Stockholders’ Equity

2005 Stock Plan

On June 14, 2005, the Company adopted the Bazaarvoice, Inc. 2005 Stock Plan (the “2005 Plan”). The 2005 Plan provided in part that incentive and non-qualified stock options, as defined by the Internal Revenue Code of 1986, as amended, to purchase shares of the Company’s common stock could be granted to employees, directors and consultants. Stock purchase rights could also be granted under the 2005 Plan. The maximum term of options issued under the 2005 Plan is ten years. Options granted to date generally vest over a four-year period with 25% vesting at the end of one year and the remaining vest monthly thereafter. The Company’s ability to grant any future equity awards under the 2005 Plan was terminated in January 2012. As of April 30, 2017, options to purchase 475,879 shares of common stock were outstanding under the 2005 Plan. Accordingly, the Company has reserved 475,879 shares of common stock to permit the exercise of 2005 Plan options outstanding. The Company’s 2005 Plan will continue to govern the terms and conditions of outstanding equity awards that were granted under the 2005 Plan.

2012 Stock Plan

On January 17, 2012, the Company adopted the Bazaarvoice, Inc. 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan was adopted to replace the 2005 Plan and also gives the Company the ability to grant restricted stock and performance related stock. Under the 2012 Plan non-qualified and incentive stock options may be issued at an exercise price equal to at least 100% of the fair market value of the Company’s common stock at the option grant date. No portion of any stock option may be exercised after the expiration date. However, if an employee owns or is deemed to own more than 10% of the combined voting power of all classes of stock of the Company and a stock option is granted to such employee, the term of such stock option will be no more than five years from the date of grant or such shorter term as may be provided in the option agreement and the exercise price must be at least 110% of the fair market value on the date of grant. The maximum term of options issued under the 2012 Plan is ten years. Options granted to date generally vest over a four-year period with 25% vesting at the end of one year and the remaining vest monthly thereafter. The Company also grants restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) which generally vest annually over a three or four year period.

As of April 30, 2017, options to purchase 5,910,892 shares of common stock and 6,208,958 shares of restricted stock were outstanding under the 2012 Plan. As of April 30, 2017, a total of 6,692,386 shares of common stock were available for grant under the 2012 Plan. All equity awards granted following the Company’s initial public offering were granted under the 2012 Plan.

Employee Stock Purchase Plan (“ESPP”)

On January 17, 2012, the Company also adopted the Bazaarvoice, Inc. 2012 Employee Stock Purchase Plan. Under the Company’s ESPP, employees are granted the right to purchase shares of common stock at a price per share that is 85% of the lesser of the fair market value of the shares at (i) the first trading day of offering period or (ii) the last day of the offering period, subject to a plan limit on the number of shares that may be purchased in a purchase period. The offerings under the ESPP commenced, beginning with a six month offering period starting in March 2013. As of April 30, 2017, the Company has 2,820,145 shares of its common stock reserved for future issuance under this plan. As of April 30, 2017, $0.3 million has been held on behalf of employees for future purchases under the plan and is recorded in accrued expenses and other current liabilities. Employees purchased 613,504 shares of common stock at an average price of $3.27 in the fiscal year ended April 30, 2017.

Stock-Based Expense

The Company estimates the fair value of options granted using the Black-Scholes option pricing model. Since the Company was a private entity prior to our initial public offering in February 2012 with little historical data regarding the volatility of the common stock price, the Company bases the expected volatility on the historical volatility of comparable companies from a representative industry peer group. The expected volatility of options granted is determined using an average of the historical volatility measures of this peer group. The volatility for ESPP is based on the historical volatility of the Company. As allowed under current guidance, the Company has elected to apply the “simplified method” in developing the estimate of expected life for “plain vanilla” stock options by using the midpoint between the graded vesting period and the contractual termination date as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. However, ASC 718 Stock-based Compensation does not permit the use of the simplified method for options with performance conditions. The Company began granting performance stock options (“PSO”s) in fiscal year 2017. For these PSOs, the Company calculated the expected term using the historical exercise and post-vesting employment termination behavior of its employees. The Company has not paid and does not anticipate paying cash dividends on the common stock; therefore, the expected dividend yield was assumed to be zero. The risk-free interest rate is based on the rate for a U.S. government security with the same estimated life at the time of the option grant and the stock purchase rights. In accordance with ASC 718, the Company must develop an assumption regarding a pre-vesting forfeiture rate on the grant date. The Company estimates the expected forfeiture rate using historical Company forfeiture data.

The following table presents the amount of stock-based compensation related to stock-based awards to employees on the Company’s consolidated statements of operations during the periods presented (in thousands):



	Year Ended April 30,
	2017		2016		2015
Cost of revenue	$	1,734	$	2,167	$	1,517
Sales and marketing	2,996		2,956		3,923
Research and development	3,770		2,996		1,960
General and administrative	7,782		6,967		4,677
Loss from discontinued operations, net of tax	—		—		124
Stock-based expense	16,282		15,086		12,201
Capitalized stock-based compensation	495		488		601
Total stock-based compensation	16,777		15,574		12,802

The fair value of the Company’s options (excluding PSOs) was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:



	Year Ended April 30,
	2017	2016	2015
Expected volatility	37% - 38%	42% - 42%	43% - 50%
Risk-free interest rate	0.97% - 1.93%	1.50% - 1.92%	1.46% - 1.93%
Expected term (in years)	3.81 - 4.58	6.00	6.00
Dividend yield	—	—	—

The fair value of the Company’s PSOs was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:



	Year Ended April 30,
	2017	2016	2015
Expected volatility	38% - 40%	—	—
Risk-free interest rate	1.04% - 1.13%	—	—
Expected term (in years)	4.77 - 5.26	—	—
Dividend yield	—	—	—

The fair value of the Company’s ESPP was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:



	Year Ended April 30,
	2017	2016	2015
Expected volatility	38% - 51%	30% - 57%	36% - 57%
Risk-free interest rate	0.46% - 0.89%	0.10% - 0.46%	0.05% - 0.11%
Expected term (in years)	0.5	0.5	0.5
Dividend yield	—	—	—

Performance Stock Option Activity

Certain executive officers were granted PSOs in the beginning of fiscal year 2017 the vesting of which is based on achievement against fiscal year 2017 Net Bookings and Net Advertising Revenue targets and continued employment throughout the performance period. It was determined that a portion of these performance options were earned as of April 30, 2017. On June 1, 2017, 25% of the earned options will vest and the remaining options will vest monthly over the following thirty-six months.

In addition, the Company granted PSOs for certain other key employees in the beginning of fiscal year 2017 the vesting of which is based on achievement against fiscal year 2017 Net Advertising Revenue targets and continued employment throughout the performance period. The targets were not achieved related to these PSOs and these outstanding options were cancelled as of April 30, 2017. The Company did not grant PSOs prior to fiscal 2017.

Performance stock option activity for the year ended April 30, 2017 was as follows:



	Number of Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Balance as of April 30, 2016	—		$	—
Options granted	2,867		3.95
Options exercised	—		—
Options expired and canceled	(2,028	)	3.96
Balance as of April 30, 2017	839		$	3.94	6.10	$	638
Options vested and expected to vest at April 30, 2017	839		$	3.94	6.10	$	638
Options vested and exercisable as of April 30, 2017	—		$	—	0.00	$	—

The Company recognizes expense for PSOs that the Company determines are probable of vesting based on the grant date fair value. Adjustments to stock-based compensation expense are made each period based on changes in the Company’s estimate of the number of PSOs that are probable of vesting. The weighted-average grant date fair value of PSOs granted during the fiscal year ended April 30, 2017 was $1.45. No PSOs vested during the fiscal year ended April 30, 2017. As of April 30, 2017, total unrecognized stock-based expense, adjusted for estimated forfeitures, related to PSOs was$0.5 million, which is expected to be recognized over the next 3.09 years.

Stock Option Activity

Stock option activity was as follows:



	Number of Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Balance as of April 30, 2015	5,093		7.83
Options granted	2,947		4.83
Options exercised	(227	)	3.95
Options forfeited	(484	)	7.42
Options expired and canceled	(641	)	8.14
Balance as of April 30, 2016	6,688		$	7.83	6.43	$	591
Options granted	749		4.25
Options exercised	(160	)	2.36
Options forfeited	(503	)	5.78
Options expired and canceled	(1,226	)	9.81
Balance as of April 30, 2017	5,548		$	5.82	6.42	$	2,506
Options vested and expected to vest at April 30, 2017	5,548		$	5.82	6.42	$	2,506
Options vested and exercisable as of April 30, 2017	3,310		$	6.46	5.98	$	1,253

The summary of stock options excluding PSOs as of April 30, 2017 is as follows (number of options in thousands):



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Number of Options	Weighted Average Exercise Price
$1.83 - $3.03	260	$	2.46	3.00	219	$	2.36
$3.15 - $3.15	838	3.15		5.84	415	3.15
$3.42 - $3.65	91	3.55		5.00	23	3.42
$3.94 - $3.94	300	3.94		6.10	—	—
$4.00 - $4.36	675	4.27		7.40	175	4.31
$4.70 - $6.28	547	5.26		6.10	378	5.18
$6.42 - $6.42	1,036	6.42		8.13	475	6.42
$6.54 - $7.39	662	6.90		5.59	621	6.88
$7.53 - $9.51	1,016	8.71		6.45	883	8.84
$9.52 - $18.67	123	13.59		5.08	121	13.63
$1.83 - $18.67	5,548	$	5.82	6.42	3,310	$	6.46

The weighted-average grant date fair value of options granted during the fiscal years ended April 30, 2017, 2016 and 2015 was $1.36, $2.06 and $3.47, respectively.

The aggregate intrinsic value of options exercised during the fiscal years ended April 30, 2017, 2016 and 2015 was $0.3 million, $0.4 million and $4.5 million, respectively. The Company received $0.4 million, $0.9 million and $5.2 million in cash from option exercises in fiscal years ended April 30, 2017, 2016 and 2015, respectively. The Company issued shares from amounts reserved under the respective Plans upon the exercise of these stock options. The Company does not currently expect to repurchase shares from any source to satisfy such obligation under any of the Company’s stock option Plans.

The aggregate fair value of options vested during the fiscal years ended April 30, 2017, 2016 and 2015 was $4.3 million, $4.2 million, and $6.1 million, respectively. As of April 30, 2017, total unrecognized stock-based expense, adjusted for estimated forfeitures, related to stock options was $3.4 million, which is expected to be recognized over the next 2.24 years.

Stock Option Exchange

On August 2, 2016, the Company completed a tender offer in which the Company exchanged certain outstanding options to purchase shares of the Company's common stock under a one-time stock option exchange program (the “Exchange Program”) for its employees, excluding its executive officers and members of the Company's Board of Directors. The Exchange Program permitted eligible employees to exchange outstanding stock options granted under the Company's 2012 Equity Incentive Plan and 2005 Stock Plan, with exercise prices equal to or greater than $6.11 per share, for a lesser number of stock options having an exercise price per share equal to the market closing price on the date of grant, which was August 2, 2016. A total of 113 eligible participants participated in the Exchange Program. Options to purchase 599,517 shares of the Company’s common stock with a weighted-average exercise price of $9.25 per share were canceled and replaced with 241,399 stock options at an exercise price of $4.14. This activity is included in the stock option tables above. The replacement stock options vest annually over two years. We accounted for this option exchange as a stock option modification in accordance with ASC 718 Share-Based Compensation. The incremental stock-based compensation expense recorded as a result of this modification was immaterial.

Restricted Stock Activity

Restricted stock activity was as follows (number of restricted shares in thousands):



	Number of Restricted Shares		Weighted Average Grant Date Fair Value
Unvested balance as of April 30, 2015	3,488		$	7.88
Restricted shares granted	3,863		5.93
Restricted shares vested	(964	)	7.70
Restricted shares forfeited	(1,420	)	7.16
Unvested balance as of April 30, 2016	4,967		$	6.60
Restricted shares granted	3,962		4.24
Restricted shares vested	(1,556	)	6.71
Restricted shares forfeited	(945	)	5.94
Unvested balance as of April 30, 2017	6,428		$	5.22

The aggregate fair value of restricted stock shares vested during the fiscal years ended April 30, 2017, 2016 and 2015 was $10.5 million, $8.5 million, and $6.2 million, respectively. As of April 30, 2017, total unrecognized stock-based expense adjusted for estimated forfeitures, related to restricted stock was $20.0 million, which is expected to be recognized over the next 2.2 years.