Benefit Plans

9 Months Ended

Mar. 31, 2020

Benefit Plans

Benefit Plans

(9)  Benefit Plans

(a)  Equity Incentive Plan

The Company maintains a 2008 Equity Incentive Plan (the “2008 Plan”) and a 2014 Equity Incentive Plan (the “2014 Plan”) pursuant to which the Company has reserved shares of its common stock for issuance to its employees, directors and non-employee third parties. The 2014 Plan serves as the successor to the 2008 Plan and permits the granting of options to purchase common stock and other equity incentives at the discretion of the compensation committee of the Company’s board of directors. No new awards have been or will be issued under the 2008 Plan since the effective date of the 2014 Plan. Outstanding awards under the 2008 Plan continue to be subject to the terms and conditions of the 2008 Plan. The number of shares of common stock reserved for issuance under the 2014 Plan may increase each calendar year, continuing through and including January 1, 2024. The number of shares added each year may be equal to the lesser of (a) four and five tenths percent (4.5%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company’s board of directors. The Company’s board of directors determined that it would not increase the number of shares in reserve for issuance under the 2014 Plan as of January 1, 2020.

As of March 31, 2020, the Company had 12,518 shares allocated to the plans, of which 3,026 shares were subject to outstanding options or awards. Generally, the Company issues previously unissued shares for the exercise of stock options or vesting of awards; however, shares previously subject to 2014 Plan grants or awards that are forfeited or net settled at exercise or release may be reissued to satisfy future issuances.

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the nine months ended March 31, 2020:

	Number of Shares
Available for grant at July 1, 2019	9,759
RSUs granted	(642)
Shares withheld in settlement of taxes and/or exercise price	321
Forfeitures	93
Shares removed	(39)
Available for grant at March 31, 2020	9,492

Shares removed represents forfeitures of shares and shares withheld in settlement of taxes and/or payment of exercise price related to grants made under the 2008 Plan. As noted above, no new awards will be issued under the 2008 Plan.

Stock-based compensation expense related to stock options, restricted stock units (“RSUs”), and the Employee Stock Purchase Plan (as described below) is included in the following line items in the accompanying unaudited consolidated statements of operations and comprehensive income:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2020		2019		2020
Cost of revenues	$	1,192	$	1,362	$	3,734	$	4,057
Sales and marketing		1,799		3,466		5,496		10,813
Research and development		1,287		1,899		4,025		4,945
General and administrative		5,035		2,789		15,582		14,533
Total stock-based compensation expense	$	9,313	$	9,516	$	28,837	$	34,348

In addition, the Company capitalized $659 and $535 of stock-based compensation expense in its capitalized internal-use software costs in the three months ended March 31, 2019 and 2020, respectively, and $1,980 and $1,843 in the nine months ended March 31, 2019 and 2020, respectively.

Under the 2008 and 2014 Plans, the exercise price of each option cannot be less than the fair value of a share of common stock on the grant date. The options vested ratably over a three or four-year period and expire 10 years from the grant date. Stock-based compensation expense for the fair value of the options at their grant date is recognized ratably over the vesting schedule for each separately vesting portion of the award.

There were no stock options granted during the nine months ended March 31, 2019 or 2020. The table below presents stock option activity during the nine months ended March 31, 2020:

	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2019	1,525	$	12.24	3.95	$	124,373
Options exercised	(153)	$	11.15
Balance at March 31, 2020	1,372	$	12.37	3.20	$	104,172
Options vested and exercisable at March 31, 2020	1,372	$	12.37	3.20	$	104,172

The total intrinsic value of options exercised was $7,197 and $16,164 during the three months ended March 31, 2019 and 2020, respectively, and $20,901 and $18,244 during the nine months ended March 31, 2019 and 2020, respectively. As of March 31, 2020, the Company had recognized all stock-based compensation cost related to outstanding stock options and all outstanding options had vested.

The Company may also grant RSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company’s board of directors. RSUs generally vest over four years following the grant date. Certain RSU awards have time-based vesting conditions while other RSUs vest based on the achievement of certain revenue growth and Adjusted EBITDA margin targets in future fiscal years. For these performance-based RSUs, the Company recognizes stock-based compensation expense based upon the probable achievement of these aforementioned performance metrics. In the third quarter of fiscal 2020, the Company determined that the probable achievement of performance metrics for such outstanding performance-based awards would be lower as a result of the COVID-19 pandemic and its anticipated impact on the Company’s operating results. As a result, the Company reversed $2,053 in stock-based compensation expense associated with such awards during the three months ended March 31, 2020.

The following table represents restricted stock unit activity during the nine months ended March 31, 2020:

	Units	Weighted average grant date fair value
RSU balance at July 1, 2019	1,813	$	53.78
RSUs granted	642	$	99.72
RSUs vested	(708)	$	49.75
RSUs forfeited	(93)	$	59.72
RSU balance at March 31, 2020	1,654	$	73.57
RSUs expected to vest at March 31, 2020	1,442	$	71.83

At March 31, 2020, there was $50,414 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of 1.91 years.

(b)  Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“ESPP”), the Company can grant stock purchase rights to all eligible employees during specific offering periods not to exceed twenty-seven months. Each offering period will begin on the trading day closest to May 16 and November 16 of each year. Shares are purchased through employees’ payroll deductions, up to a maximum of 10% of employees’ compensation for each purchase period, at a purchase price equal to 85% of the lesser of the fair market value of the Company’s common stock at the first trading day of the applicable offering period or the purchase date. Participants may purchase up to $25 worth of common stock or 2 shares of common stock in any one year. The ESPP is considered compensatory and recorded as stock-based compensation expense.

As of March 31, 2020, a total of 950 shares of common stock were reserved for future issuances under the ESPP. The number of shares of common stock reserved for issuance under the ESPP may increase each calendar year, continuing through and including January 1, 2024. The number of shares added each year may be equal to the lesser of (a) 400, (b) seventy-five one hundredths percent (0.75%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (c) an amount determined by the Company’s board of directors. The Company’s board of directors determined that it would not increase the number of shares in reserve for issuance under the ESPP as of January 1, 2020.

The Company issued 45 shares upon the completion of its six-month offering period ending November 15, 2019. The Company recorded compensation expense attributable to the ESPP of $516 and $831 for the three months ended March 31, 2019 and 2020, respectively, and $1,401 and $2,208 for the nine months ended March 31, 2019 and 2020, respectively, which is included in the summary of stock-based compensation expense above. The grant date fair value of the ESPP offering periods was estimated using the following weighted average assumptions:

	Nine Months Ended
	March 31,
	2019		2020
Valuation assumptions:
Expected dividend yield	0	%	0	%
Expected volatility	33.5 - 38.3	%	38.6 - 43.3	%
Expected term (years)	0.5		0.5
Risk‑free interest rate	2.10 - 2.48	%	1.58 - 2.44	%

(c)  401(k) Plan

The Company maintains a 401(k) plan with a matching provision that covers all eligible employees. The Company matches 50% of employees’ contributions up to 8% of their gross pay. Contributions were $1,604 and $2,176 for the three months ended March 31, 2019 and 2020, respectively, and $4,138 and $5,947 for the nine months ended March 31, 2019 and 2020, respectively.