Stock-Based Compensation

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

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 September 30, 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.

In June 2016, stockholders approved an amendment to the 2014 Plan that increased the number of shares available for grant by 3,900,000. As of September 30, 2016, 4,173,014 shares of Class A common stock were available for grant under the 2014 Plan.

Stock-based compensation expense for the nine months ended September 30, 2016 was $7.0 million and $3.6 million for options to purchase Class A common stock and restricted stock, respectively. Stock-based compensation expense for the nine months ended September 30, 2015 was $5.5 million and $2.4 million 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 September 30,				Nine months ended September 30,
	2016		2015		2016		2015
Cost of revenue
Subscription and support	$	122	$	92	$	365	$	275
Professional services	100		90		315		251
Operating expenses
Research and development	594		586		1,787		1,289
Sales and marketing	567		461		1,471		1,243
General and administrative	2,287		1,853		6,624		4,818
Total	$	3,670	$	3,082	$	10,562	$	7,876

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 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” as defined by SEC Staff Accounting Bulletin No. 110 (Topic 14.D.2). 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 (Separate Trading of Registered Interest and Principal of Securities) 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 September 30,		Nine months ended September 30,
	2016	2015	2016	2015
Expected term (in years)	6.1	6.1	6.1	6.1
Risk-free interest rate	1.15% - 1.32%	1.70% - 1.93%	1.15% - 1.90%	1.35% - 1.93%
Expected volatility	44.36% - 44.57%	46.09% - 47.07%	44.36% - 45.29%	42.35% - 47.07%

Stock Options

The following table summarizes the option activity under the Plans for the nine months ended September 30, 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	1,194,119		15.24
Forfeited	(251,073	)	14.58
Exercised	(322,228	)	4.22
Outstanding at September 30, 2016	7,589,951		$	12.18	7.4	$	45,209
Exercisable at September 30, 2016	4,107,422		$	9.69	6.3	$	34,677

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 nine months ended September 30, 2016 and 2015 was $3.4 million and $5.9 million, respectively.

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2016 and 2015 was $6.78 and $6.31, respectively. The total fair value of options vested during the nine months ended September 30, 2016 and 2015 was approximately $6.9 million and $6.8 million, respectively. Total unrecognized compensation expense of $20.4 million related to options will be recognized over a weighted-average period of 2.5 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 and restricted stock units 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 nine months ended September 30, 2016 was approximately $3.3 million. No restricted stock awards or units vested during the nine months ended September 30, 2015.

The following table summarizes the restricted stock activity under the Plan for the nine months ended September 30, 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	381,952		15.11
Forfeited	—		—
Vested	(246,690	)	13.35
Outstanding at September 30, 2016	735,287		$	14.29	$	13,331

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 September 30, 2016, there was approximately $7.6 million of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted-average period of 1.8 years.