STOCKHOLDERS’ EQUITY

Stock Repurchase Program

On July 31, 2017, the Company’s board of directors authorized a stock repurchase program under which the Company may repurchase up to $200.0 million of its outstanding common stock. The Company may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. During the year ended December 31, 2017, the Company repurchased on the open market 302,206 shares for an aggregate purchase price of approximately $12.6 million. The Company subsequently retired 301,106 of these shares and 1,100 shares remained as treasury stock as of December 31, 2017, which are carried at cost. The Company has since retired the shares held as treasury stock as of December 31, 2017.

Elimination of Dual-Class Common Stock Structure

On September 22, 2016, all outstanding shares of the Company’s Class A common stock and Class B common stock automatically converted into a single class of common stock (the “Conversion”) pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation. On September 23, 2016, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement and cancellation of the Class A common stock and Class B common stock. This certificate of retirement had the additional effect of eliminating the authorized Class A and Class B shares, thereby reducing the Company’s total number of authorized shares of common stock from 500,000,000 to 200,000,000.

The following table presents the number of shares authorized and issued and outstanding as of the dates indicated:



	December 31, 2017		December 31, 2016
	Shares Authorized	Shares Issued and Outstanding	Shares Authorized	Shares Issued and Outstanding
Stockholders’ equity:
Common stock, $0.000001 par value	200,000,000	83,724,916	200,000,000	79,429,833
Undesignated Preferred Stock	10,000,000	—	10,000,000	—

Common Stock Reserved for Future Issuance

As of December 31, 2017, the Company had reserved shares of common stock for future issuances in connection with the following:



	Number of Shares
Options outstanding	7,078,932
Restricted stock units and awards outstanding	7,249,205
Available for future stock option and restricted stock units and awards grants	4,845,772
Available for future ESPP offerings	2,518,929
Total reserved for future issuance	21,692,838

Equity Incentive Plans

The Company has outstanding awards under three equity incentive plans: the Amended and Restated 2005 Equity Incentive Plan (the “2005 Plan”); the 2011 Equity Incentive Plan (the “2011 Plan”); and the 2012 Equity Incentive Plan, as amended (the “2012 Plan”). In July 2011, the Company adopted the 2011 Plan, terminated the 2005 Plan and provided that no further stock awards were to be granted under the 2005 Plan. All outstanding stock awards under the 2005 Plan continue to be governed by their existing terms. Upon the effectiveness of the underwriting agreement in connection with the Company’s initial public offering (“IPO”), the Company terminated the 2011 Plan and all shares that were reserved under the 2011 Plan but not issued were assumed by the 2012 Plan. No further awards will be granted pursuant to the 2011 Plan. All outstanding stock awards under the 2011 Plan continue to be governed by their existing terms. Under the 2012 Plan, the Company has the ability to issue incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), performance units and performance shares. Additionally, the 2012 Plan provides for the grant of performance cash awards to employees, directors and consultants.

Stock Options

Stock options granted under the 2012 Plan are granted at a price per share not less than the fair value of a share of the Company’s common stock at date of grant. Options granted to date generally vest over a 4.0-year period, on one of four schedules: (a) 25% vesting at the end of one year and the remaining shares vesting monthly thereafter; (b) 10% vesting over the first year, 20% vesting over the second year, 30% vesting over the third year and 40% vesting over the fourth year; (c) ratably on a monthly basis; or (d) 35% vesting over the first year, 40% vesting over the second year and 25% vesting over the third year. Options granted are generally exercisable for up to 10 years. The Company issues new shares when stock options are exercised.

A summary of stock option activity for the year ended December 31, 2017 is as follows:



	Options Outstanding
	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding-December 31, 2016	8,018,941		$	21.71	6.10 years	$	147,673
Granted	920,850		34.60
Exercised	(1,519,771	)	19.74
Canceled	(341,088	)	44.78
Outstanding-December 31, 2017	7,078,932		$	22.70	5.56 years	$	145,613
Options vested and exercisable as of December 31, 2017	5,774,043		$	20.55	4.87 years	$	131,625

Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock as quoted on the New York Stock Exchange on a given date and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was approximately $28.0 million, $23.2 million and $26.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The weighted-average grant date fair value of options granted was $15.35, $10.16 and $22.48 per share for the years ended December 31, 2017, 2016 and 2015, respectively.

As of December 31, 2017, total unrecognized compensation costs related to unvested stock options was approximately $17.3 million, which is expected to be recognized over a weighted-average time period of 2.38 years.

RSUs

The cost of RSUs is determined using the fair value of the Company’s common stock on the date of grant. RSUs generally vest over a four-year period, on one of three schedules: (a) 25% vesting at the end of one year and the remaining vesting quarterly or annually thereafter; (b) 10% vesting over the first year, 20% vesting over the second year, 30% vesting over the third year and 40% vesting over the fourth year; or (c) ratably on a quarterly basis.

A summary of RSU activity for the year ended December 31, 2017 is as follows:



	Restricted Stock Units
	Number of Shares		Weighted- Average Grant Date Fair Value
Unvested December 31, 2016	7,090,465		$	32.43
Granted	4,647,404		37.22
Released ⁽¹⁾	(2,761,821	)	34.06
Canceled	(1,726,843	)	33.75
Unvested December 31, 2017	7,249,205		$	34.57

(1) Included in this balance is 58,983 shares vested but not issued due to net share settlement for payment of employee taxes

As of December 31, 2017, the Company had approximately $233.1 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over the remaining weighted-average vesting period of approximately 2.69 years.

Employee Stock Purchase Plan

The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations, during designated offering periods. At the end of each offering period, employees are able to purchase shares at 85% of the fair market value of the Company’s common stock on the last day of the offering period, based on the closing sales price of the Company's common stock as quoted on the New York Stock Exchange on such date.

During the years ended December 31, 2017, 2016, and 2015, employees purchased 373,580, 342,057, and 312,697 shares at a weighted-average purchase price per share of $29.23, $26.12, and $25.80, respectively, and the Company recognized stock-based compensation expense related to the ESPP of $2.0 million, $1.5 million, and $4.3 million, respectively, in the year ended December 31, 2017.

Stock-Based Compensation

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes-Merton option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term (weighted-average period of time that the options granted are expected to be outstanding), the volatility in the fair market value of the Company’s common stock, a risk-free interest rate, and expected dividends. No compensation cost is recorded for options that do not vest. The Company uses the simplified calculation of expected life and volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

The Company uses the straight-line method for expense attribution. For the years ended December 31, 2017, 2016 and 2015, the weighted-average assumptions are as follows:



	Year Ended December 31,
	2017		2016		2015
Dividend yield	—		—		—
Annual risk-free rate	2.14	%	1.53	%	1.78	%
Expected volatility	44.00	%	44.00	%	49.27	%
Expected term (years)	5.90		5.84		6.11

The following table summarizes the effects of stock-based compensation expense related to stock-based awards in the consolidated statements of operations during the periods presented (in thousands):



	Year Ended December 31,
	2017			2016			2015
Cost of revenue	$	4,010		$	2,446		$	1,117
Sales and marketing	28,100			27,098			21,962
Product development	47,280			36,323			23,431
General and administrative	21,025			20,394			14,332
Total stock-based compensation in income (loss) before incomes taxes	100,415			86,261			60,842
Benefit from income taxes	(1,407		)	(643		)	(402		)
Total stock-based compensation in income (loss)	$	99,008		$	85,618		$	60,440

During the years ended December 31, 2017, 2016 and 2015, the Company capitalized $5.8 million, $4.5 million and $3.0 million, respectively, of stock-based compensation expense as website and internal-use software costs.