9. Stock-based Compensation

2013 Equity Incentive Plan

In October 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), which became effective in March 2014 and serves as the successor to the Company’s 2006 Stock Plan (the “2006 Plan”). Pursuant to the 2013 Plan, 4,000,000 shares of common stock were initially reserved for grant, plus (1) any shares that were reserved and available for issuance under the 2006 Plan at the time the 2013 Plan became effective, (2) any shares that become available upon forfeiture or repurchase by the Company under the 2006 Plan and (3) any shares added to the 2013 Plan pursuant to the next paragraph.

Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units (“RSUs”), performance shares and units to employees, directors and consultants. The shares available will be increased at the beginning of each year by the lesser of (i) 4% of outstanding common stock on the last day of the immediately preceding year, or (ii) such number determined by the Board of Directors and subject to additional restrictions relating to the maximum number of shares issuable pursuant to incentive stock options. Under the 2013 Plan, both the ISOs and NSOs are granted at a price per share not less than 100% of the fair market value on the effective date of the grant. The Board of Directors determines the vesting period for each option award on the grant date, and the options generally expire 10 years from the grant date or such shorter term as may be determined by the Board of Directors.

Stock Options

The fair value of each option was estimated using the Black-Scholes model on the date of grant for the periods presented using the following assumptions:

	Three Months Ended March 31,
	2018		2017
Expected life (in years)		6.02	6.08 - 6.25
Risk-free interest rate	2.66%		2.05% - 2.14%
Volatility	50%		50%
Dividend yield	—		—

The weighted-average grant-date fair value of options granted was $6.59 and $6.44 per share during the three months ended March 31, 2018 and 2017, respectively.

Restricted Stock Units and Performance-Based Restricted Stock Units

The fair value of RSUs equals the market value of the Company’s common stock on the date of the grant. The RSUs are excluded from issued and outstanding shares until they are vested.

A summary of the Company’s stock option and RSU award activity under the 2013 Plan is as follows:

				RSUs Outstanding					Options Outstanding
	Shares Available for Grant			Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2017		4,425,155			5,194,292		$	12.26		7,412,228		$	10.36		6.09	$	25,415
Increase in shares authorized		3,727,989		—			—		—			—		—		—
Options granted		(801,000	)	—			—			801,000		$	13.10	—		—
Options exercised	—			—			—			(229,658	)	$	7.29	—		$	1,318
Options canceled or expired		69,869		—			—			(69,869	)	$	11.54	—		—
RSUs granted		(2,018,982	)		2,018,982		$	13.06	—			—		—		—
RSUs vested	—				(1,342,056	)	$	13.49	—			—		—		—
RSUs canceled or expired		155,766			(155,766	)	$	11.33	—			—		—		—
RSUs withheld for taxes		524,090		—			—		—			—		—		—
Balance as of March 31, 2018		6,082,887			5,715,452		$	12.28		7,913,701		$	10.72		6.22	$	30,327
Vested and exercisable as of March 31, 2018										5,459,769		$	10.23		5.07	$	27,111

The aggregate intrinsic value disclosed in the table above is based on the difference between the exercise price of the options and the fair value of the Company’s common stock.

The aggregate total fair value of options which vested was $2.4 million and $2.3 million during the three months ended March 31, 2018 and 2017, respectively.

Employee Stock Purchase Plan

Eligible employees can enroll and elect to contribute up to 15% of their base compensation through payroll withholdings in each offering period which is six months in duration, subject to certain limitations. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date.

The fair value of the option feature is estimated using the Black-Scholes model for the period presented based on the following assumptions:

	Three Months Ended March 31,
	2018		2017
Expected life (in years)		0.50		0.50
Risk-free interest rate	1.42%		0.62%
Volatility	40%		50%
Dividend yield	—		—

As of March 31, 2018, a total of 825,848 shares of common stock were issued under the 2013 Employee Stock Purchase Plan (“ESPP”), since inception of the plan. As of March 31, 2018, a total of 1,974,152 shares are available for issuance under the ESPP. The ESPP provides that the shares available thereunder will be increased at the beginning of each year by the lesser of (i) 0.5% of outstanding common stock on the last day of the immediately preceding year, (ii) 400,000 shares, or (iii) such number determined by the Board of Directors.

Stock-based Compensation Expense

The following table sets forth the total stock-based compensation expense resulting from stock options, RSUs and ESPP included in the Company’s condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2018		2017
Cost of revenues	$	540	$	451
Sales and marketing		1,600		1,332
Research and development		1,827		2,011
General and administrative		3,829		3,962
Total stock-based compensation expense	$	7,796	$	7,756

As of March 31, 2018, there was $77.2 million of unrecognized stock-based compensation expense, of which $14.3 million is related to stock options and ESPP shares and $62.9 million is related to RSUs. The total unrecognized stock-based compensation expense related to stock options and ESPP as of March 31, 2018 will be amortized over a weighted-average period of 2.93 years. The total unrecognized stock-based compensation expense related to RSUs as of March 31, 2018 will be amortized over a weighted-average period of 2.96 years.

During the three months ended March 31, 2018 and 2017, the Company capitalized $0.1 million and $0.1 million of stock-based compensation cost, respectively, in projects in process as part of property and equipment, net on the accompanying consolidated balance sheets.