| Stockholders' Equity | 7. STOCKHOLDERS’ EQUITY Common Stock Each share of common stock is entitled to one vote
for matters to be voted on by the stockholders of the Company. The
holders of common stock are also entitled to receive dividends
whenever declared by the Board of Directors from legally available
funds. 2011 Stock Option and Grant Plan In December 2014, in connection with the closing of
the Company’s initial public offering, the Hortonworks, Inc.
2011 Stock Option Plan and Grant Plan (the “2011 Plan”)
was terminated and shares authorized for issuance under the 2011
Plan were canceled (except for those shares reserved for issuance
upon exercise of outstanding stock options). As of
September 30, 2016, options to purchase 7,187,994 shares of
common stock were outstanding under the 2011 Plan pursuant to their
original terms and no shares were available for future grant. 2014 Stock Option and Incentive
Plan The Hortonworks, Inc. 2014 Stock Option and
Incentive Plan (the “2014 Plan”) was adopted by the
Company’s Board of Directors in September 2014. The 2014 Plan
was approved by the Company’s stockholders in November 2014
and became effective immediately prior to the closing of the
Company’s IPO. An amendment and restatement of the 2014 Plan
(the “Amended 2014 Plan”) was approved by the Board of
Directors in April 2016 and by the Company’s stockholders in
May 2016. The Amended 2014 Plan allows the Compensation Committee
to make equity-based incentive awards to the Company’s full
or part-time officers, employees, non-employee directors and
consultants.
The Company initially reserved 6,000,000 shares of
the Company’s common stock for the issuance of awards under
the 2014 Plan, plus 923,732 shares of the Company’s common
stock that remained available for issuance under the 2011 Plan as
of the Company’s IPO date. The amendment and restatement of
the 2014 Plan increased the number of shares reserved for issuance
under the Amended 2014 Plan by 7,000,000 shares. The Amended 2014
Plan also 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. In April, June and July 2015, under the 2014 Plan,
the Company granted 421,484 Performance Stock Units
(“PSUs”) to certain executive and senior officers (the
“Grantees”) that vest upon (a) the achievement of
specified performance targets as set by the Compensation Committee
and (b) the Grantee remaining employed during the respective
six-month performance cycle over a service period of up to three
years, with such service periods commencing on July 1, 2015.
The performance target value for each performance cycle is based on
an average of the applicable internal and external billings amounts
for the respective performance cycle. The number of PSUs that vest
for a given performance cycle is based on the Company’s
achievement percentile of actual billings relative to the
performance target value. In October 2015, under the 2014 Plan, the Company
granted 266,084 PSUs to the Grantees that vest upon (a) the
achievement of specified performance targets as set by the
Compensation Committee and (b) the Grantee remaining employed
for the duration of the respective 12-month performance cycle over
a service period of up to two years, with such service periods
commencing on January 1, 2016. The number of PSUs that
vest for a given performance cycle is based on the Company’s
achievement percentile for earnings before interest, taxes,
depreciation and amortization (“EBITDA”) growth and
revenue growth relative to the linear ranking of a pre-selected
group of the Company’s peers. As of September 30, 2016, options to purchase
shares of stock, restricted stock units (“RSUs”), PSUs
and restricted stock covering an aggregate of 11,604,665 shares of
common stock were outstanding under the Amended 2014 Plan. On January 1, 2016, the shares reserved for
issuance under the 2014 Plan increased by 2,326,899, resulting in
18,863,638 total shares reserved for issuance under the Amended
2014 Plan as of September 30, 2016, of which 5,325,656
remained available for issuance. 2014 Employee Stock Purchase Plan The Company’s 2014 Employee Stock Purchase
Plan (the “ESPP”) was adopted and approved by the
Company’s Board of Directors in September 2014, was adopted
and approved by the Company’s stockholders in November 2014
and was amended in August 2015, to allow employees of certain of
the Company’s non-U.S. 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,
2016, the shares reserved for issuance increased by 465,225,
resulting in 3,392,473 total shares reserved for issuance under the
ESPP as of September 30, 2016. 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 the ESPP.
As of September 30, 2016, there was $2.0
million of unrecognized stock-based compensation expense related to
the ESPP, which is expected to be recognized over a
weighted-average period of 0.62 years. Stock Options
A summary of information related to stock options for the nine
months ended September 30, 2016 is presented below:
Number of Shares Underlying Outstanding Options Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value
(In thousands)
Outstanding—December 31, 2015 11,552,487 $ 9.80 7.82 $ 140,873
Options granted
—
—
Options exercised (1,308,409 ) 2.44
Options canceled/forfeited (2,191,998 ) 14.67
Outstanding—September 30, 2016 8,052,080 $ 9.68 6.88 $ 18,861
Vested and expected to vest—September 30, 2016 7,888,937 $ 9.58 6.82 $ 18,793
Exercisable—September 30, 2016 5,233,231 $ 7.93 6.41 $ 16,627
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 three months
ended September 30, 2016 and 2015 was $2.8 million and $11.8
million, respectively, and for the nine months ended
September 30, 2016 and 2015 was $10.9 million and $38.4
million, respectively. Restricted Stock
A summary of information related to restricted stock for the nine
months ended September 30, 2016 is presented below:
Number of Shares Issued Under the Stock Plans Number of Shares Issued Outside the Stock Plans Weighted- Average Exercise Price Per Share Weighted-Average Grant Date Fair Value Per Share (*) Aggregate Intrinsic Value
(In thousands)
Unvested balance—December 31, 2015 145,968 644,014 $ 0.67 $ 23.76 $ 4,551
Granted
—
—
—
—
Vested (144,718 ) (368,179 ) 0.67 23.76
Canceled/forfeited
—
—
—
—
Unvested balance—September 30, 2016 1,250 275,835 $ 1.28 $ 23.76 $ 400
( *
The weighted-average grant-date fair value per
share relates to 1,424,946 shares of restricted stock paid as part
of the acquisition of Onyara, of which 275,835 shares are unvested
as of September 30, 2016. The fair value of the restricted stock vested
during the three months ended September 30, 2016 and 2015 was
$2.5 million and $29.6 million, respectively, and for the nine
months ended September 30, 2016 and 2015 was $4.5 million and
$35.9 million, respectively. As of September 30, 2016, there was $22.9
million of unrecognized stock-based compensation expense related to
unvested stock options and restricted stock to be recognized over a
weighted-average period of 1.74 years.
Restricted Stock Units and Performance Stock
Units
A summary of information related to RSUs and PSUs for the nine
months ended September 30, 2016 is presented below:
Number of Shares Issued Under the 2014 Plan Weighted- Grant Date Fair Value Per
Unvested balance—December 31, 2015 5,852,619 $ 23.33
Granted 7,928,170 10.28
Vested (1,823,515 ) 21.00
Canceled/forfeited (1,216,695 ) 17.04
Unvested balance—September 30, 2016 10,740,579 $ 14.70
The fair value of the RSUs and PSUs that vested
during the three months ended September 30, 2016 was $6.1
million. No RSUs and PSUs vested during the three months ended
September 30, 2015. The fair value of the RSUs and PSUs that
vested during each of the nine months ended September 30, 2016
and 2015 was $20.2 million and $1.1 million, respectively. As of September 30, 2016, there was $119.3
million of unrecognized stock-based compensation expense related to
RSUs and PSUs to be recognized over a weighted-average period of
1.68 years. Restricted Stock and Stock Options Subject to
Repurchase The 2011 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
$1.28 to $14.22 per share as of September 30, 2016 was 40,380.
The liability for shares subject to repurchase as of
September 30, 2016 was $0.5 million, of which $0.3 million is
included in accrued expenses and other current liabilities and $0.2
million is included in other long-term liabilities. Stock-Based Compensation Expense Total stock-based compensation expense, including
stock-based compensation expense to non-employees, by category was
as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Cost of revenue $ 1,332 $ 825 $ 4,107 $ 1,616
Sales and marketing 7,650 3,518 19,308 6,882
Research and development 9,810 3,897 26,392 8,251
General and administrative 5,428 3,139 25,753 6,970
Total stock-based compensation expense $ 24,220 $ 11,379 $ 75,560 $ 23,719
In February 2016, one of the executives of the
Company voluntarily canceled a stock option to purchase 1,185,000
shares. As a result, the Company recognized in general and
administrative expense a stock-based compensation expense of $10.0
million for the nine months ended September 30, 2016. |
