourse
against the restricted stock issued along with the Notes and
recourse of up to 80 percent of the principal amount, and up to the
full amount of accrued interest, against the individual’s
personal assets. The Company accounted for the Notes as non-recourse
in their entirety because the Notes are not aligned with a
corresponding percentage of the underlying shares. Accordingly, the
non-recourse notes received by the Company as consideration for the
issuance of the restricted stock were considered as stock options
for accounting purposes as the substance is similar to the grant of
an option because the employee generally will relinquish the stock
in lieu of repaying the Note. Nonrefundable principal payments were
recorded as a credit to additional paid-in capital for the
underlying shares that were vested as of the repayment date and as
a repurchase liability for the underlying shares that were unvested
as of the repayment date. Nonrefundable interest was recorded as
interest income. The number of shares of restricted stock
outstanding subject to the Company’s right of repurchase at
prices ranging from $0.18 to $1.28 per share for the year ended
December 31, 2015 was 286,679. The liability for shares
subject to repurchase as of December 31, 2015 was $0.2
million, which was included in accrued expenses and other current
liabilities. These restricted stock arrangements were accounted
for similarly to stock options until the Notes were repaid. During
the year ended December 31, 2015, there were no restricted
shares repurchased. During the year ended December 31, 2014,
528,745 restricted shares were repurchased from ten stockholders.
During the eight months ended December 31, 2013,
1,031,415 restricted shares were repurchased from one
stockholder. During the year ended April 30, 2013, a total of
536,458 restricted shares were repurchased from two stockholders.
Because the restricted shares were accounted for as options, the
Notes were not recorded in the accompanying consolidated balance
sheets, the shares were excluded in the totals for common stock
outstanding as December 31, 2013 and April 30 2013, and
compensation cost was recognized over the requisite service period
with an offsetting credit to additional paid-in capital. In October
2014, all outstanding promissory notes were repaid in full and the
restricted stock that had vested became shares of common stock.
The fair value of the options was determined based
on the Black-Scholes option pricing model using the following
assumptions:
Years Ended Eight Months Ended Years Ended
2015 2014 2013 2012 2013 2012
(Unaudited)
Expected term (in years)
— 5.00
— 5.59 5.63 5.37
Risk-free interest rate — % 1.58 % — % 0.78 % 0.81 % 1.50 %
Expected volatility — % 40 % — % 46 % 46 % 48 %
Dividend rate — % — % — % — % — % — % Periodic principal payments were recorded as a
credit to additional paid-in capital for the underlying shares that
were vested as of the repayment date and as a repurchase liability
for the underlying shares that are unvested as of the repayment
date. The shares were recorded when they vested and when principal
payments were received. The following table summarizes activity for
the promissory notes and related restricted stock arrangements:
Restricted Promissory Weighted Weighted-Average
(in thousands, except for share and per share amounts)
Balance—April 30, 2012 9,466,459 2,245 0.24 9.33
Restricted shares and promissory note issued under the 2011 Option
Plan 1,325,762 1,698 1.28
Balance—April 30, 2013 10,792,221 3,943 0.37 8.46
Repurchased at original issue price (1,031,415 ) (186 ) 0.18
Notes paid following vesting of shares (1,718,585 ) (309 ) 0.18
Balance—December 31, 2013 8,042,221 3,448 0.43 8.56
Restricted shares and promissory note issued under the 2011 Option
Plan 390,269 1,858 4.76
Repurchased at original issue price (374,435 ) (301 ) 0.80
Repurchased at fair value (154,310 ) (140 ) 0.91
Notes paid for vested and unvested shares (7,903,745 ) (4,865 ) 0.62
Balance—December 31, 2014
—
—
—
—
Balance—December 31, 2015
—
—
—
—
The interest amounts related to the Notes were
recognized as interest income in the accompanying consolidated
statements of operations because the interest portion of the Notes
was full recourse. The interest income was not material for any
period presented.
Restricted Stock and Stock Options Subject to
Repurchase The 2011 Option Plan allowed for the granting of
options that may be exercised before the options have vested.
Shares issued as a result of early exercise and shares that had not
vested are deemed to be restricted stock and are subject to a
vesting schedule identical to the vesting schedule of the related
restricted stock and options, as well as certain other
restrictions. Shares issued as a result of early exercise that have
not vested are subject to repurchase by the Company upon
termination of the purchaser’s employment or services, at the
price paid by the purchaser, and are not deemed to be issued for
accounting purposes until those related shares vest. The amounts
received in exchange for these shares have been recorded as a
liability on the accompanying balance sheets and will be
reclassified into common stock and additional paid-in-capital as
the shares vest. The Company’s right to repurchase these
shares generally lapses 1/48 of the original grant date per month
over four years. The number of shares of restricted stock and early
exercised options to purchase common stock outstanding subject to
the Company’s right of repurchase at prices ranging from
$0.18 to $14.22 per share for the year ended December 31 2015
was 342,282. The liability for shares subject to repurchase as of
December 31, 2015 was $0.9 million, of which $0.5 million
is included in accrued expenses and other current liabilities and
$0.4 million is included in other long-term liabilities.
2014 Employee Stock Purchase Plan The Company’s Employee Stock Purchase Plan
(the “ESPP”) was adopted and approved by the
Company’s Board of Directors in September 2014, adopted and
approved by the Company’s stockholders in November 2014, and
most recently was amended in August 2015, to allow employees of
certain of the Company’s non-United States subsidiaries to
participate in the ESPP. The ESPP initially reserved and authorized
the issuance of up to a total of 2,500,000 shares of common
stock to participating employees. The ESPP provides that the number
of shares reserved and available for issuance will automatically
increase each January 1, beginning on January 1, 2015, by
the lesser of (i) 1,000,000 shares of common stock,
(ii) 1 percent of the outstanding number of shares of the
Company’s common stock on the immediately preceding
December 31, or (iii) such lesser number of shares as
determined by the ESPP administrator. This number is subject to
adjustment in the event of a stock split, stock dividend or other
change in the Company’s capitalization. On January 1,
2015, the shares reserved for issuance increased by 427,248
resulting in total shares reserved for issuance under the ESPP of
2,927,248 as of December 31, 2015. The following table summarizes the assumptions used
in the Black-Scholes option-pricing model to determine fair value
of the Company’s common shares to be issued under the
ESPP:
Year Ended
2015
Expected term (in years) 0.5-1.0
Risk-free interest rate 0.25%-0.40%
Expected volatility 35%-37%
Dividend rate — % Each employee who is a participant in the ESPP may
purchase shares by authorizing payroll deductions of up to 15
percent of his or her base compensation during an offering period.
Unless the participating employee has previously withdrawn from the
offering, his or her accumulated payroll deductions will be used to
purchase shares on the last business day of the offering period at
a price equal to 85 percent of the fair market value of the shares
on the first business day or the last business day of the offering
period, whichever is lower. Under applicable tax rules, an employee
may purchase no more than $25,000 worth of shares of common stock,
valued at the start of the purchase period, under the ESPP in any
calendar year. There is no minimum holding period associated with
shares purchased pursuant to this plan. As of December 31, 2015, there was $0.5
million of unrecognized stock-based compensation expense related to
the ESPP, which is expected to be recognized over a
weighted-average period of 0.35 years.
Determining Fair Value for Non-employees Stock-based compensation expense related to stock
options and RSUs granted to non-employees is recognized as the
stock options and RSUs are vested. As of December 31, 2015,
the Company granted options to purchase 548,726 shares of common
stock to non-employees and 105,270 RSUs with a weighted-average
exercise price of $6.91 per share. As of December 31, 2015,
106,791 of these shares were outstanding with a weighted-average
exercise price of $2.62 per share. As of December 31, 2014,
the Company granted options to purchase 345,834 shares of common
stock to non-employees and 28,125 RSUs with a weighted-average
exercise price of $4.28 per share. As of December 31, 2014,
127,969 of these shares were outstanding with a weighted-average
exercise price of $4.78 per share. The Company granted non-employees options to
purchase and RSUs to convert to a total of 5,124 and 230,625 shares
of common stock for the years ended December 31, 2015 and
2014, respectively, 11,750 and 50,000 for the eight months ended
December 31, 2013 and 2012 (unaudited), respectively, and
50,000 and 135,834 for the years ended April 30, 2013 and
2012, respectively. Compensation expense related to these options
was $0.6 million and $1.2 million for the years ended
December 31, 2015 and 2014, respectively, $0.1 million and
$35,000 for the eight months ended December 31, 2013 and 2012
(unaudited), respectively, and $0.1 million and $2,000 for the
years ended April 30, 2013 and 2012, respectively. The Company believes that the fair value of the
stock options is more reliably measurable than the fair value of
services received. The fair value of the stock options granted is
calculated at each reporting date using the Black-Scholes option
pricing model with the following weighted-average assumptions:
Years Ended
Eight Months Ended December 31, Years Ended
2015 2014 2013 2012 2013 2012
(Unaudited)
Expected term (in years) 6.4 8.84 8.47 9.28 8.98 9.82
Risk-free interest rate 1.74 % 2.34 % 2.53 % 1.58 % 1.56 % 1.87 %
Expected volatility 45 % 43 % 45 % 51 % 49 % 56 %
Dividend rate — % — % — % — % — % — %
Stock-based Compensation Expense Total stock-based compensation expense, including
stock-based compensation expense to non-employees, by category was
as follows (in thousands):
Years Ended Eight Months Ended Years Ended
2015 2014 2013 2012 2013 2012
(Unaudited)
Cost of revenue $ 2,702 $ 580 $ 132 $ 44 $ 45 $ 14
Research and development 15,193 2,257 468 140 244 140
Sales and marketing 11,688 1,881 321 110 234 18
General and administrative 11,356 4,314 406 122 239 150
Total stock-based compensation expense $ 40,939 $ 9,032 $ 1,327 $ 416 $ 762 $ 322 |
