Stockholders’ Equity

Preferred Stock

The Company has authorized 10,000,000 shares of undesignated preferred stock with a par value of $0.001 per share. None of the preferred shares were issued and outstanding at December 31, 2018 and 2017.

Voting Rights

The holders of each share of common stock shall be entitled to one vote per share on all matters to be voted upon by the Company’s stockholders.

Stock Option Plans

In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of December 31, 2018, approximately 8.7 million shares were reserved for future grants under the 2011 Stock Plan.

A summary of the activities related to the Company’s stock option plans is as follows:



	Shares Available for Grant		Options Outstanding				Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price (per Share)		Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
Balances as of December 31, 2015	16,845,316		20,995,756		$	32.39
Granted	(3,555,363	)	3,555,363		102.03
Exercised	—		(2,113,772	)	17.48
Balances as of December 31, 2016	13,289,953		22,437,347		$	44.83
Granted	(2,550,038	)	2,550,038		159.56
Exercised	—		(3,338,474	)	26.79
Expired	—		(1,561	)	$	3.25
Balances as of December 31, 2017	10,739,915		21,647,350		$	61.13
Granted	(2,039,974	)	2,039,974		311.66
Exercised	—		(3,205,911	)	38.66
Expired	—		(2,135	)	4.60
Balances as of December 31, 2018	8,699,941		20,479,278		$	89.61	5.71	$	3,748,339
Vested and exercisable at December 31, 2018			20,479,278		$	89.61	5.71	$	3,748,339

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of 2018. This amount changes based on the fair market value of the Company’s common stock. Total intrinsic value of options exercised for the years ended December 31, 2018, 2017 and 2016 was $863 million, $464 million and $189 million, respectively.

Cash received from option exercises for the years ended December 31, 2018, 2017 and 2016 was $125 million, $88 million and $37 million, respectively.

Stock-Based Compensation

Stock options granted are exercisable for the full ten year contractual term regardless of employment status. The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:



	Year Ended December 31,
	2018			2017			2016
Dividend yield	—		%	—		%	—		%
Expected volatility	40% - 42%			34% - 37%			40% - 50%
Risk-free interest rate	2.61% - 3.09%			2.24% - 2.45%			1.57% - 2.04%
Suboptimal exercise factor	2.80 - 3.01			2.48 - 2.63			2.48
Valuation data:
Weighted-average fair value (per share)	$	157.19		$	71.45		$	48.85
Total stock-based compensation expense (in thousands)	320,657			182,209			173,675
Total income tax impact on provision (in thousands)	67,575			61,842			65,173

The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior.

The Company calculates expected volatility based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.

In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. 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 valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.