. Share option and

equity incentive plans

The Company has issued share options since

2003,

restricted shares since

2014

and RSUs since

2015

to incentivize employees and directors providing services to the Company. The Company currently maintains

two

equity compensation plans, the Amended and Restated

2008

Stock Incentive Plan and the

2013

Share Incentive Plan (the Plans). With the adoption of the

2013

Share Incentive Plan, the Company is no longer authorized to grant awards under the Amended and Restated

2008

Stock Incentive Plan.

November

2013,

in connection with the Company’s IPO, the Company adopted the

2013

Share Incentive Plan (the

2013

Plan) which provides for the grant of share options, restricted shares, RSUs and other share-based awards to employees, officers, directors and consultants of the Company. The

2013

Plan authorizes the Company to grant up to

2,684,563

ordinary shares with such amount automatically increasing annually on each

January

through

January

2023

of the number of shares outstanding on the close of business of the immediately preceding

December

, provided that the Board of Directors

may

limit the increase to a smaller amount or to no increase in any given year.

December

31,

2016,

there were

2,004,074

shares available for future issuance under the

2013

Plan.

Under both the

2008

Plan and the

2013

Plan, share options, and only under the

2013

Plan, restricted shares and RSUs, have been granted to employees, officers and directors who provide services to the Company. Options generally vest based on the grantee’s continued service with the Company during a specified period following grant or, in rare instances, based on the achievement of performance or other conditions as determined by the Board of Directors, and expire after

ten

years. Option awards to employees generally vest monthly over a

four

year period. For options granted prior to

2015,

the vesting percentage was generally

until the

second

anniversary of the vesting start date of the employee’s

first

option award under the

2008

Plan and either the

second

anniversary of the employee’s date of hire or the

first

day of the month following the

second

anniversary of the employee’s date of hire under the

2013

Plan. Effective with

2015,

the Company began granting options that vest in equal parts over

four

years starting on the vesting start date. Generally, restricted shares and RSUs vest based on the grantees’ continued service with the Company during a specified period following grant as follows:

40%

on the

second

anniversary of the grant date;

30%

on the

third

anniversary of the grant date; and

30%

on the

fourth

anniversary of the grant date.

The fair value of the options was estimated at the grant date using the Black-Scholes option pricing model, taking into account the terms and conditions upon which options are granted. The fair value of the options is amortized on a straight-line basis over the requisite service period of the awards. The weighted-average grant date fair value per share relating to share options granted under the Plans during the years ended

December

31,

2016,

2015

and

2014

was

$4.53,

$6.33

and

$9.32,

respectively. Share-based compensation expense for restricted shares and RSUs is calculated based on the grant date market price of the shares and is also amortized on a straight-line basis over the requisite service period of the awards.

The fair value of each option granted under the Plans has been calculated on the date of grant using the following assumptions:

	201 6		201 5		201 4
Expected dividend yield (%)		—		—		—
Expected volatility (%)		43.70		44.11		46.87
Risk-free interest rate (%)		1.53		1.66		1.86
Expected life of option (years)		6.16		6.19		6.19
Weighted-average share price ($)		10.29		14.15		19.66
Weighted-average exercise price ($)		10.29		14.15		19.66
Model used		Black-Scholes Model		Black-Scholes Model		Black-Scholes Model

Expected dividend yield:

The Company has

t paid and does not anticipate paying any dividends in the foreseeable future.

Expected volatility:

As the Company operated as a private company until

November

2013,

there is not sufficient historical volatility for the expected term of the options. Therefore, the Company used an average share price volatility over a historical period equal in length to the expected term, based on an analysis of reported data for a peer group of comparable companies which were selected based upon industry similarities. The Company intends to continue to use comparable companies in its volatility factor calculation until a sufficient amount of historical information regarding the volatility of its own share price becomes available.

Risk-free interest rate:

The Company determined the risk-free interest rate by using a weighted-average equivalent to the expected term based on the U.S. Treasury yield curve in effect as of the date of grant.

Expected

life of options

(in years):

Expected life of options represents the period that the Company’s share option grants are expected to be outstanding. As the Company operated as a private company until

November

2013,

there is not sufficient historical share data to calculate the expected term of the options. Therefore, the Company elected to utilize the “simplified” method to value share option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. The Company estimates forfeitures based on historical termination behavior. For the years ended

December

31,

2016,

2015

and

2014,

a forfeiture rate of

was applied.

The following table illustrates the number of ordinary shares and weighted-average exercise prices, or WAEP, of, and movements in, share options during the year:

	Number of ordinary shares			WAEP
Outstanding as of January 1, 2016		2,425,426		$	9.03
Granted		749,964			10.29
Exercised		(85,943	)		0.82
Forfeited		(239,667	)		14.27
Outstanding as of December 31, 2016		2,849,780			9.15
Vested or expected to vest as of December 31, 2016		2,790,851		$	9.08
Exercisable as of December 31, 2016		1,671,179		$	6.81

The following table illustrates the number of restricted shares and RSUs, and weighted-average fair value, or WAFV, of, and movements in, restricted shares and RSUs during the year:

	Number of ordinary shares			WAFV
Unvested balance as of January 1, 2016		366,739		$	19.72
Granted		108,361			10.21
Cancelled		(57,530	)		16.17
Vested		(88,105	)		22.99
Unvested balance as of December 31, 2016		329,465			16.34

As of

December

31,

2016,

there was

$5.0

million and

$3.3

million of total unrecognized compensation cost related to unvested share options and unvested restricted shares and RSUs, respectively, granted under the Plans. The cost for unvested share options and unvested restricted shares and RSUs is expected to be recognized over weighted-average periods of

2.4

years and

1.9

years, respectively.

The aggregate intrinsic value of all share options outstanding under the Plans as of

December

31,

2016

and

2015

was

$19.2

million and

$12.6

million, respectively. The aggregate intrinsic value of share options that were fully vested under the Plans as of

December

31,

2016

was

$15.6

million.

During the years ended

December

31,

2016,

2015

and

2014,

current and former employees of the Company exercised a total of

85,943,

41,222

and

65,054

share options, respectively, resulting in total proceeds of

$76,000

during

2016,

$20,000

during

2015

and

$14,000

during

2014.

The intrinsic value of share options exercised during the years ended

December

31,

2016,

2015

and

2014

was

$1.0

million,

$0.5

million and

$0.9

million, respectively. In accordance with Company policy, the shares were issued from a pool of shares reserved for issuance under the Plans described above.

A summary of the activity of the Company’s unvested share options is as follows:

	Number of shares			Weighted- average grant date fair value
Balance as of December 31, 2015		1,124,443		$	6.53
Granted		749,964			4.53
Vested		(479,295	)		5.92
Forfeited		(216,510	)		6.08
Balance as of December 31, 2016		1,178,602			5.61

The total fair value of shares vested for the years ended

December

31,

2016,

2015

and

2014

was

$2.9

million,

$1.9

million and

$1.0

million, respectively.

The impact on the Company’s results of operations from share-based compensation for the years ended

December

31,

2016

2015

and

2014

, was as follows:

(in thousands)	2016		2015		201 4
Cost of revenue	$	57	$	529	$	330
Research and development		548		86		87
Sales and marketing		1,725		1,045		949
General and administrative		2,689		1,825		1,155
Total share-based compensation	$	5,019	$	3,485	$	2,521

For the year ended

December

31,

2016,

the Company incurred shared-based compensation expense related to share options, and restricted shares and RSUs of approximately

$3.2

million and

$1.8

million, respectively. For the year ended

December

31,

2015,

the Company incurred shared-based compensation expense related to share options, and restricted shares and RSUs of approximately

$2.4

million and

$1.1

million, respectively. For the year ended

December

31,

2014,

the Company incurred shared-based compensation expense related to share options and restricted shares of approximately

$1.6

million and

$0.9

million, respectively.