Stock-Based Compensation

We grant stock-based incentive awards to attract, motivate and retain qualified employees, non-employee directors and consultants, and to align their financial interests with those of our stockholders. We utilize stock-based compensation in the form of restricted stock awards, restricted stock units (together, “restricted stock”) and options to purchase Class A common stock.

As of March 31, 2016, awards outstanding under the 2009 Plan consisted of stock options, and awards outstanding under the 2014 Plan consisted of stock options, restricted stock awards and restricted stock units.

As of March 31, 2016, 746,029 shares of Class A common stock were available for grant under the 2014 Plan.

Stock-based compensation expense for the three months ended March 31, 2016 was $2.2 million and $1.1 million for options to purchase Class A common stock and restricted stock, respectively. Stock-based compensation expense for the three months ended March 31, 2015 was $1.6 million and $542,000 for options to purchase Class A common stock and restricted stock, respectively.

Stock-based compensation expense associated with stock options and restricted stock was recorded in the following cost and expense categories consistent with the respective employee or service provider’s related cash compensation (in thousands):



	Three months ended March 31,
	2016		2015
Cost of revenue
Subscription and support	$	118	$	96
Professional services	122		72
Operating expenses
Research and development	584		334
Sales and marketing	455		350
General and administrative	2,111		1,322
Total	$	3,390	$	2,174

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on historical volatilities for publicly traded stock options of comparable companies over the estimated expected life of the options. The expected term represents the period of time the options are expected to be outstanding and is based on the “simplified method.” We use the “simplified method” due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the options. The risk-free interest rate is based on yields on U.S. Treasury STRIPS with a maturity similar to the estimated expected term of the options. The fair value of our stock options was estimated assuming no expected dividends and the following weighted-average assumptions:



	Three months ended March 31,
	2016	2015
Expected term (in years)	6.0 - 6.1	6.1
Risk-free interest rate	1.48% - 1.90%	1.35% - 1.74%
Expected volatility	44.96% - 45.29%	42.35% - 44.08%
Forfeiture rate	0% - 4.80%	5.12% - 5.21%

Stock Options

The following table summarizes the option activity under the Plans for the three months ended March 31, 2016:



	Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
					(in thousands)
Outstanding at December 31, 2015	6,969,133	$	11.37	7.7	$	43,287
Granted	634,619	15.06
Forfeited	28,515	14.52
Exercised	74,621	3.80
Outstanding at March 31, 2016	7,500,616	$	11.75	7.6	$	17,721

Exercisable at March 31, 2016	3,613,938	$	8.40	6.3	$	17,337

Options to purchase Class A common stock generally vest over a three or four-year period and are generally granted for a term of ten years. The total intrinsic value of options exercised during the three months ended March 31, 2016 and 2015 was $648,000 and $114,000, respectively.

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2016 and 2015 was $6.75 and $5.50, respectively. The total fair value of options vested during the three months ended March 31, 2016 and 2015 was approximately $1.6 million and $2.2 million, respectively. Total unrecognized compensation expense of $22.5 million related to options will be recognized over a weighted-average period of 2.7 years.

Restricted Stock

We have granted restricted stock awards and restricted stock units to our executive officers that vest in three equal annual installments from the date of grant and restricted stock awards to non-employee members of our Board of Directors with one-year cliff vesting from the date of grant. The fair value for restricted stock awards and units is calculated based on the stock price on the date of grant. The total fair value of restricted stock awards and units vested during the three months ended March 31, 2016 was approximately $2.4 million. No restricted stock awards or units vested during the three months ended March 31, 2015.

The following table summarizes the restricted stock activity under the Plan for the three months ended March 31, 2016:



	Number of Shares		Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value
					(in thousands)
Outstanding at December 31, 2015	600,025		$	13.38	$	10,542
Granted	311,612		15.55
Forfeited	—		—
Vested	(176,665	)	13.40
Outstanding at March 31, 2016	734,972		$	14.29	$	8,562

Compensation expense associated with unvested restricted stock is recognized on a straight-line basis over the vesting period. The expense recognized each period is dependent upon our estimate of the number of shares that will ultimately be issued. At March 31, 2016, there was approximately $9.1 million of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted-average period of 2.3 years.