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Stock-Based Compensation
 9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
Plans
The Company’s stock-based compensation program is a long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. As of September 30, 2020, the Company had one stock-based compensation plan under which it was granting equity awards. The Company is currently granting stock-based awards from its Second Amended and Restated 2014 Equity Incentive Plan (the "2014 Plan"), which was recently amended at the Company's Annual Meeting of Stockholders on June 3, 2020. Pursuant to the June 2020 amendment, the maximum number of shares of common stock available for issuance under the 2014 Plan was increased to 51,300,000. In addition, the amendment extended the term of the 2014 Plan to June 3, 2030 and updated the vesting provisions from monthly to annual vesting for annual director awards, consistent with the Company's current compensation program for non-employee directors.
As of September 30, 2020, there were 18,516,165 shares of common stock reserved for issuance pursuant to the Company’s stock-based compensation plans, including authorization under its 2014 Plan to grant stock-based awards covering 12,718,506 shares of common stock.
The Company also has an Employee Stock Purchase Plan (the “ESPP”), which provides for the issuance of a maximum of 16,000,000 shares of common stock. As of September 30, 2020, 2,675,657 shares have been issued under the ESPP. The Company recorded stock-based compensation costs related to the ESPP of $4.2 million and $4.0 million for the three months ended September 30, 2020 and 2019, respectively, and $8.8 million and $9.5 million for the nine months ended September 30, 2020 and 2019, respectively.
The Company used the Black-Scholes model to estimate the fair value of the ESPP awards with the following weighted-average assumptions:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Expected volatility factor
0.21 - 0.35
0.22 - 0.29
0.21 - 0.35
0.22 - 0.29
Risk free interest rate
0.13% - 1.56%
2.06% - 2.49%
0.13% - 2.06%
2.06% - 2.49%
Expected dividend yield
0.92% - 1.20%
1.31% - 1.39%
0.92% - 1.39%
1.27% - 1.39%
Expected life (in years)0.50.50.50.5
The Company determined the expected volatility factor by considering the implied volatility in six-month market-traded options of the Company's common stock based on third-party volatility quotes. The Company's decision to use implied volatility was based upon the availability of actively traded options on the Company's common stock and its assessment that implied volatility is more representative of future stock price trends than historical volatility. The risk-free interest rate was based on a U.S. Treasury instrument whose term is consistent with the expected term of the stock options. The current dividend yield has been updated for expected dividend yield payout. The expected term was based on the term of the purchase period for grants made under the ESPP.
Stock-Based Compensation
The detail of the total stock-based compensation recognized by income statement classification is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
Income Statement Classifications2020201920202019
Cost of subscription, support and services$3,542 $2,898 $9,708 $8,056 
Research and development28,803 25,505 81,386 78,761 
Sales, marketing and services28,411 23,838 76,640 68,188 
General and administrative24,413 16,728 61,120 47,518 
Total$85,169 $68,969 $228,854 $202,523 
Non-vested Stock Units
Service-Based Stock Units
The Company awards senior level employees and certain other employees non-vested stock units granted under the 2014 Plan that vest based on service. These non-vested stock unit awards vest 33.33% on each of the first, second and third anniversary subsequent to the grant date of the award. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. In addition, the Company awards non-vested stock units to all of its continuing non-employee directors, which represent the right to receive one share of the Company's common stock upon vesting. Previously, non-vested stock unit awards granted to the Company's continuing non-employee directors vested monthly in 12 equal installments. Beginning in 2020, new awards granted to non-employee directors will vest in full in one installment on the earlier of: (i) the first anniversary of the award date; or (ii) the day immediately prior to the Company’s next annual meeting of the stockholders following the award date.
Company Performance Stock Units
On April 1, 2020, the Company awarded senior level employees 294,605 non-vested performance stock unit awards granted under the 2014 Plan. The number of non-vested performance stock units that ultimately vest will be determined within sixty days following completion of the performance period ending December 31, 2022 and will be based on the achievement of specific corporate financial performance goals related to the Company’s annualized recurring revenue (ARR) growth measured during the period from January 1, 2020 to December 31, 2022. The number of non-vested stock units issued will be based on a graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 200% of the target number of non-vested stock units set forth in the award agreement. The Company is required to estimate the attainment expected to be achieved related to the defined performance goals and the number of non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. Compensation expense will be recorded through the end of the performance period on December 31, 2022 if it is deemed probable that the performance goals will be met. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed.
On April 6, 2020, the Company awarded certain senior level employees 90,756 non-vested performance stock unit awards granted under the 2014 Plan that vest based on the Company’s ARR growth during the relevant performance periods, which span January 1, 2020 through December 31, 2021. The number of non-vested stock units issued upon the vesting of the award will be based on a graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 125% of the target number of non-vested stock units set forth in the award agreement. The Company is required to estimate the attainment expected to be achieved related to the defined performance goals and the number of non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. Compensation expense will be recorded through the end of the performance period on December 31, 2021 if it is deemed probable that the performance goals will be met. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed.
Unrecognized Compensation Related to Stock Units
As of September 30, 2020, the total number of non-vested stock units outstanding, including company performance awards and service-based awards was 5,748,376. As of September 30, 2020, there was $480.0 million of total unrecognized compensation cost related to non-vested stock units. The unrecognized cost of the awards legally granted through September 30, 2020 is expected to be recognized over a weighted-average period of 1.66 years.