8. Stock-Based Compensation

Stock Compensation Plans and General Award Terms

We have issued stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to our 2005 Stock Incentive Plan (the 2005 Plan) and our 2010 Equity Incentive Plan (the 2010 Plan). The 2005 Plan was approved by the stockholders on May 26, 2005 and expired on March 31, 2015.

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 September 30, 2015 and 2014 was $13.59 and $13.64, respectively.

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

	Three Months Ended
	September 30,
	2015		2014
Risk-free interest rate	1.4	%	1.5	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.6		4.5
Expected volatility factor	34.1	%	35.0	%

The stock-based compensation expense and its classification in the unaudited consolidated statements of operations for the three months ended September 30, 2015 and 2014 are as follows:

	Three Months Ended
	September 30,
	2015		2014
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	357	$	338
Selling and marketing	912		750
Research and development	824		991
General and administrative	2,330		2,125

Total stock-based compensation	$	4,423	$	4,204

A summary of stock option and RSU activity under all equity plans for the three months ended September 30, 2015 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, 2015	1,214,257		$	27.25	7.26	$	22,232	542,432		$	36.13
Granted	356,097		44.33					326,382		44.33
Settled (RSUs)	—							(89,900	)	36.62
Exercised	(39,313	)	15.46					—
Cancelled / Forfeited	(41,374	)	34.81					(47,848	)	35.47

Outstanding at September 30, 2015	1,489,667		$	31.43	7.59	$	13,439	731,066		$	39.78


Vested and exercisable at September 30, 2015	811,059		$	24.03	6.40	$	12,031	—

Vested and expected to vest as of September 30, 2015	1,413,489		$	30.95	7.52	$	13,278	649,061		$	39.78

The weighted average grant-date fair value of RSUs granted during the three months ended September 30, 2015 and 2014 was $44.33 and $43.44, respectively. During the three months ended September 30, 2015 and 2014, the total fair value of shares vested from RSU grants was $3.4 million and $4.3 million, respectively.

At September 30, 2015, the total future unrecognized compensation cost related to stock options and RSUs was $7.7 million and $25.8 million, respectively, and both are expected to be recorded over a weighted average period of 3.0 years.

The total intrinsic value of options exercised during the three months ended September 30, 2015 and 2014 was $0.9 million and $2.3 million, respectively. We received $0.6 million and $1.1 million in cash proceeds from option exercises during the three months ended September 30, 2015 and 2014, respectively. We paid $1.1 million and $1.4 million for withholding taxes on vested RSUs during the three months ended September 30, 2015 and 2014, respectively.

At September 30, 2015, common stock reserved for future issuance or settlement under equity compensation plans was 5.8 million shares.