Stockholders' Equity

Common Stock

At December 31, 2013, there were 100,000,000 shares of common stock authorized, 54,484,760 shares issued and outstanding. As of December 31, 2012, there were 100,000,000 shares of common stock authorized, 55,948,924 shares issued and outstanding. The par value for common shares is $0.001.

Preferred Stock

As of December 31, 2013 and 2012, there were 5,000,000 shares of preferred stock authorized, zero shares issued and outstanding. The par value for preferred shares is $0.001.

Stock-Based Compensation

The Company follows FASB ASC 718-10, “Stock Compensation,” which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.

The following table summarizes stock-based compensation expense related to employee stock options under ASC 718-10 included in Company’s statement of operations for the years ended (amounts in thousands):



	December 31,
	2013		2012		2011
Cost of revenue	$	1,954	$	1,579	$	1,023
Sales and marketing	2,851		2,878		1,668
General and administrative expense	4,148		3,294		2,377
Product development expense	3,555		2,964		1,703
Total stock based compensation included in operating expenses	$	12,508	$	10,715	$	6,771

The per share weighted average fair value of stock options granted during the years ended December 31, 2013, 2012 and 2011 was $5.12, $8.20 and $6.47, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31, 2013, 2012 and 2011:



	December 31,
	2013	2012	2011
Dividend yield	—%	—%	—%
Risk-free interest rate	0.7% – 1.4%	0.6% – 0.9%	0.9% – 3.7%
Expected life (in years)	5.0	5.0	5.0
Historical volatility	55.6% – 60.1%	59.3% – 60.8%	60.1% – 61.5%

A description of the methods used in the significant assumptions used to estimate the fair value of stock-based-based compensation awards follows:

Dividend yield – The Company uses 0% as it has never issued dividends and does not anticipate issuing dividends in the near term.

Risk-free interest rate – The Company uses the market yield on U.S. Treasury securities at five years with constant maturity, representing the current expected life of stock options in years.

Expected life – The Company uses historical data to estimate the expected life of a stock option.

Historical volatility – The Company uses a trailing five year from grant date to determine volatility.

Stock Options and Employee Stock Purchase Plans

During 1998, the Company established the Stock Option and Restricted Stock Purchase Plan (the “1998 Plan”). Under the 1998 Plan, the Board of Directors could issue incentive stock options or nonqualified stock options to purchase up to 5,850,000 shares of common stock. The 2000 Stock Incentive Plan (the “2000 Plan”) succeeded the 1998 Plan. Under the 2000 Plan, the options which had been outstanding under the 1998 Plan were incorporated in the 2000 Plan increasing the number of shares available for issuance under the plan by approximately 4,150,000, thereby reserving for issuance 10,000,000 shares of common stock in the aggregate.

The Company established the 2009 Stock Incentive Plan (as amended and restated, the “2009 Plan”) as a successor to the 2000 Plan. Under the 2009 Plan, the options which had been outstanding under the 2000 Plan were incorporated into the 2009 Plan and the Company increased the number of shares available for issuance under the plan by 6,000,000. The Company amended the 2009 stock incentive plan (the “Amended 2009 Plan”) effective June 7, 2012. The Amended 2009 Plan increased the number of shares authorized for issuance under the plan by an additional 4,250,000, thereby reserving for issuance 23,817,744 shares of common stock in the aggregate. Options to acquire common stock granted thereunder have 10-year terms. As of December 31, 2013, approximately 14,600,000 shares of common stock were reserved for issuance under the 2009 Plan (taking into account all option exercises through December 31, 2013).

As of December 31, 2013, there was approximately $30.1 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of approximately 2.0 years.

In June 2010, our stockholders approved the 2010 Employee Stock Purchase Plan with 1,000,000 shares of common stock initially reserved for issuance. As of December 31, 2013, approximately 693,000 shares of common stock were reserved for issuance under the Employee Stock Purchase Plan (taking into account all share purchases through December 31, 2013).

A summary of the Company’s stock option activity and weighted average exercise prices follows:



	Options		Weighted Average Exercise Price
Options outstanding at December 31, 2010	8,816,760		$	5.04
Options granted	3,642,600		12.24
Options exercised	(2,278,451	)	4.28
Options cancelled	(1,337,496	)	7.03
Options outstanding at December 31, 2011	8,843,413		7.91
Options granted	3,463,500		16.20
Options exercised	(1,634,658	)	5.10
Options cancelled	(830,776	)	10.78
Options outstanding at December 31, 2012	9,841,479		11.06
Options granted	2,573,700		10.20
Options exercised	(771,810	)	6.48
Options cancelled	(1,919,176	)	13.11
Options outstanding at December 31, 2013	9,724,193		$	10.86

Options exercisable at December 31, 2011	2,805,399		$	4.63
Options exercisable at December 31, 2012	3,220,228		$	6.61
Options exercisable at December 31, 2013	4,090,492		$	8.71

The total value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 was approximately $2.5 million, $16.3 million and $17.2 million, respectively. The total intrinsic value of options exercisable at December 31, 2013, 2012 and 2011 was approximately $26.2 million, $20.8 million and $21.9 million, respectively. The total intrinsic value of nonvested options at December 31, 2013, 2012 and 2011 was approximately $17.0 million, $10.1 million and $19.8 million, respectively. The total intrinsic value of all outstanding options at December 31, 2013, 2012 and 2011 was approximately $43.2 million, $30.9 million and $41.7 million, respectively.

A summary of the status of the Company’s nonvested options as of December 31, 2011, and changes during the years ended December 31, 2012 and 2013 is as follows:



	Shares		Weighted Average Grant-Date Fair Value
Nonvested Shares at December 31, 2011	6,038,014		$	5.04
Granted	3,463,500		8.20
Vested	(2,060,707	)	4.46
Cancelled	(819,556	)	5.69
Nonvested Shares at December 31, 2012	6,621,251		$	6.84
Granted	2,573,700		5.12
Vested	(1,927,755	)	6.05
Cancelled	(1,633,495	)	6.74
Nonvested Shares at December 31, 2013	5,633,701		$	6.90

Stock Repurchase Program

On December 10, 2012, the Company’s Board of Directors approved a stock repurchase program through June 30, 2014. Under the stock repurchase program, the Company is authorized to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the Board of Directors depending upon prevailing market conditions and other corporate considerations. On May 21, 2013, the Company's Board of Directors increased the aggregate purchase price of the stock repurchase program from $20.0 million to $30.0 million. There were no shares purchased under this program during 2012. There were 2,391,362 shares repurchased under this program during 2013. As of December 31, 2013, approximately $3.3 million remained available for purchase under the program.