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STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
Stock Options and Awards
The Company’s equity incentive program is a long-term retention program that is intended to attract, retain, and provide incentives for talented employees, consultants, officers, and directors and to align stockholder and employee interests. The Company may grant time based options, market condition based options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, and other stock-based or cash-based awards to employees, officers, directors, and consultants. Under this program, stock options may be granted at prices not less than the fair market value on the date of grant for stock options. These options generally vest over four years and expire from seven to ten years from the date of grant. In addition to time based vesting, market condition based options are subject to a market condition: the closing price of the Company stock must exceed a certain level for a number of trading days within a specified timeframe or the options will be canceled before the expiration of the options. On June 2, 2017, the Company's stockholders approved an increase to the number of shares reserved for issuance by 3,476,850 shares. Restricted stock generally vests over one year. RSUs generally vest over 3 years. Awards granted other than an option or stock appreciation right shall reduce the common stock shares available for grant by 1.75 shares for every share issued.
 
December 31, 2018
Common stock shares available for grant
1,791,088

Standard and market condition based stock options outstanding
2,134,504

Restricted stock awards outstanding
54,667

Restricted stock units outstanding
1,090,752



Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees may purchase common stock through payroll deductions at a purchase price of 85% of the lower of the fair market value of the Company’s stock at the beginning of the offering period or the purchase date. Participants may not purchase more than 2,000 shares in a six-month offering period or purchase stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period. A total of 1,000,000 shares of common stock have been reserved for issuance under the ESPP. As of December 31, 2018, 724,822 shares had been purchased since the inception of the ESPP in 1999. The ESPP is considered a compensatory plan and the Company is required to recognize compensation cost related to the fair value of the award purchased under the ESPP. Shares purchased under the ESPP for the year ended December 31, 2018 are listed below. Shares purchased under the ESPP for the year ended December 31, 2017 were 48,750. The intrinsic value listed below is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.
 
Year Ended December 31, 2018
Shares purchased under ESPP
26,689

Average price of shares purchased under ESPP
$
8.17

Intrinsic value of shares purchased under ESPP
$
106,000



Summary of Standard Stock Options
The following table sets forth the summary of standard stock option activity under the Company’s stock option plans for the years ended December 31, 2018, 2017, and 2016:
 
Number of Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Fair Value
Of Options Granted
 
Aggregate
Intrinsic
Value
of Options
Exercised
(in thousands)
Outstanding at January 1, 2016
3,596,533

 
$
8.45

 
 
 
 
Granted
815,794

 
$
7.85

 
$
3.67

 
 
Exercised
(395,515
)
 
$
6.48

 
 
 
$
918

Forfeited
(344,541
)
 
$
9.05

 
 
 
 
Expired
(251,150
)
 
$
8.87

 
 
 
 
Outstanding at December 31, 2016
3,421,121

 
$
8.44

 
 
 
 
Granted
489,568

 
$
8.48

 
$
3.82

 
 
Exercised
(70,608
)
 
$
7.34

 
 
 
$
151

Forfeited
(361,687
)
 
$
9.11

 
 
 
 
Expired
(200,403
)
 
$
15.04

 
 
 
 
Outstanding at December 31, 2017
3,277,991

 
$
7.99

 
 
 
 
Granted
207,500

 
$
12.50

 
$
5.82

 
 
Exercised
(1,452,306
)
 
$
6.52

 
 
 
$
8,222

Forfeited
(78,390
)
 
$
8.31

 
 
 
 
Expired
(92,372
)
 
$
11.93

 
 
 
 
Outstanding at December 31, 2018
1,862,423

 
$
9.44

 
 
 
 


The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money.
Information regarding standard stock options outstanding at December 31, 2018, 2017, and 2016 is summarized below:
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life (years)
 
Aggregate
Intrinsic
Value
(in millions)
December 31, 2016
 
 
 
 
 
 
 
Options outstanding
3,421,121

 
$
8.44

 
3.99
 
$
9.0

Options vested and expected to vest using estimated forfeiture rates
3,223,919

 
$
8.43

 
3.87
 
$
8.5

Options exercisable
2,131,268

 
$
8.22

 
3.10
 
$
6.4

December 31, 2017
 
 
 
 
 
 
 
Options outstanding
3,277,991

 
$
7.99

 
2.88
 
$
2.2

Options vested and expected to vest using estimated forfeiture rates
3,175,002

 
$
7.99

 
2.78
 
$
2.2

Options exercisable
2,633,990

 
$
7.94

 
2.14
 
$
2.1

December 31, 2018
 
 
 
 
 
 
 
Options outstanding
1,862,423

 
$
9.44

 
2.85
 
$
0.8

Options vested and expected to vest using estimated forfeiture rates
1,785,740

 
$
9.40

 
2.74
 
$
0.7

Options exercisable
1,396,171

 
$
9.22

 
1.97
 
$
0.5



Additional information regarding standard options outstanding as of December 31, 2018 is as follows:
 
 
Options Outstanding
 
Options Exercisable
Range of
Exercise
  Prices
 
Number
Outstanding
 
Weighted
Average
Remaining
Contractual
Life (Years)
 
Weighted
Average
Exercise
Price
 
Number
Exercisable
 
Weighted
Average
Exercise
Price
$5.53 - $7.79
 
321,144

 
4.16
 
$
7.21

 
189,149

 
$
7.06

8.09 - 8.45
 
222,175

 
4.38
 
8.29

 
143,083

 
8.22

8.64 - 9.00
 
259,173

 
2.45
 
8.83

 
226,776

 
8.82

9.53 - 9.53
 
671,500

 
0.95
 
9.53

 
671,500

 
9.53

9.68 - 11.84
 
205,573

 
5.68
 
11.66

 
25,693

 
10.87

11.94 - 12.20
 
100,963

 
1.51
 
11.94

 
100,963

 
11.94

12.26 - 12.26
 
21,675

 
3.43
 
12.26

 
21,675

 
12.26

12.38 - 12.38
 
4,320

 
3.87
 
12.38

 
3,420

 
12.38

12.48 - 12.48
 
15,900

 
3.54
 
12.48

 
13,912

 
12.48

15.25 - 15.25
 
40,000

 
6.54
 
15.25

 
—

 
—

$5.53 - $15.25
 
1,862,423

 
2.85
 
$
9.44

 
1,396,171

 
$
9.22



Summary of Market Condition Based Stock Options
In 2014, the Company began granting options that are subject to both time-based vesting and a market condition. For these options, the closing price of the Company stock must exceed a certain level for a number of trading days within a specified timeframe or the options will be canceled before the seven-year life of the options. The following table sets forth the summary of the market condition based option activity under the Company’s stock option plans for the years ended December 31, 2018, 2017 and 2016. There were no activities for the year ended December 31, 2018.
 
Number
of Shares    
 
Weighted
Average
Exercise
Price    
 
Weighted Average Fair Value Of Options Granted    
 
Aggregate Intrinsic Value of Options Exercised (in thousands)  
Outstanding at January 1, 2016
200,000

 
$
9.05

 
 
 
 
Granted
75,000

 
$
9.00

 
$
3.68

 
 
Exercised
—

 


 
 
 

Forfeited
(50,000
)
 
$
11.94

 
 
 
 
Expired
—

 


 
 
 
 
Outstanding at December 31, 2016
225,000

 
$
8.39

 
 
 
 
Granted
120,830

 
$
8.65

 
$
3.12

 
 
Exercised
—

 
 
 
 
 
 
Forfeited
(73,749
)
 
$
8.64

 
 
 
 
Expired
—

 
 
 
 
 
 
Outstanding at December 31, 2017
272,081

 
$
8.44

 
 
 
 
Granted
—

 


 


 
 
Exercised
—

 


 
 
 

Forfeited
—

 


 
 
 
 
Expired
—

 


 
 
 
 
Outstanding at December 31, 2018
272,081

 
$
8.44

 
 
 
 


The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money.
Information regarding these market condition based stock options outstanding at December 31, 2018, 2017 and 2016 is summarized below:
 
Number
of Shares    
 
Weighted
Average
Exercise
Price    
 
Weighted
Average
Remaining
Contractual Life (years)     
 
Aggregate
Intrinsic
Value
(in millions)  
December 31, 2016
 
 
 
 
 
 
 
Options outstanding
225,000

 
$
8.39

 
5.50
 
$
0.5

Options vested and expected to vest using estimated forfeiture rates
209,141

 
$
8.38

 
5.49
 
$
0.5

Options exercisable
65,625

 
$
8.09

 
5.17
 
$
0.2

December 31, 2017
 
 
 
 
 
 
 
Options outstanding
272,081

 
$
8.44

 
1.91
 
$
—

Options vested and expected to vest using estimated forfeiture rates
272,081

 
$
8.44

 
1.91
 
$
—

Options exercisable
272,081

 
$
8.44

 
1.91
 
$
—

December 31, 2018
 
 
 
 
 
 
 
Options outstanding
272,081

 
$
8.44

 
0.91
 
$
0.1

Options vested and expected to vest using estimated forfeiture rates
272,081

 
$
8.44

 
0.91
 
$
0.1

Options exercisable
272,081

 
$
8.44

 
0.91
 
$
0.1



Additional information regarding market condition based stock options outstanding as of December 31, 2018 is as follows:
 
Options Outstanding
 
Options Exercisable
Range of
Exercise
Prices
Number
Outstanding
 
Weighted Average Remaining Contractual Life (Years)
 
Weighted
Average
Exercise Price
 
Number
Exercisable
 
Weighted
Average
Exercise Price
$8.09 - $8.09
135,000

 
0.91
 
$
8.09

 
135,000

 
$
8.09

  8.65 - 8.65
84,581

 
0.91
 
$
8.65

 
84,581

 
$
8.65

  9.00 - 9.00
52,500

 
0.91
 
$
9.00

 
52,500

 
$
9.00

$8.09 - $9.00
272,081

 
0.91
 
$
8.44

 
272,081

 
$
8.44



Summary of Restricted Stock Units
RSU activity for the years ended December 31, 2018, 2017, and 2016 was as follows:
 
Number of Shares    
 
Weighted Average
Grant Date Fair Value    
 
Fair Value
of Released RSU’s (in thousands)    
Outstanding at January 1, 2016
487,423

 
 
 
 
Awarded
320,880

 
$
8.67

 
 
Released
(247,556
)
 
 
 
$
2,118

Forfeited
(133,555
)
 
 
 
 
Outstanding at December 31, 2016
427,192

 
 
 
 
Awarded
483,015

 
$
8.46

 
 
Released
(198,058
)
 
 
 
$
1,991

Forfeited
(203,269
)
 
 
 
 
Outstanding at December 31, 2017
508,880

 
 
 
 
Awarded
957,443

 
$
11.74

 
 
Released
(178,447
)
 
 
 
$
2,133

Forfeited
(197,124
)
 
 
 
 
Outstanding at December 31, 2018
1,090,752

 
 
 
 


Information regarding RSU’s at December 31, 2018, 2017, and 2016 is summarized below:
 
Number of Shares      
 
Weighted
Average
Remaining
Contractual Life (years)     
 
Aggregate
Intrinsic
Value
(in millions)  
 
Fair Value
(in millions)  
December 31, 2016
 
 
 
 
 
 
 
RSUs outstanding
427,192

 
0.93
 
$
4.5

 
$
4.5

RSUs vested and expected to vest using estimated forfeiture rates
349,759

 
0.80
 
$
3.7

 
 
December 31, 2017
 
 
 
 
 
 
 
RSUs outstanding
508,880

 
1.30
 
$
3.6

 
$
3.6

RSUs vested and expected to vest using estimated forfeiture rates
414,847

 
1.16
 
$
2.9

 
 
December 31, 2018
 
 
 
 
 
 
 
RSUs outstanding
1,090,752

 
0.67
 
$
9.8

 
$
9.8

RSUs vested and expected to vest using estimated forfeiture rates
959,209

 
0.56
 
$
8.6

 
 


The aggregate intrinsic value is calculated as the market value as of the end of the reporting period.
Summary of Restricted Stock Awards
Restricted stock award activity for the years ended December 31, 2018, 2017, and 2016 was as follows:
 
Number of Shares    
 
Weighted Average Grant Date
Fair Value
 
Total Fair Value of Awards Released
(in thousands)
Outstanding at January 1, 2016
21,356

 
$
12.26

 
 
Awarded
77,540

 
$
6.52

 
 
Released
(21,356
)
 
$
12.26

 
$
139

Forfeited
—

 
 
 
 
Outstanding at December 31, 2016
77,540

 
$
6.52

 
 
Awarded
44,538

 
$
8.65

 
 
Released
(77,540
)
 
$
6.52

 
$
671

Forfeited
—

 
 
 
 
Outstanding at December 31, 2017
44,538

 
$
8.65

 
 
Awarded
62,556

 
$
13.32

 
 
Released
(44,538
)
 
$
8.65

 
$
673

Forfeited
(7,889
)
 
$
15.44

 
 
Outstanding at December 31, 2018
54,667

 
$
13.02

 
 


Stock-based Compensation
Valuation and amortization methods — The Company uses the Black-Scholes-Merton option pricing model (“Black-Scholes model”), single-option approach to determine the fair value of standard stock options and ESPP shares. All share-based payment awards are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. Stock-based compensation expense recognized at fair value includes the impact of estimated forfeitures. The Company estimates future forfeitures at the date of grant and revises the estimates if necessary, in subsequent periods if actual forfeitures differ from these estimates. The determination of the fair value of share-based payment awards on the date of grant using an option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include actual and projected employee stock option exercise behaviors that impact the expected term, the Company’s expected stock price volatility over the term of the awards, risk-free interest rate, and expected dividends.
Expected term — The Company estimates the expected term of options granted by calculating the average term from the Company’s historical stock option exercise experience. The expected term of ESPP shares is the length of the offering period.
Expected volatility — The Company estimates the volatility of its common stock taking into consideration its historical stock price movement and its expected future stock price trends based on known or anticipated events.
Risk-free interest rate — The Company bases the risk-free interest rate that it uses in the option pricing model on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.
Expected dividend — The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option-pricing model.
Forfeitures — The Company is required to estimate future forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest.
The Company uses the Monte-Carlo Simulation model to value the stock options with a market condition. Valuation techniques such as a Monte-Carlo Simulation model have been developed to value path-dependent awards. The Monte-Carlo Simulation model is a generally accepted statistical technique used, in this instance, to simulate a range of future stock prices for the Company.
The assumptions used to value option grants under the Company’s stock plans are as follows:
 
Standard Stock Options    
 
2018
 
2017
 
2016
Expected life (in years)
4.4

 
4.6

 
4.5

Interest rate
3.0
%
 
2.0
%
 
1.2
%
Volatility
55
%
 
52
%
 
56
%
Dividend yield
—
%
 
—
%
 
—
%
 
Market Condition Based Stock Options
 
2018 (1)
 
2017
 
2016
Expected life (in years)
N/A
 
7.0

 
7.0

Interest rate
N/A
 
2.0
%
 
1.6
%
Volatility
N/A
 
55
%
 
59
%
Dividend yield
N/A
 
—
%
 
—
%
(1) No market condition based stock options were granted during the year ended December 31, 2018.
 
Employee Stock Purchase Plan    
 
2018
 
2017
 
2016
Expected life (in years)
0.5

 
0.5

 
0.5

Interest rate
1.9
%
 
0.9
%
 
0.4
%
Volatility
58
%
 
48
%
 
53
%
Dividend yield
—
%
 
—
%
 
—
%


Total stock-based compensation recognized in the consolidated statements of income is as follows:
 
Year Ended December 31,
 
2018
 
2017
 
2016
Income Statement Classifications
(in thousands)
Sales and marketing
$
946

 
$
1,025

 
$
1,280

Research and development
1,948

 
981

 
1,297

General and administrative
5,792

 
4,096

 
3,534

Total
$
8,686

 
$
6,102

 
$
6,111



As of December 31, 2018, there was $6.0 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options, restricted stock awards and RSU’s granted to the Company’s employees and directors. This cost will be recognized over an estimated weighted-average period of approximately 2.47 years for standard options, 0.46 years for restricted stock awards and 1.13 years for RSU’s. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.