Common Stock Reserved —As of December 31, 2018 and 2017, the Company has authorized 500 million shares of common stock. The number of shares of common stock reserved for the vesting of RSUs and exercise of common stock options are as follows (in thousands):

	December 31, 2018		December 31, 2017
RSUs		1,983		2,085
Common stock options		1,840		2,315
		3,823		4,400

For shares reserved for issuance for the Conversion Option of the 2022 Notes and common stock warrants see Note 7.

Equity Incentive Plan —The Company’s 2007 Equity Incentive Plan (the “2007 Plan”) was terminated in connection with the IPO, and accordingly, no shares are available for issuance under the 2007 Plan. The 2007 Plan will continue to govern outstanding awards granted thereunder, the 2007 Plan provided for the grant of qualified incentive stock options and nonqualified stock options or other awards such as RSUs to the Company’s employees, officers, directors and outside consultants. The term of each option is fixed by the Company’s compensation committee and may not exceed 10 years from the date of grant. As of December 31, 2018, 1.3 million options to purchase common stock and no RSUs remained outstanding under the 2007 Plan.

On September 25, 2014, the Company’s board of directors adopted and the Company’s stockholders approved the 2014 Stock Option and Incentive Plan (the “2014 Plan”). The 2014 Plan became effective upon the closing of the Company’s IPO in the fourth quarter of 2014. The Company initially reserved 1,973,551 shares of its common stock, or the Initial Limit, for the issuance of awards under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the plan automatically increases each January 1, beginning on January 1, 2015, by 5% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number of shares as determined by the compensation committee. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. The term of each option is fixed by the Company’s compensation committee and may not exceed 10 years from the date of grant. As of December 31, 2018, 563 thousand options to purchase common stock and 2.0 million RSUs remained outstanding under the 2014 Plan.

Equity Compensation Expense —The Company’s equity compensation expense is comprised of awards of options to purchase common stock, RSUs, and stock issued under the Company’s ESPP.

The following two tables show stock compensation expense by award type and where the stock compensation expense is recorded in the Company’s consolidated statements of operations:

	Year Ended December 31,
	2018		2017		2016
	( in thousands)
Options	$	5,108	$	4,948	$	5,202
ESPP		2,833		1,233		1,093
RSUs		68,320		41,136		26,380
Total stock-based compensation	$	76,261	$	47,317	$	32,675

	2018		2017		2016
	(in thousands)
Cost of revenue, subscription	$	1,476	$	658	$	512
Cost of revenue, service		2,924		2,327		1,640
Research and development		23,328		12,816		8,828
Sales and marketing		31,099		19,016		13,352
General and administrative		17,434		12,500		8,343
Total stock-based compensation	$	76,261	$	47,317	$	32,675

Excluded from stock-based compensation expense is $2.4 million of capitalized software development costs in 2018, $1.6 million in 2017, and $1.2 million in 2016.

Stock Options —The fair value of employee options is estimated on the date of each grant using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2018		2017		2016
Risk-free interest rate (%)	2.62-2.85		1.74-2.09		1.38 - 1.41
Expected term (years)	5.06-6.42		5.18-6.21		5.08 - 6.21
Volatility (%)	41.34-43.55		39.4-43.7		38.0 - 41.0
Expected dividends		—		—		—

The weighted-average grant-date fair value of options granted was $51.48 per share in 2018, $24.56 per share in 2017, and $16.97 per share in 2016.

The interest rate was based on the U.S. Treasury bond rate at the date of grant with a maturity approximately equal to the expected term. The expected term of options granted to employees was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option. The expected volatility for the Company’s common stock was based on an average of the historical volatility of a peer group of similar public companies. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. Forfeitures of share-based awards prior to vesting results in a reversal of previously recorded stock-compensation expense associated with such forfeited awards

Prior to the Company’s IPO, the fair value of the Company’s common stock was determined by the Board of Directors at each award grant date based upon a variety of factors, including the results obtained from independent third-party valuations, the Company’s financial position and historical financial performance, the status of technological developments within the Company’s products, the composition and ability of the engineering and management team, an evaluation of benchmark of the Company’s competition, the climate in the marketplace, the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including redeemable convertible preferred stock), the effect of the rights and preferences of the preferred stockholders and the prospects of a liquidity event, among others. After the Company’s IPO, the fair value of the Company’s common stock is the closing price of the stock on the date of grant.

	Options (in thousands)			Weighted- Average Exercise Price		Weighted- Average Remaining Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding—January 1, 2018		2,315		$	16.69		5.3	$	165,974
Granted	146				113.95
Exercised		(608	)	17.87
Forfeited/expired		(13	)	32.01
Outstanding—December 31, 2018		1,840			23.89		4.6	$	187,342
Options vested or expected to vest—December 31, 2018		1,840		$	23.89		4.6	$	187,342
Options exercisable—December 31, 2018		1,576		$	14.38	3.9		$	175,466

Total unrecognized compensation cost related to the nonvested options was $7.6 million at December 31, 2018. That cost is expected to be recognized over a weighted-average period of 2.7 years as of December 31, 2018.

Restricted Stock Units —RSUs vest upon achievement of a service condition and, prior to six months after the Company’s IPO, a performance condition. As soon as practicable following each vesting date, the Company will issue to the holder of the RSUs the number of shares of common stock equal to the aggregate number of RSUs that have vested. Notwithstanding the foregoing, the Company may, in its sole discretion, in lieu of issuing shares of common stock to the holder of the RSUs, pay the holder an amount in cash equal to the fair market value of such shares of common stock. The service condition is a time-based condition met over a period of four years, with 25% met after one year, and then in equal monthly or quarterly installments over the succeeding three years, or over a period of four years, with equal quarterly installments over those four years. The performance condition was met six months following the Company’s IPO. Upon completion of the Company’s IPO the Company began recording stock-based compensation expense based on the grant-date fair value of the RSUs using the accelerated attribution method for RSUs granted prior to its IPO and using the straight-line method for RSUs granted following its IPO. The total stock-based compensation expense expected to be recorded over the remaining life of outstanding RSUs is approximately $150.1 million at December 31, 2018. That cost is expected to be recognized over a weighted-average period of 2.7 years as of December 31, 2018. As of December 31, 2018, there are 2.0 million RSUs expected to vest with an aggregate intrinsic value of $248.9 million. The total fair value of RSUs vested was approximately $65.0 million in the year ended December 31, 2018, $ 48.6 million in the year ended December 31, 2017, and $24.0 million in the year ended December 31, 2016.

The following table summarizes the activity related to RSUs for the year ended December 31, 2018:

	RSUs Outstanding
	Shares (in thousands)			Weighted- Average Grant Date Fair Value Per Share
Unvested and outstanding at January 1, 2018		2,085		$	54.12
Granted		1,162			110.43
Vested		(1,110	)		58.60
Canceled		(154	)		66.00
Unvested and outstanding at December 31, 2018		1,983		$	83.67

Employee Stock Purchase Plan— On September 25, 2014, the Company’s board of directors adopted and the Company’s stockholders approved (the “ESPP”). The ESPP became effective upon the closing of the Company’s IPO. The ESPP authorizes the issuance of up to a total of 1,785,021 shares of common stock to participating employees and allows eligible employees to purchase shares of common stock at a 15% discount from the fair market value of the stock as determined on specific dates at six-month intervals. The offering periods for the ESPP commence on June 1 and November 1 of each year.

The following table summarizes the activity related to ESPP (in thousands, except the weighted average purchase price):

	Shares Issued (in thousands)		Weighted- Average Purchase Price		Total Cash Proceeds (in thousands)
2018		148		80.21		11,863
2017		94		38.83		3,635
2016		70		38.98		2,721