Note 8—Stock-Based Compensation

Stock-Based Compensation Expense

Total stock-based compensation expense, by operating expense category, in the condensed consolidated statements of operations was as follows (in thousands):

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2016		2015		2016		2015
Platform operations	$	75	$	34	$	114	$	51
Sales and marketing	200		34		318		88
Technology and development	216		24		330		53
General and administrative	165		24		286		59

Total	$	656	$	116	$	1,048	$	251

Stock Options

A summary of stock option activity for the nine months ended September 30, 2016, is as follows:

	Shares		Weighted-		Weighted-Average
	Under Option		Average		Contractual
	(in thousands)		Exercise Price		Life
Outstanding at December 31, 2015	5,177		$	0.74	7.4 years
Granted	721		16.86
Exercised	(626	)	0.69
Cancelled	(65	)	2.51

Outstanding at September 30, 2016	5,207		2.96		7.0 years

The fair value of options on the date of grant is estimated based on the Black-Scholes option pricing model. The weighted average assumptions used to value options granted to employees during the three and nine months ended September 30, 2016 and 2015 were as follows:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2016		2015		2016		2015
Expected term (years)	6.1		5.9		6.0		6.0
Expected volatility	59.0	%	65.8	%	58.9	%	68.5	%
Risk-free interest rate	1.28	%	1.68	%	1.34	%	1.57	%
Estimated dividend yield	—	%	—	%	—	%	—	%

The weighted average grant date fair value per share of stock options granted for the three months ended September 30, 2016 and 2015 were $9.83 and $1.41, respectively. The weighted average grant date fair value per share of stock options granted for the nine months ended September 30, 2016 and 2015 were $9.27 and $0.89, respectively.

Stock-based compensation expense related to stock options totaled $0.4 million and $0.1 million for the three months ended September 30, 2016 and 2015, respectively. Stock-based compensation expense related to stock options totaled $0.8 million and $0.3 million for the nine months ended September 30, 2016 and 2015, respectively. At September 30, 2016, the Company had unrecognized employee stock-based compensation relating to stock options of approximately $7.5 million, which is expected to be recognized over a weighted-average period of 3.6 years.

Employee Stock Purchase Plan

In September 2016, the Company established an ESPP with 800,000 shares of Class A common stock available for issuance. In addition, on the first day of each calendar year beginning on January 1, 2017 and ending on (and including) January 1, 2026, the number of shares available for issuance under the ESPP will be increased by a number of shares equal to the least of (1) 800,000 shares, (2) 1% of the shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, and (3) such smaller number of shares as determined by our board of directors.

Under the ESPP, all eligible employees were auto-enrolled upon the IPO and each eligible employee may authorize payroll deductions of up to 100% of their compensation to purchase shares of Class A common stock, subject to applicable ESPP and statutory limits. The ESPP provides for offering periods generally up to two years, with purchases occurring and new offering periods commencing generally every six months. The first ESPP purchase occurs on December 29, 2016, and subsequent purchases will generally occur on May 15th and November 15th each year. At each purchase date, employees are able to purchase shares at 85% of the lower of (i) the closing market price per share of Class A common stock on the employee’s enrollment into the applicable offering period or (ii) the closing market price per share of Class A common stock on the purchase date. The ESPP has an automatic reset feature, whereby the offering period resets if the fair value of the Company’s common stock on a purchase date is less than that on the original offering date.

The fair value of ESPP shares was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:


		As of
		September 30, 2016
Expected term (years)		1.3
Expected volatility		51.8%
Risk-free interest rate		0.61%
Estimated dividend yield		—%

The first offering period allows for cash contributions in addition to payroll deductions, and as a result, stock-based compensation expense for this offering period is marked-to-market at each reporting date. Stock-based compensation expense for ESPP is recognized on a graded-vesting attribution basis over the requisite service period of each award. The ESPP also has a six month holding period (twelve months for the first offering period) with respect to common stock purchases. Due to the holding period, the Company applies a discount to reflect the non-transferability of the shares. Stock-based compensation expense related to ESPP totaled $0.2 million for the three and nine months ended September 30, 2016.