STOCK-BASED COMPENSATION

For the three and six months ended June 30, 2015 and 2014, the components of stock-based compensation expense were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Stock options	$	1,689	$	1,245	$	2,836	$	2,459
Restricted stock awards and units	5,082		3,307		9,303		6,476
Performance-based restricted stock units	6,377		3,700		11,582		8,450
Employee stock purchase plan	988		378		2,085		944
Total stock-based compensation	$	14,136	$	8,630	$	25,806	$	18,329

Stock Options

The fair value of each stock option granted during the three and six months ended June 30, 2015 and 2014 was estimated on the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Expected volatility	43	%	44	%	43	%	43	%
Expected life	6 years		6 years		6 years		6 years
Risk-free interest rate	1.69	%	1.86	%	1.69	%	1.80	%
Dividend yield	—		—		—		—

The following table summarizes the status of the Company's stock options as of June 30, 2015, and changes during the six months then ended (in thousands, except per share data):



	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at January 1, 2015	2,330		$	18.93
Granted	106		50.71
Exercised	(356	)	14.61
Forfeited	(64	)	12.93
Expired	(1	)	0.31
Outstanding at June 30, 2015	2,015		$	21.56	6.26	$	67,629
Exercisable at June 30, 2015	1,415		$	13.79	5.34	$	57,663
Vested and expected to vest at June 30, 2015	1,966		$	20.85	6.19	$	67,226

The weighted-average grant-date fair value of stock options granted during the three months ended June 30, 2015 and 2014 was $22.11 and $17.10, respectively. The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2015 and 2014 was $22.11 and $22.64, respectively. The total intrinsic value of stock options exercised during the three months ended June 30, 2015 and 2014 was $5.1 million and $1.7 million, respectively. The total intrinsic value of stock options exercised during the six months ended June 30, 2015 and 2014 was $12.4 million and $8.5 million, respectively. The total fair value of stock options vested during the three months ended June 30, 2015 and 2014 was $1.1 million and $1.4 million, respectively. The total fair value of stock options vested during the six months ended June 30, 2015 and 2014 was $2.4 million and $2.1 million, respectively. As of June 30, 2015, there was $9.7 million in unrecognized compensation cost related to all non-vested stock options granted. This cost is expected to be recognized over a weighted-average remaining period of 2.36 years.

Restricted Stock Awards and Units

The following table summarizes the status of the Company’s nonvested time-based RSAs and RSUs as of June 30, 2015, and changes during the six months then ended (in thousands, except per share data):



	Number of Shares		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2015	1,383		$	30.64
Granted	601		47.44
Vested	(521	)	22.29
Forfeited	(73	)	34.20
Nonvested at June 30, 2015	1,390		$	40.85

The total fair value of RSAs and RSUs vested during the three months ended June 30, 2015 and 2014 was $18.2 million and $19.8 million, respectively. The total fair value of RSAs and RSUs vested during the six months ended June 30, 2015 and 2014 was $27.2 million and $28.2 million, respectively. As of June 30, 2015, there was $49.2 million in unrecognized compensation cost related to all nonvested RSAs and RSUs granted. This cost is expected to be recognized over a weighted-average remaining period of 2.69 years.

Performance-Based Restricted Stock Units

No PBRSUs were granted during the three months ended June 30, 2015 and 2014.

During the six months ended June 30, 2015, the Company granted 242 thousand PBRSUs ("2015 TSR PBRSUs") with market conditions based on the Company's total stockholder return ("TSR") relative to that of the Russell 2000 Index over the one-, two-, and three-year periods ending December 31, 2015, 2016, and 2017, respectively, vesting in equal parts upon those dates, and with the number of PBRSUs ultimately earned ranging from zero to 200% of the target number of shares.

During the six months ended June 30, 2014, the Company granted (a) 74 thousand PBRSUs ("2014 TSR PBRSUs") with market conditions based on the Company's TSR relative to that of the NASDAQ Composite Index for the year ending December 31, 2014, vesting annually over three years commencing on the first anniversary of the grant date, with the number of PBRSUs ultimately earned ranging from zero to 200% of the target number of shares; (b) 149 thousand PBRSUs ("2014 Revenue PBRSUs") with performance conditions based on revenue for the year ending December 31, 2014, vesting annually over three years commencing on the first anniversary of the grant date, with the number of PBRSUs ultimately earned ranging from zero to 200% of the target number of shares. The Company also granted an insignificant number of other PBRSUs with performance conditions based on achievement of certain individual performance objectives.

The fair value of PBRSUs with market conditions was estimated as of the date of grant using a Monte Carlo valuation model with the following weighted average assumptions:



	2015 TSR PBRSUs		2014 TSR PBRSUs
Expected volatility - Medidata	46	%	52	%
Expected volatility - comparison index	41	%	13	%
Expected life	2.88 years		0.89 years
Risk-free interest rate	0.99	%	0.12	%
Dividend yield	—		—

The following table summarizes the status of the Company’s PBRSUs based upon expected performance as of June 30, 2015, and changes during the six months then ended (in thousands, except per share data):



	Revenue		TSR		Long-Term		Other	Total Number of Shares		Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2015	303		151		1,115		9	1,578		$	27.42
Granted (based on performance at 100% of targeted levels)	—		242		—		—	242		66.99
Adjustment related to expected performance	—		66		(73	)	—	(7	)	44.87
Vested	(151	)	(76	)	—		—	(227	)	26.33
Forfeited	(16	)	(23	)	(8	)	—	(47	)	38.96
Nonvested at June 30, 2015	136		360		1,034		9	1,539		$	35.44

No PBRSUs vested during the three months ended June 30, 2015 and 2014. The total fair value of PBRSUs vested during the six months ended June 30, 2015 and 2014 was $10.6 million and $13.3 million, respectively. As of June 30, 2015, there was $21.1 million in unrecognized compensation cost related to all nonvested PBRSUs. This cost is expected to be recognized over a weighted-average remaining period of 0.87 years.

Employee Stock Purchase Plan

The fair value of ESPP shares was estimated using the Black-Scholes pricing model with the following weighted-average assumptions:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Expected volatility	51	%	49	%	51	%	49	%
Expected life	1.56 years		1.22 years		1.56 years		1.22 years
Risk-free interest rate	0.35	%	0.21	%	0.35	%	0.21	%
Dividend yield	—		—		—		—

During the three and six months ended June 30, 2015, 86 thousand shares were purchased under the ESPP at a weighted-average price of $37.93. During the three and six months ended June 30, 2014, 68 thousand shares were purchased under the ESPP at a weighted-average price of $36.39. As of June 30, 2015, there was $3.6 million in unrecognized compensation cost related to ESPP shares. This cost is expected to be recognized over a weighted-average remaining period of 0.95 years.

Modifications

During May 2015, the Company entered into a separation agreement with its previous chief financial officer that triggered a modification of a portion of his outstanding stock options, RSAs, and Long-Term PBRSUs, resulting in incremental expense of $1.3 million, all of which was recognized during the second quarter of 2015. Additionally, approximately $0.4 million of unamortized expense was accelerated from future periods, partially offset by $0.2 million in forfeitures of unvested awards. With regard to the Long-Term PBRSUs, incremental and accelerated expense amounts were based on expected performance as of June 30, 2015, and adjustments for any future changes in fair value will be recognized in the period in which those changes occur.

Incremental expense associated with other modifications during the three and six months ended June 30, 2015 was immaterial both individually and in the aggregate.