Equity Incentive Plans and Stock-Based Compensation

Equity Incentive Plans

2014 Equity Incentive Plan

The 2014 Equity Incentive Plan (the “2014 Plan”) provides for the granting of stock options, restricted stock awards, restricted stock units (“RSUs”), performance-based RSUs (“PSUs”), stock appreciation rights, performance units and performance shares to our employees, consultants and members of our board of directors. In June 2015, our board of directors adopted and our stockholders approved an amendment and restatement of the 2014 Plan, which increased the number of shares available for issuance under the 2014 Plan by the number of shares granted under the 2008 Stock Plan (the “2008 Plan”) that were or may in the future be canceled or otherwise forfeited or repurchased after March 20, 2014. A maximum of 8,310,566 shares may become available from such awards granted under the 2008 Plan for issuance under the 2014 Plan.

As of December 31, 2016, we had 4,241,980 shares available for future grant. Annually, the shares authorized for the 2014 Plan increase by the least of (i) 8,000,000 shares, (ii) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year, or (iii) such other amount as determined by our Board of Directors. On January 1, 2017, the number of shares in the 2014 Plan was increased by 3,394,376 shares, representing 5% of the prior year end’s common stock outstanding. In addition, 266,799 shares granted under the 2008 Plan that had been canceled, forfeited or repurchased during the year ended December 31, 2016 became available for issuance under the 2014 Plan.

As of March 31, 2017, we had 7,129,441 shares available for future grant plus an additional approximately 49,000 shares granted under the 2008 Plan that have been canceled, forfeited or repurchased during the three months ended March 31, 2017.

2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan (the "2014 Purchase Plan") provides for twenty-four month offering periods with four six-month purchase periods in each offering period. Employees purchase shares in each purchase period at 85% of the market value of our common stock at the beginning of the offering period or the end of the purchase period, whichever is lower. If the market value of our common stock at the end of the purchase period is less than the market value at the beginning of the offering period, participants will be withdrawn from the then current offering period following their purchase of shares, and automatically will be enrolled in the immediately following offering period. Participants may contribute up to 15% of their eligible compensation, subject to certain limits.

As of March 31, 2017, we had 4,104,060 shares available for future issuance under the 2014 Purchase Plan.

Stock-Based Compensation

A summary of our stock-based compensation expense is as follows (in thousands):



	Three Months Ended March 31,
	2017		2016
Stock-based compensation by type of award:
Stock options	$	819	$	1,100
Stock awards	2,949		2,960
Employee stock purchase plan	548		552
	$	4,316	$	4,612

Stock-based compensation by category of expense:
Cost of revenue	$	283	$	365
Sales and marketing	1,536		2,085
Research and development	1,664		1,431
General and administrative	833		731
	$	4,316	$	4,612

As of March 31, 2017, we had $40.2 million of unrecognized stock-based compensation expense related to unvested stock-based awards which will be recognized over a weighted-average period of 2.4 years.

The fair value of the options is estimated as of the grant date using the Black-Scholes option-pricing model with the following assumptions:



	Three Months Ended March 31,
	2017	2016
Expected term (in years)	*	4.9
Risk-free interest rate	*	1.42%
Volatility	*	49%
Dividend rate	*	—%

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* We did not grant stock options during the three months ended March 31, 2017.

There were no employee stock purchase rights granted during the three months ended March 31, 2017 and 2016.

Stock Options

The following tables summarize our stock option activities and related information:



	Number of Shares (thousands)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
Outstanding as of December 31, 2016	7,868		$	4.82
Granted	—		—
Exercised	(728	)	$	2.84
Canceled (1)	(120	)	$	6.82
Outstanding as of March 31, 2017	7,020		$	5.00	6.2	$	30,187
Vested and exercisable as of March 31, 2017	5,247		$	4.87	5.6	$	23,268

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(1)	Includes 49,000 shares of canceled stock options from the 2008 Plan that were added to the 2014 Plan.

As of March 31, 2017, the aggregate intrinsic value represents the excess of the closing price of our common stock of $9.15 over the exercise price of the outstanding in-the-money options.

The following table provides information pertaining to our stock options (in thousands, except weighted-average fair value):



	Three Months Ended March 31,
	2017		2016
Fair value of options granted	*		$	1,603
Weighted-average fair value of options granted	*		$	2.38
Intrinsic value of options exercised	$	4,708	$	421

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* We did not grant stock options during the three months ended March 31, 2017.

Stock Awards

We have granted RSUs to our employees, consultants and members of our board of directors, and PSUs and market performance-based restricted stock units (“MSUs”) to certain executives.

In 2014 and 2015, we granted 540,000 MSUs and 40,000 MSUs, respectively, to certain executives. These MSUs will vest if the closing price of our common stock remains above certain predetermined target prices for 20 consecutive trading days within a 4-year period following the grant date, subject to continued service by the award holder. None of these MSUs were vested as of March 31, 2017.

In February 2016, we granted 547,000 PSUs with certain financial and operational targets. These PSUs are subject to service condition vesting requirements with 25% of the PSUs that become eligible to vest upon achievement of the performance targets scheduled to vest on each of the first, second, third and fourth year anniversary following February 2016. Actual performance resulted in participants achieving 80% of target, or approximately 0.4 million shares, of which approximately 0.1 million shares vested in February 2017.

In October 2016, we granted 60,641 PSUs with certain financial and operational targets. These PSUs are subject to service condition vesting requirements with scheduled vesting dates March 2017 through June 2018 to the extent they become eligible to vest upon achievement of the performance targets. None of these PSUs were vested as of March 31, 2017.

In March 2017, we granted 395,383 PSUs with certain financial targets. These PSUs will vest between ranges of 0% and 150% based on the actual performance, and are subject to service condition vesting requirements with 25% of the PSUs that become eligible to vest upon achievement of the performance targets scheduled to vest on each of the first, second, third and fourth year anniversary following February 2017. None of these PSUs were vested as of March 31, 2017.

The following table summarizes our stock award activities and related information:



	Number of Shares (thousands)		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Vesting Term (years)	Aggregate Intrinsic Value (thousands)
Outstanding as of December 31, 2016	5,959		$	5.81
Granted	1,092		$	9.24
Released	(657	)	$	5.68
Canceled	(247	)	$	6.78
Outstanding as of March 31, 2017	6,147		$	6.40	1.7	$	56,249

The aggregate intrinsic value of outstanding awards is calculated based on the closing price of our common stock of $9.15 on March 31, 2017.

The aggregate fair value of stock awards released as of the respective vesting dates was approximately $6.2 million and $0.7 million for the three months ended March 31, 2017 and 2016, respectively.

Stock Repurchase Program

On October 27, 2016, we announced that our board of directors authorized a share repurchase program for up to $20.0 million of our common stock over 12 months. Under the repurchase authorization, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. The repurchase authorization may be commenced, suspended or discontinued at any time at our discretion. As of March 31, 2017, we had $18.2 million remaining authorized to purchase shares.

There were no stock repurchases during the three months ended March 31, 2017.