Stockholders' equity

Stock repurchase program

On September 30, 2015, the Company's Board of Directors authorized a program to repurchase up to $300 million of the Company's Class A common stock. The repurchase program, which expires in September 2016, does not obligate the Company to acquire any specific number of shares and may be discontinued at any time by the Board of Directors. Share repurchases under the program may be made from time-to-time through open market transactions, block trades, privately negotiated transactions or otherwise, including under plans complying with both Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The Company has not repurchased any shares under the program.

Stock contributions

In the second quarter of 2015, the CEO contributed an aggregate 4,858,180 shares of Class B common stock to the Company without consideration per the terms of a Contribution Agreement dated December 28, 2011, and amended on May 11, 2015. Under the original Contribution Agreement, the CEO agreed to contribute back to the Company from time-to-time the same number of shares of common stock as are issued to a certain Company employee upon the exercise of certain stock options held by such employee. Pursuant to this agreement, the CEO contributed back to the Company 180,000 shares of Class B common stock in April 2015. In May 2015, the CEO contributed back to the Company 4,678,180 shares of Class B common stock pursuant to the amended agreement, representing all of the then remaining shares subject to the contribution obligations. All of the shares contributed by the CEO were retired in the second quarter of 2015.

Equity incentive plans

The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan), and the 2014 Employee Stock Purchase Plan (ESPP). No new options or awards have been granted under the 2010 Plan since June 2014. Outstanding options and awards under the 2010 plan continue to be subject to the terms and conditions of the 2010 Plan. The 2014 Plan serves as the successor to the 2010 Plan and provides for the granting of incentive and nonqualified stock options, restricted stock awards (RSAs), restricted stock units (RSUs), stock appreciation rights, stock bonus awards, and performance awards to qualified employees, non-employee directors, and consultants. Options granted under the 2014 Plan generally expire within 10 years from the date of grant and generally vest over four years. Options with performance or market-based conditions are generally subject to a required service period along with the performance or market condition. RSUs granted under the 2014 Plan generally vest annually over a four year period based upon continued service and are settled at vesting in shares of the Company's Class A common stock. The ESPP allows eligible employees to purchase shares of the Company's Class A common stock through payroll deductions at a price equal to 85% of the lesser of the fair market values of the stock as of the first date or the ending date of each six-month offering periods. For additional information regarding the Company's equity incentive plans, please refer to the footnotes to the audited financial statements contained in its 2014 Annual Report.

Stock option activity

A summary of the Company’s stock option activity and related information is as follows:



	Options outstanding
(shares in thousands)	Shares		Weighted- average exercise price		Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2014:	25,134		$	6.62	$	1,425,339
Granted	527		47.37
Exercised	(12,027	)	1.97
Forfeited/Cancelled	(249	)	18.65
Outstanding at September 30, 2015:	13,385		$	12.19	$	276,067

Exercisable at September 30, 2015	8,258		$	5.48	$	214,083
Vested and expected to vest at September 30, 2015	13,127		$	11.94	$	273,232

At September 30, 2015, there was $54.6 million of unearned stock-based compensation expense related to unvested options, which is expected to be amortized over a weighted average period of 2.31 years.

Restricted stock units

A summary of the Company’s RSU activity is as follows:



(shares in thousands)	Shares		Weighted- average grant date fair value
Non-vested shares at December 31, 2014	4,307		$	21.98
Granted	1,525		52.93
Vested	(1,372	)	16.53
Forfeited	(52	)	69.51
Non-vested shares at September 30, 2015	4,408		$	33.82

In June 2014, the Company granted an award of 4.5 million RSUs to the Chief Executive Officer (CEO RSUs), which included 1.5 million RSUs that vested immediately upon grant and 3.0 million RSUs that were subject to both a market-based condition and a service condition. In January 2015, the market-based condition was achieved and the Company recorded stock-based compensation expense of $4.3 million and $26.1 million during the three and nine months ended September 30, 2015.

At September 30, 2015, there was $107.3 million of unearned stock-based compensation related to RSUs (including $10.2 million related to the CEO RSUs), which is expected to be amortized over a weighted average period of 2.51 years.

Employee stock purchase plan

During the nine months ended September 30, 2015, employees purchased an aggregate of 436,924 shares under the ESPP at a price of $26.88 per share. During the three and nine months ended September 30, 2015, the Company recorded $1.0 million and $3.0 million of stock-based compensation expense related to the ESPP. At September 30, 2015, there was $1.7 million of unearned stock-based compensation related to the Company’s ESPP, which is expected to be recognized over 0.37 years.

Stock-based compensation expense

The Company measures compensation expense for all stock-based payment awards, including stock options, RSUs, and purchases under the Company's ESPP, based on the estimated fair values on the date of the grant. The fair value of stock options granted and purchases under the Company's ESPP is estimated using the Black-Scholes option pricing model. The fair value of RSUs is determined using the Company's stock price on the date of grant. There have been no significant changes in the Company’s valuation assumptions for measuring compensation expense from those disclosed in the footnotes to the audited financial statements contained in its 2014 Annual Report.

Total stock-based compensation expense recognized was as follows:



	Three months ended						Nine months ended
(in thousands)	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Stock-based compensation expense:
Cost of revenue	$	410		$	233		$	1,043		$	555
Research and development	4,872			2,428			12,117			5,486
Sales and marketing	3,516			3,225			9,514			6,293
General and administrative	9,072			8,027			39,886			39,809
Total stock-based compensation expense	17,870			13,913			62,560			52,143
Total tax benefit recognized	(7,323		)	(2,949		)	(22,867		)	(14,774		)
Decrease in net income	$	10,547		$	10,964		$	39,693		$	37,369