Stockholders’ Equity

Stock Split

In March 2015, the Company's Board of Directors adopted an amendment to the Company's Certificate of Incorporation, to increase the number of shares of capital stock the Company is authorized to issue from 170,000,000 (160,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001 to 5,000,000,000 (4,990,000,000 shares of common stock and 10,000,000 shares of preferred stock), par value $0.001. This amendment to the Company's certificate of incorporation was approved by the Company's stockholders at the 2015 Annual Meeting held on June 9, 2015.

On June 23, 2015, the Company's Board of Directors declared a seven-for-one stock split in the form of a stock dividend that was paid on July 14, 2015 to all shareholders of record as of July 2, 2015. Outstanding share and per-share amounts disclosed for all periods presented have been retroactively adjusted to reflect the effects of the Stock Split.

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, 2016 and 2015.

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, 2016, 13.3 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, as adjusted for the Stock Split, 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, 2013	23,844,219		24,688,286		$	13.61
Granted	(3,819,011	)	3,819,011		57.55
Exercised	—		(5,661,880	)	10.81
Balances as of December 31, 2014	20,025,208		22,845,417		$	21.65
Granted	(3,179,892	)	3,179,892		82.67
Exercised			(5,029,553	)	15.38
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	6.18	$	1,772,185
Vested and exercisable at December 31, 2016			22,437,347		$	44.83	6.18	$	1,772,185

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 2016 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 2016. 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, 2016, 2015 and 2014 was $189.2 million, $368.4 million and $265.1 million, respectively.

Cash received from option exercises for the years ended December 31, 2016, 2015 and 2014 was $37.0 million, $78.0 million and $60.5 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,
	2016			2015			2014
Dividend yield	—		%	—		%	—		%
Expected volatility	40% - 50%			36% - 53%			41% - 48%
Risk-free interest rate	1.57% - 2.04%			2.03% - 2.29%			2.39% - 2.83%
Suboptimal exercise factor	2.48			2.47 - 2.48			2.66 - 5.44
Valuation data:
Weighted-average fair value (per share)	$	48.85		$	39.22		$	30.17
Total stock-based compensation expense (in thousands)	173,675			124,725			115,239
Total income tax impact on provision (in thousands)	65,173			47,125			43,999

The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior and the employee groupings. Prior to January 1, 2015, the Company bifurcated its option grants into two employee groupings (executive and non-executive) to determine the suboptimal exercise factor. Beginning on January 1, 2015, the Company began aggregating employee groupings for its determination of the suboptimal exercise factor as the previous bifurcation into two groupings did not have a material impact on the fair value of the options granted.

Prior to January 1, 2015, the Company's computation of expected volatility was based on a blend of historical volatility of its common stock and implied volatility of tradable forward call options to purchase shares of its common stock, as low trade volume of its tradable forward call options prior to 2011 precluded sole reliance on implied volatility. Beginning on January 1, 2015, expected volatility is 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.