Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

6. Stock-Based Compensation

The Company has included the following amounts for stock-based compensation expense, including the cost related to restricted stock units (“RSUs”), stock options, and market stock units (“MSUs,” a form of share price performance-based restricted stock unit) granted under the Company’s equity award plans including the Company’s employee stock purchase plan (“ESPP”) and the warrant issued in August 2011 (the “Warrant”) (for further information, see “Note 5: Stockholders’ Equity,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011), in the accompanying unaudited condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Services cost of sales	$	183	$	37	$	331	$	234
Engineering and technology		332		251		894		684
Sales and marketing		587		177		1,389		829
General and administrative		1,093		2,584		8,309		4,673
Discontinued operations		—		—		—		(159	)
Total	$	2,195	$	3,049	$	10,923	$	6,261
Excluded and capitalized as part of internal-use software	$	21	$	44	$	66	$	197

The stock based compensation expense for three and nine months ended September 30, 2011 includes $1.9 million fair value classified to general and administrative expenses for the Warrant issued in August 2011. The acquisition of the TaxACT business on January 31, 2012 fulfilled the Warrant agreement’s remaining performance condition and extended the Warrant’s expiration date. The extension of the Warrant’s term was a modification that resulted in a $4.3 million charge to stock-based compensation expense equal to the increase in the Warrant’s fair value and was recognized in general and administrative expenses in the first quarter of 2012. Additionally, subsequent to the modification, the Company treated the award as a derivative instrument, and the modification date fair value previously recognized in paid in capital was classified as a current liability. The Warrant’s fair value will be determined each reporting period until settled, with gains or losses related to the change in fair value recorded in other income (loss), net. The Company recorded a loss in other loss, net of $4.3 million from derivative instruments relating to the Warrant in the three and nine months ended September 30, 2012. The Company recorded $8.6 million in total expense relating to the modification and change in fair value for the Warrant for the nine months ended September 30, 2012.

In October 2011, the Company granted 200,000 stock options to a non-employee consultant who performed acquisition-related activities, and the award’s vesting was predicated on completing a “qualified acquisition” under the terms of the award. As a qualified acquisition did not occur in 2011, no expense was recorded for the year ended December 31, 2011. The expense for that award was recognized in the nine months ended September 30, 2012 due to the completion of the acquisition of the TaxACT business on January 31, 2012, which constituted a qualifying acquisition. The vesting of the award resulted in a charge of $903,000 to stock-based compensation expense in the nine months ended September 30, 2012 and was classified to general and administrative expenses.

The total intrinsic value and net shares issued for RSUs vested, MSUs vested, options exercised, and shares purchased pursuant to the ESPP during the three and nine months ended September 30, 2012 and 2011 is presented below (in thousands):

	Three months ended September 30,								Nine months ended September 30,
	2012				2011				2012				2011
	Intrinsic value		Net shares issued		Intrinsic value		Net shares issued		Intrinsic value		Net shares issued		Intrinsic value		Net shares issued
RSUs vested	$	356		18	$	857		67	$	3,258		191	$	4,598		362
MSUs vested		—		—		—		—		511		30		—		—
Options exercised		1,335		243		814		504		2,832		817		2,300		2,053
Shares purchased pursuant to ESPP		178		38		58		24		277		62		100		54
Total	$	1,869		299	$	1,729		595	$	6,878		1,100	$	6,998		2,469

To determine the stock-based compensation expense or derivative gain or loss that was recognized with respect to RSUs, the Warrant, and stock options in the three and nine months ended September 30, 2012 and 2011, the Company used the fair value at date of grant for RSUs, the Monte Carlo valuation method for the market stock unit grants, and the Black-Scholes-Merton option-pricing model for employee and non-employee stock option grants and the Warrant, basing expected volatility on historical volatility adjusted for special dividends for all awards. The following weighted-average inputs were used for stock option grants and the Warrant:

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Employee stock option grants:
Risk-free interest rate		0.38	%		0.64	%		0.47	%		1.05	%
Expected dividend yield		0	%		0	%		0	%		0	%
Expected volatility		44	%		46	%		44	%		47	%
Expected life		3.3 years			3.3 years			3.1 years			3.0 years
Non-employee stock option grant:
Risk-free interest rate		—			—			0.26	%		—
Expected dividend yield		—			—			0	%		—
Expected volatility		—			—			38-41	%		—
Expected remaining life		—			—			1.6 – 2.2 years			—
Market stock unit grants:
Risk-free interest rate		—			0.15	%		—			0.15	%
Blucora expected dividend yield		—			0	%		—			0	%
iShares Russell 2000 Index expected dividend yield		—			1.08	%		—			1.08	%
Blucora closing stock price		—		$	8.74			—		$	8.74
iShares Russell 2000 Index closing price		—		$	82.29			—		$	82.29
Blucora expected volatility		—			37.4	%		—			37.4	%
iShares Russell 2000 Index expected volatility		—			20.3	%		—			20.3	%
Measurement period		—			1.0 years			—			1.0 years
Warrant grant:
Risk-free interest rate		0.68	%		0.46	%		0.68% -0.89	%		0.46	%
Expected dividend yield		0	%		0	%		0	%		0	%
Expected volatility		47	%		39	%		46 – 48	%		39	%
Remaining contractual term		4.9 years			2.0 years			5.4 - 4.9 years			2.0 years