8. Stock-Based Compensation

General Award Terms

We issue stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to stockholder-approved equity compensation plans. Option awards are granted with an exercise price equal to the market closing price of our stock on the trading day prior to the grant date; those options generally vest over four years and expire within 7 or 10 years of grant. RSUs generally vest over four years. Historically, our practice has been to settle stock option exercises and RSU vesting through newly-issued shares.

Stock-Based Compensation Accounting

We recognize stock-based compensation expense on a straight-line basis, net of forfeitures, over the requisite service period for time-vested awards. Our share-based awards are accounted for as equity instruments. Our policy is to issue new shares upon the exercise of stock awards.

We utilize the Black-Scholes option valuation model for estimating the fair value of options granted. The Black-Scholes option valuation model incorporates assumptions regarding expected stock price volatility, the expected life of the option, the risk-free interest rate, dividend yield and the market value of our common stock. The expected stock price volatility is determined based on our stock’s historic prices over a period commensurate with the expected life of the award. The expected life of an option represents the period for which options are expected to be outstanding as determined by historic option exercises and post-vesting cancellations. The risk-free interest rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of the options granted. The expected dividend yield is zero, based on our history and expectation of not paying dividends on common shares.

The weighted average estimated fair value of option awards granted during the three months ended December 31, 2013 was $10.86. There were no option awards granted during the three months ended December 31, 2014. The weighted average estimated fair value of option awards granted during the six months ended December 31, 2014 and 2013 was $13.64 and $11.33, respectively.

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:

	Six Months Ended
	December 31,
	2014		2013
Risk-free interest rate	1.5	%	1.3	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.5		4.6
Expected volatility factor	35.0	%	39.3	%

The stock-based compensation expense and its classification in the unaudited consolidated statements of operations for the three and six months ended December 31, 2014 and 2013 are as follows:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2014		2013		2014		2013
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	339	$	327	$	677	$	628
Selling and marketing	754		710		1,504		1,821
Research and development	973		889		1,964		1,745
General and administrative	1,396		1,225		3,521		3,344
Total stock-based compensation	$	3,462	$	3,151	$	7,666	$	7,538

A summary of stock option and RSU activity under all equity plans for the six months ended December 31, 2014 is as follows:

	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in 000’s)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2014	1,246,528		$	20.30	7.14	$	32,543	617,269		$	25.74
Granted	281,085		43.44					331,742		43.44
Settled (RSUs)	—							(211,020	)	27.51
Exercised	(112,417	)	13.48					—
Cancelled / Forfeited	(24,058	)	25.22					(27,197	)	25.45
Outstanding at December 31, 2014	1,391,138		$	25.44	7.35	$	15,754	710,794		$	33.49

Vested and exercisable at December 31, 2014	800,889		$	19.50	6.43	$	12,831	—

Vested and expected to vest as of December 31, 2014	1,314,255		$	25.00	7.28	$	15,342	617,512		$	33.58

The weighted average grant-date fair value of RSUs granted during the six months ended December 31, 2014 was $43.44, and during the three and six months ended December 31, 2013 was $38.10 and $32.61, respectively. There were no RSUs granted during the three months ended December 31, 2014. During the three months ended December 31, 2014 and 2013, the total fair value of shares vested from RSU grants was $3.5 million and $5.0 million, respectively, and during the six months ended December 31, 2014 and 2013 was $7.7 million and $12.2 million, respectively.

At December 31, 2014, the total future unrecognized compensation cost related to stock options and RSUs was $5.9 million and $20.6 million, respectively, and is expected to be recorded over a weighted average period of 2.8 years each, respectively.

The total intrinsic value of options exercised during the three months ended December 31, 2014 and 2013 was $0.7 million and $2.7 million, respectively. The total intrinsic value of options exercised during the six months ended December 31, 2014 and 2013 was $3.0 million and $9.2 million, respectively. We received $1.5 million and $4.4 million in cash proceeds from option exercises during the six months ended December 31, 2014 and 2013, respectively. We paid $2.7 million and $4.2 million for withholding taxes on vested RSUs during the six months ended December 31, 2014 and 2013, respectively.

At December 31, 2014, common stock reserved for future issuance or settlement under equity compensation plans was 6.3 million shares.