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Stockholders' Equity
6 Months Ended
Jun. 30, 2017
Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]  
Stockholders' Equity
Stockholders’ Equity
Stock Option Plan
In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of June 30, 2017, 11.9 million shares were reserved for future grants under the 2011 Stock Plan.
A summary of the activities related to the Company’s stock option plans is as follows:
 
 
 
Options Outstanding
 
 
 
 
 
Shares
Available
for Grant
 
Number of
Shares
 
Weighted-
Average
Exercise Price
(per share)
 
Weighted-Average Remaining
Contractual Term
(in years)
 
Aggregate
Intrinsic Value
(in thousands)
Balances as of December 31, 2016
13,289,953

 
22,437,347

 
$
44.83

 
 
 
 
Granted
(1,374,941
)
 
1,374,941

 
145.41

 
 
 
 
Exercised

 
(1,695,532
)
 
23.11

 
 
 
 
Expired

 
(1,561
)
 
$
3.25

 
 
 
 
Balances as of June 30, 2017
11,915,012

 
22,115,195

 
$
52.75

 
6.11
 
$
2,141,769

Vested and exercisable as of June 30, 2017
 
 
22,115,195

 
$
52.75

 
6.11
 
$
2,141,769



The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the second quarter of 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the second quarter of 2017. This amount changes based on the fair market value of the Company’s common stock.
A summary of the amounts related to option exercises, is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
2017
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
 
(in thousands)
Total intrinsic value of options exercised
$
101,727

 
$
37,268

 
$
208,824

 
$
68,725

Cash received from options exercised
$
14,826

 
$
4,232

 
$
39,004

 
$
7,768


Stock-based Compensation
Stock options granted are exercisable for the full ten year contractual term regardless of employment status. The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:
 
Three Months Ended
 
Six Months Ended
 
June 30,
2017
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
Dividend yield
%
 
%
 
%
 
%
Expected volatility
34
%
 
45
%
 
34% - 37%

 
45% - 50%

Risk-free interest rate
2.37
%
 
1.83
%
 
2.37%- 2.45%

 
1.83% - 2.04%

Suboptimal exercise factor
2.51

 
2.48

 
2.48 - 2.51

 
2.48

Weighted-average fair value (per share)
$
67.21

 
$
48.38

 
$
64.67

 
$
49.52

Total stock-based compensation expense (in thousands)
$
44,028

 
$
44,112

 
$
88,916

 
$
86,534

Total income tax impact on provision (in thousands)
$
14,477

 
$
16,571

 
$
29,178

 
$
32,534



The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior.
The Company calculates expected volatility based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.
In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.