Stock-Based Compensation (Notes)

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

We grant stock-based incentive awards to attract, motivate and retain qualified employees, non-employee directors and consultants, and to align their financial interests with those of our stockholders. We utilize stock-based compensation in the form of restricted stock awards, restricted stock units, options to purchase Class A common stock and ESPP purchase rights. Prior to our corporate conversion in December 2014, awards were provided under the 2009 Unit Incentive Plan (the 2009 Plan). Immediately prior to our IPO, the 2009 Plan was amended to provide that no further awards will be issued thereunder, and our board of directors and stockholders adopted and approved our 2014 Equity Incentive Plan (the 2014 Plan and, together with the 2009 Plan, the Plans).

As of December 31, 2017, awards granted under the 2009 Plan consisted of stock options and awards granted under the 2014 Plan consisted of stock options, restricted stock awards and restricted stock units. There were no other grants of any other award types under the Plans.

In June 2016, stockholders approved an amendment to the 2014 Plan that increased the number of shares available for grant by 3,900,000. As of December 31, 2017, 1,999,415 shares of Class A common stock were available for grant under the 2014 Plan.

Our Employee Stock Purchase Plan (“ESPP”) became effective on June 13, 2017. Under the ESPP, eligible employees are granted options to purchase shares of Class A common stock at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. Options to purchase shares are granted twice yearly on or about July 15 and January 15 and are exercisable on or about the succeeding January 14 and July 14, respectively, of each year. As of December 31, 2017, 5,000,000 shares of Class A common stock were available for issuance under the ESPP. No participant may purchase more than $12,500 worth of Class A common stock in a six-month offering period. The ESPP’s initial offering period began in July 2017. As of December 31, 2017, we held employee contributions of approximately $1.4 million for future purchases under the ESPP included within accrued expenses and other current liabilities on the consolidated balance sheet. Accordingly, no shares of Class A common stock had been purchased or distributed pursuant to the ESPP as of December 31, 2017.

Stock-Based Compensation Expense

Stock-based compensation expense was recorded in the following cost and expense categories consistent with the respective employee or service provider’s related cash compensation (in thousands):


	Year ended December 31,
	2017		2016		2015
Cost of revenue
Subscription and support	$	738	$	493	$	363
Professional services	465		411		349
Operating expenses
Research and development	2,224		2,365		1,924
Sales and marketing	2,983		2,075		1,727
General and administrative	13,066		8,903		6,637
Total	$	19,476	$	14,247	$	11,000

The fair value of each option grant and ESPP purchase right is estimated on the date of grant using the Black-Scholes option-pricing model. For stock options, expected volatility is based on the historical volatility of our Class A common stock and historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the options. For the ESPP purchase rights, expected volatility is based on the historical volatility of our Class A common stock. The expected term represents the period of time the options and the ESPP purchase rights are expected to be outstanding. For stock options, the expected term is based on the “simplified method” as defined by SEC Staff Accounting Bulletin No. 110 (Topic 14.D.2). We use the “simplified method” due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the options. The expected term for the ESPP purchase rights approximates the offering period. The risk-free interest rate is based on yields on U.S. Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) with a maturity similar to the estimated expected term of the options and ESPP purchase rights.

The fair value of our stock options and ESPP purchase rights was estimated assuming no expected dividends and the following weighted-average assumptions:


	Year ended December 31,
	2017	2016	2015
Stock Options
Expected term (in years)	0.2 - 6.1	6.0 - 6.1	6.1
Risk-free interest rate	1.5% - 2.2%	1.2% - 2.1%	1.4% - 1.9%
Expected volatility	23.7% - 43.8%	43.0% - 45.3%	42.4% - 47.1%

ESPP
Expected term (in years)	0.5	—	—
Risk-free interest rate	1.2%	—%	—%
Expected volatility	28.5%	—%	—%

Stock Options

The following table summarizes the option activity under the Plans for the year ended December 31, 2017:


	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
					(in thousands)
Outstanding at December 31, 2016	7,532,455	$	12.22	7.2	$	19,988
Granted	2,111,253	16.10
Forfeited	(339,111)	14.93
Exercised	(1,158,820)	10.77
Outstanding at December 31, 2017	8,145,777	$	13.33	7.0	$	65,913

Exercisable at December 31, 2017	4,607,812	$	11.49	5.7	$	45,653

Options to purchase Class A common stock generally vest over a three- or four-year period and are generally granted for a term of ten years. The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $9.8 million, $3.9 million and $8.4 million, respectively.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2017, 2016 and 2015 was $6.79, $6.79 and $6.53, respectively. The total fair value of options vested during the years ended December 31, 2017, 2016 and 2015 was approximately $10.2 million, $9.3 million and $8.7 million, respectively. Total unrecognized compensation expense of $19.7 million related to options will be recognized over a weighted-average period of 2.5 years.

Restricted Stock Awards

We have granted restricted stock awards to our executive officers that vest in three equal annual installments from the date of grant and to non-employee members of our Board of Directors with one-year cliff vesting from the date of grant. The recipient of an award of restricted stock under the Plan may vote and receive dividends on the shares of restricted stock covered by the award. The fair value for restricted stock awards is calculated based on the stock price on the date of grant. The total fair value of restricted stock awards vested during the years ended December 31, 2017, 2016, and 2015 was approximately $2.7 million, $3.3 million, and $750,000 respectively.

The following table summarizes the restricted stock award activity under the Plan for the year ended December 31, 2017:


	Number of Shares	Weighted-Average Grant Date Fair Value

Unvested at December 31, 2016	353,335	$	13.40
Granted	—	—
Forfeited	—	—
Vested	(190,003)	13.40
Unvested at December 31, 2017	163,332	$	13.40

Compensation expense associated with unvested restricted stock awards is recognized on a straight-line basis over the vesting period. At December 31, 2017, there was approximately $0.2 million of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 0.1 years.

Restricted Stock Units

We have granted restricted stock units to our executive officers that vest in three equal annual installments from the date of grant and to non-employee members of our Board of Directors with one-year cliff vesting from the date of grant. The recipient of a restricted stock unit award under the Plan will have no rights as a stockholder until share certificates are issued by us, but, at the discretion of our Compensation Committee, has the right to receive a dividend equivalent payment in the form of additional restricted stock units. Additionally, until the shares are issued, they have no voting rights and may not be bought or sold. The fair value for restricted stock unit awards is calculated based on the stock price on the date of grant. The total fair value of restricted stock units vested during the year ended December 31, 2017 was approximately $3.6 million. No restricted stock units vested during the years ended December 31, 2016 or 2015.

The following table summarizes the restricted stock unit activity under the Plan for the year ended December 31, 2017:


	Number of Shares	Weighted-Average Grant Date Fair Value

Unvested at December 31, 2016	381,952	$	15.11
Granted	413,792	13.95
Forfeited	—	—
Vested⁽¹⁾	(221,672)	14.48
Unvested at December 31, 2017	574,072	$	14.51

(1) As of December 31, 2017, recipients of 191,485 shares had elected to defer settlement of the vested restricted stock units in accordance with our Nonqualified Deferred Compensation Plan.

Compensation expense associated with unvested restricted stock units is recognized on a straight-line basis over the vesting period. At December 31, 2017, there was approximately $5.0 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.6 years.

Employee Stock Purchase Plan

Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At December 31, 2017, there was approximately $27,000 of total unrecognized compensation expense related to the ESPP, which is expected to be recognized over a weighted-average period of 0.03 years.