STOCK-BASED COMPENSATION

2014 Equity Incentive Plan

On March 26, 2014, the Company's 2014 Equity Incentive Plan ("2014 Plan") became effective. On March 27, 2014, the Company's earlier 2006 Global Share Plan ("2006 Plan") was terminated and all reserved-but-unissued shares under the 2006 Plan were added to the 2014 Plan and all shares underlying stock awards granted under the 2006 Plan that otherwise would return to the 2006 Plan instead were rolled into the 2014 Plan. The Company may not grant additional awards under the 2006 Plan, but the 2006 Plan will continue to govern outstanding awards previously granted under the 2006 Plan.

The 2014 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, only to employees of the Company or any parent or subsidiary of the Company, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to employees, directors and consultants of the Company, and the employees and consultants of any parent or subsidiary of the Company.

In January 2017, the Company effected an increase of 2,612,263 shares reserved under the 2014 Plan. As of June 30, 2017, the Company had 6,645,767 total shares of common stock reserved and available for grant under the 2014 Plan.

The following table summarizes the total number of shares available for grant under the 2014 Plan as of June 30, 2017:




	Shares Available for Grant

Balance, December 31, 2016	5,116,753
Authorized	2,612,263
Options granted	—
Options canceled	905,082
Awards granted	(3,191,974	)
Awards canceled	1,203,643
Balance, June 30, 2017	6,645,767

Stock Options

The following table summarizes the information about outstanding stock option activity:



	Options Outstanding
	Number of Shares Underlying Outstanding Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2016	6,219,774		$	6.15	6.42	$	6,056
Options granted	—		—
Options exercised	(396,865	)	1.75
Options canceled	(905,082	)	7.16
Balance, June 30, 2017	4,917,827		$	6.31	5.85	$	3,694
Options exercisable, June 30, 2017	3,743,487		$	6.11	5.15	$	3,689

The weighted-average grant-date fair value of options granted was $3.22 and $3.16 per share for the three and six months ended June 30, 2016, respectively, and the aggregate grant-date fair value of the Company's stock options granted was $2.6 million and $2.8 million for the three and six months ended June 30, 2016, respectively. There were no options granted during the three and six months ended June 30, 2017.

The aggregate intrinsic value of stock options exercised was $0.8 million and $0.3 million for the three months ended June 30, 2017 and 2016, respectively, and $1.2 million and $0.7 million for the six months ended June 30, 2017 and 2016, respectively. The intrinsic value for each share underlying an option represents the difference between the option exercise price per share and the closing stock price of a share of the Company’s common stock. The total grant-date fair value of the options vested was $0.9 million and $1.3 million for the three months ended June 30, 2017 and 2016, respectively, and $1.9 million and $4.5 million for the six months ended June 30, 2017 and 2016.

Restricted Stock Units

The Company currently grants Restricted Stock Units ("RSUs") to certain employees and directors. The RSUs typically vest over a period of time, generally one to three years, and are subject to the participant’s continuing service to the Company over that period. Until vested, RSUs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

The following is a summary of the Company’s RSU activity and related information for the three months ended June 30, 2017:



	Restricted Stock Units Outstanding
	Shares		Weighted Average Grant Date Fair Value Per Share

Balance, December 31, 2016	4,365,670		$	6.23
Awards granted	3,191,974		4.97
Awards vested	(970,734	)	5.09
Awards canceled	(1,108,066	)	6.20
Balance, June 30, 2017	5,478,844		$	5.55

The weighted-average grant-date fair value of RSUs granted was $4.96 and $6.43 per share for the three months ended June 30, 2017 and 2016, respectively, and was $4.97 and $6.24 for the six months ended June 30, 2017 and 2016, respectively. The aggregate grant-date fair value of RSUs granted was $11.8 million and $16.9 million, respectively for the three months ended June 30, 2017 and 2016, respectively, and was $15.9 million and $19.0 million for the six months ended June 30, 2017 and 2016, respectively. The aggregate fair value of shares vested as of the respective vesting dates was $2.4 million and $3.4 million, respectively, for the three months ended June 30, 2017 and 2016 and was $4.6 million and $5.9 million, respectively for the six months ended June 30, 2017 and 2016.

The number of RSUs vested includes shares that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as determined by the Company. During the three months ended June 30, 2017 and 2016, the Company withheld 25,209 and 36,758 shares of stock, for an aggregate value of $0.1 million and $0.2 million, respectively. During the six months ended June 30, 2017 and 2016, the Company withheld 95,577 and 95,548, for an aggregate value of 0.5 million and 0.5 million, respectively. The Company returned such shares to the 2014 Plan, which are available under the plan terms for future issuance.

The number of RSUs granted includes 378,644 shares of performance-based restricted stock units ("PBRSUs") that the Company granted to certain executives in the first quarter of 2017 pursuant to the 2014 Plan. Each PBRSU represents the right to receive one share of the Company's common stock upon vesting, subject to the Company's achievement of certain performance conditions. At each reporting period, the Company assesses the probability of the number of these PBRSUs expected to vest based on its achievement of the performance condition.

The number of RSUs granted also includes 358,000 shares of market-based restricted stock units (MBRSUs) that the Company granted to certain executives in June 2017 pursuant to the 2014 Plan. Each MBRSU represents the right to receive one share of the Company's common stock upon vesting subject to the Company's achievement of certain stock price targets. The Company estimated the fair value of the MBRSUs using the Monte Carlo option-pricing model on the date of grant as the MBRSUs contain both market and service conditions. The weighted average grant date fair value of these MBRSU's was $4.18 per share. The Company will record the total expense related to all of the MBRSUs on a graded-vesting method over the estimated term.

2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan ("ESPP") is a ten-year plan, effective in March 2014. The ESPP authorizes the Company to issue shares of common stock pursuant to purchase rights it grants to the Company's employees and those of its designated subsidiaries. In January 2017, the Company effected an increase of 1,000,000 shares reserved under the ESPP. As of June 30, 2017, the Company had 2,012,431 total shares of common stock reserved and available for issuance under the ESPP.

Under the ESPP, the Company grants stock purchase rights to all eligible employees, currently covering a one-year offering period ending December 1, 2017, with purchase dates at the end of each interim six-month purchase period. Employees purchase shares using employee payroll deductions at purchase prices equal to 85% of the lesser of the fair market value of the Company’s common stock at either the first day of each offering period or the date of purchase. The ESPP currently has a reset provision: If the closing price of the Company’s common stock on the last day of any purchase period during an offering period is lower than the closing sales price on the first day of the related offering period, that offering period will terminate upon the purchase of shares for such purchase period and participants will be automatically re-enrolled in the immediately following offering period. As a result, the reference price for purposes of determining the purchase price of shares for subsequent purchase periods for all participants of the new offering period resets to such lower price. No participant may purchase more than $25,000 worth of common stock in any calendar year, or 5,000 shares of common stock in any six-month purchase period. For the six months ended June 30, 2017 and 2016, the Company issued 563,174 and 646,278 shares, under the ESPP plan, respectively.

Stock Repurchase Program

In February 2016, the Company's board of directors authorized a stock repurchase program of up to $10.0 million, with stock purchases made from time to time in compliance with applicable securities laws in the open market or in privately negotiated transactions. The timing and amounts of any purchases will be based on market conditions and other factors including price, regulatory requirements and capital availability. The authorization does not require the purchase of any minimum number of shares, and the Company may suspend, modify or discontinue the program at any time without prior notice. In August 2017, our board of directors extended this program to June 30, 2018. As of June 30, 2017, we had repurchased under this program 573,406 shares of our common stock at a total price $3.2 million average purchase price $5.51 per share of our common stock. Approximately $6.8 million remains available as of June 30, 2017 for repurchases under this program. We are not obligated to repurchase any minimum or specific number or dollar amount of shares, and we may suspend or terminate the program at any time before its expiration as of June 30, 2018.

During the six months ended June 30, 2017, the Company repurchased a total of 208,779 shares of its common stock on the open market at a total cost of $1.0 million with an average price per share of $4.88. During the six months ended June 30, 2016, the Company repurchased a total of 261,515 shares at a total cost of $1.5 million with an average price per share of $5.55.

Determination of Fair Values

Weighted-average assumptions for the Company's stock options granted were as follows:



	Three Months Ended June 30,			Six Months Ended June 30,
	2017	2016		2017	2016
Stock options:
Expected term (in years)	N/A	5.77		N/A	5.78
Expected volatility	N/A	55.11	%	N/A	55.16	%
Risk free interest rate	N/A	1.50	%	N/A	1.50	%

Weighted-average assumptions to value MBRSUs under the Monte Carlo model were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
MBRSUs:
Expected volatility	46	%	53	%	46	%	53	%
Risk free interest rate	1.45	%	1.07	%	1.45	%	1.07	%

Weighted-average assumptions to value employee stock purchase rights under the Black-Scholes model were as follows:



	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
ESPP purchase rights:
Expected term (in years)	0.50 - 1.00	0.50 - 2.00	0.50 - 1.00	0.50 - 2.00
Expected volatility	34% - 39%	35% - 55%	34% - 39%	35% - 55%
Risk free interest rate	0.60% - 1.07%	0.07% - 0.51%	0.60% - 1.07%	0.07% - 0.51%

Stock-based Compensation Expense

The total stock-based compensation the Company recognized for stock-based awards in the consolidated statements of operations is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in thousands)
Cost of revenue	$	276	$	321	$	547	$	593
Research and development	1,065		1,366		1,753		2,711
Sales and marketing	1,501		2,063		2,795		3,831
General and administrative	1,602		1,704		2,902		3,215
Total stock-based compensation	$	4,444	$	5,454	$	7,997	$	10,350

The following table presents stock-based compensation expense by award-type:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in thousands)
Stock Options	$	820	$	1,185	$	1,703	$	2,331
Restricted Stock Units	3,193		3,544		5,463		6,691
Employee Stock Purchase Plan	431		725		831		1,328
Total stock-based compensation	$	4,444	$	5,454	$	7,997	$	10,350

As of June 30, 2017, unrecognized stock-based compensation related to outstanding stock options, RSUs and ESPP purchase rights, was $3.9 million, $26.9 million and $1.0 million, respectively, which the Company expects to recognize over weighted-average periods of 1.82 years, 2.24 years and 0.42 years, respectively.