Employee benefit plans

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. Options granted under the 2014 Plan generally expire within 10 years from the date of grant and generally vest over four years. Restricted stock units (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 value of the stock as of the first date or the ending date of each six month offering period. For additional information regarding the Company's equity incentive plans, please refer to the audited financial statements contained in its 2015 Annual Report.

Stock options

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



	Options outstanding
	Shares (in thousands)		Weighted- average exercise price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2015:	13,081		$	11.82	6.70	$	108,846
Granted	2,516		11.33
Exercised	(1,442	)	1.53
Forfeited/Cancelled	(1,115	)	19.61
Outstanding at September 30, 2016:	13,040		$	12.20	6.41	$	86,550

Vested and expected to vest at September 30, 2016	12,803		$	12.12	6.37	$	85,781
Exercisable at September 30, 2016	8,132		$	9.28	5.51	$	73,387

The aggregate intrinsic value of the stock options outstanding as of September 30, 2016 represents the value of the Company's closing stock price on September 30, 2016 in excess of the exercise price multiplied by the number of options outstanding.

Restricted stock units

A summary of the Company’s RSU activity for the nine months ended September 30, 2016 is as follows:



	Shares (in thousands)		Weighted- average grant date fair value
Non-vested shares at December 31, 2015	4,638		$	32.15
Granted	6,912		12.15
Vested	(1,229	)	26.23
Forfeited	(1,031	)	26.10
Non-vested shares at September 30, 2016	9,290		$	18.73

In June 2014, the Company granted an award of 4.5 million RSUs covering shares of the Company's Class B common stock to the Company's CEO (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 vesting condition and a three-year service-based vesting condition. The market-based condition was achieved in January 2015. Stock-based compensation expense related to the CEO RSUs was $5.5 million and $26.1 million for the nine months ended September 30, 2016 and 2015, respectively.

Employee stock purchase plan. In the nine months ended September 30, 2016 and 2015, the Company issued 668,107 and 436,924 shares under its ESPP at weighted average prices of $9.15 and $26.88, respectively. The weighted-average fair value of each right to purchase shares of the Company's Class A common stock granted under the ESPP for these periods was $4.23 and $15.13, respectively.

Stock-based compensation expense. The Company measures compensation expense for all stock-based payment awards based on the estimated fair values on the date of the grant. The fair value of stock options granted and ESPP issuances is estimated using the Black-Scholes option pricing model. The fair value of RSUs is determined using the Company's closing stock price on the date of grant. There have been no significant changes in the Company’s valuation assumptions from those disclosed in its 2015 Annual Report.

The following table summarizes stock-based compensation included in the condensed consolidated statements of operations:



	Three months ended						Nine months ended
(in thousands)	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Cost of revenue	$	426		$	410		$	1,195		$	1,043
Research and development	8,039			4,872			21,135			12,117
Sales and marketing	3,816			3,516			10,699			9,514
General and administrative	6,185			9,072			18,572			39,886
Total stock-based compensation expense, before income taxes	18,466			17,870			51,601			62,560
Total tax benefit recognized	(5,573		)	(7,323		)	(15,723		)	(22,867		)
Total stock-based compensation expense, net of income taxes	$	12,893		$	10,547		$	35,878		$	39,693

At September 30, 2016, total unearned stock-based compensation of $164.2 million related to stock options, RSUs and ESPP is expected to be recognized over a weighted average period of 2.8 years.