Note 10—Stock-Based Compensation

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

	Year Ended December 31,
	2015		2016		2017
Platform operations	$	71	$	756	$	2,674
Sales and marketing		127		1,707		6,261
Technology and development		85		1,513		6,661
General and administrative		91		1,080		5,721
Total	$	374	$	5,056	$	21,317

Stock-Based Award Plans

The Company is authorized to issue stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based and cash-based awards under its 2016 Incentive Award Plan. As of December 31, 2017, 3.5 million shares remained available for grant under the Company’s 2016 Incentive Award Plan. The number of shares authorized for grant is subject to increase each year on January 1, equal to the lesser of (a) 4% of the common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (b) such smaller number of shares as determined by the board of directors.

Stock options granted under the Company’s stock incentive plans generally vest over four years, subject to the holder’s continued service through the vesting date, and expire no later than 10 years from the date of grant. Restricted stock awards and units, which are referred to collectively as restricted stock, generally vest over four years, subject to the holder’s continued service through the vesting date.

Stock Option Information

The following summarizes stock option activity:

	Shares Under Option (in thousands)			Weighted- Average Exercise Price		Weighted-Average Contractual Life (years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2016 (1)		5,429		$	4.94
Granted		1,473			44.20
Exercised		(1,932	)		1.33
Cancelled		(225	)		18.49
Outstanding as of December 31, 2017 (2)		4,745		$	17.96		7.4	$	136,085
Exercisable as of December 31, 2017		2,242		$	4.81		5.9	$	91,829

(1)	Includes options to purchase 389 and 5,040 shares of Class A and Class B common stock, respectively.

(2)	Includes options to purchase 1,780 and 2,965 shares of Class A and Class B common stock, respectively.

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 for the periods presented were as follows:

	Year Ended December 31,
	2015			2016			2017
Expected term (years)		6.0			6.0			6.0
Expected volatility		64.5	%		58.1	%		52.6	%
Risk-free interest rate		1.62	%		1.62	%		2.03	%
Estimated dividend yield		—	%		—	%		—	%

The weighted average grant date fair value per share of stock options granted for the years ended December 31, 2015, 2016 and 2017 and were $1.12, $11.61 and $22.48, respectively. The total intrinsic value of options exercised during the years ended December 31, 2015, 2016 and 2017 were $1.9 million, $13.7 million and $84.8 million, respectively.

Stock-based compensation expense related to stock options was $0.4 million, $1.7 million and $7.9 million for the years ended December 31, 2015, 2016 and 2017, respectively. At December 31, 2017, the Company had unrecognized employee stock-based compensation relating to stock options of approximately $36.7 million, which is expected to be recognized over a weighted-average period of 2.8 years.

On January 1, 2018, the number of shares authorized for grant under the Company’s 2016 Incentive Award Plan was increased by 1.7 million shares in accordance with plan provisions.

Restricted Stock and Restricted Stock Units

The following summarizes restricted stock activity:

	Shares (in thousands)			Weighted- Average Grant Date Fair Value Per Share
Unvested as of December 31, 2016		193		$	29.65
Granted		307			43.76
Vested		(54	)		30.06
Forfeited		(28	)		29.97
Unvested as of December 31, 2017		418		$	39.95

Stock-based compensation expense related to restricted stock was $0.1 million and $2.7 million for the years ended December 31, 2016 and 2017, respectively. At December 31, 2017, the Company had unrecognized employee stock-based compensation relating to restricted stock of approximately $15.6 million, which is expected to be recognized over a weighted-average period of 3.4 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. As of December 31, 2017, 0.5 million shares remained available for grant under this plan. The number of shares authorized for grant is subject to increase each year on January 1, equal to the lesser of (a) 800,000 shares, (b) 1% of the common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, and (c) such smaller number of shares as determined by the Company’s board of directors.

Under the ESPP, all eligible employees were auto-enrolled upon the IPO and each eligible employee was then permitted to 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 (pursuant to a truncated purchase period starting on the Company’s IPO) occurred 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 (1) the closing market price per share of Class A common stock on the employee’s enrollment into the applicable offering period and (2) 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:

	Year ended December 31,
	2016			2017
Expected term (years)		0.8			0.9
Expected volatility		48.9	%		45.9	%
Risk-free interest rate		0.69	%		1.22	%
Estimated dividend yield		—	%		—	%

The first offering period allowed for cash contributions in addition to payroll deductions, and as a result, stock-based compensation expense for this offering period was marked-to-market. On December 14, 2016, the cash contribution feature was removed and the final mark-to-market adjustment was recorded as of this date. The ESPP has a six month holding period (12 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 $3.3 million and $10.7 million for the years ended December 31, 2016 and 2017, respectively, and stock-based compensation related to the first offering period was $3.3 million and $10.1 million for the years ended December 31, 2016 and 2017, respectively. The first offering period is scheduled to expire immediately following the November 15, 2018 purchase date. At December 31, 2017, the Company had unrecognized employee stock-based compensation relating to ESPP awards of approximately $6.6 million, which is expected to be recognized over a weighted-average period of 0.7 years.

On January 1, 2018, the number of shares available for issuance under the Company’s Employee Stock Purchase Plan was increased by 0.4 million shares in accordance with plan provisions.