(12) Stockholders’ Equity

(a) Convertible Preferred Stock

In December 2012, the Board approved the Company’s Amended and Restated Certificate of Incorporation to be effective immediately prior to the closing of the Company’s IPO in 2013. Under the Amended and Restated Certificate of Incorporation, 25,000,000 shares of preferred stock are authorized, par value $0.0001 per share, all of which are undesignated.

Immediately prior to the completion of the Company’s IPO in 2013, all shares of the Company’s outstanding convertible preferred stock automatically converted into 21,444,251 shares of common stock. As of December 31, 2014 and 2013, the Company has no issued and outstanding convertible preferred stock. Dividends on the preferred stock of 8% of the per share liquidation preference were payable when and if declared by the Board of Directors. Dividends were not cumulative. The dividend requirements of the preferred stock must be satisfied prior to the payment of any dividends or distributions with respect to the Company’s common stock. Holders of preferred stock were entitled to voting rights equivalent to the number of common shares into which their shares were convertible.

(b) Common Stock

In December 2012, the Board approved the Company’s Amended and Restated Certificate of Incorporation to be effective immediately prior to the closing of the Company’s IPO. Under the Amended and Restated Certificate of Incorporation, 500,000,000 shares of common stock is authorized, par value $0.0001 per share. Of these shares, 38,592,808 and 37,583,945 are issued and outstanding as of December 31, 2014 and December 31, 2013, respectively.

The Company has never declared or paid cash dividends on its common stock. It currently intends to retain any future earnings and does not expect to pay any dividends in the foreseeable future.

Under the 2010 Stock Option Plan (the “2010 Plan”), which was an amendment and restatement of the Company’s prior option plan, the Company granted incentive and nonqualified stock options to employees, directors and consultants of the Company at an option price not less than 85% of the fair value of the common stock at the date of grant. Under the 2012 Stock Option and Incentive Plan (the “2012 Plan”), the Company may grant stock options, stock appreciation rights, restricted stock units, stock awards, cash-based awards and performance share awards. Options vest according to the grant document. Options currently outstanding generally vest in equal amounts over periods not to exceed four or five years and have a maximum life of ten years. The 2012 Plan became effective, and the 2010 Plan was terminated, as of the closing of the Company’s IPO in 2013.

As of December 31, 2014, the Company was authorized to grant up to 4,855,057 shares underlying equity awards. There were 2,471,172 shares available for future grant as of December 31, 2014.

For the years ended December 31, 2014, 2013 and 2012, the Company recorded $0, $31,000 and $0, respectively, of excess tax benefits from stock-based compensation. No stock-based compensation cost was capitalized for any of the years presented as it was insignificant for all years presented.

The following table shows a summary of the stock-based compensation in the Company’s consolidated statements of operations during the years presented:


		Year Ended December 31,
		2014	2013		2012
		(in thousands)
Stock-based compensation expense:
Marketing	$	1,038	$	417	$	282
Technology and development		3,223		1,294		727
Customer service and operations		844		415		256
General and administrative*		4,311		1,943		1,180
Total stock-based compensation	$	9,416	$	4,069	$	2,445

* Note: 2014 stock-based compensation expense (in thousands) excludes $60.1 of issued unrestricted stock as annual retainer to certain non-employee directors of the Company for their 2015 services.

Stock Options

The weighted-average grant date fair value of options granted was $11.14, $10.90 and $3.92 per option for the years ended December 31, 2014, 2013 and 2012, respectively.

The Company utilizes the Black-Scholes model for valuing its stock options. This model utilizes several inputs including fair value of the Company’s common stock, volatility, expected term, risk free interest rate and dividend yield. Prior to the Company’s IPO in 2013, the fair value of the Company’s common stock was determined by the Company’s Board of Directors considering numerous objective and subjective factors. Since the completion of the IPO, the Company has determined the fair value of the common stock underlying the stock options based on the closing price of the common stock at the date of grant. Volatility is based on an average of the historical volatilities of an index fund and industry peers with characteristics similar to those of the Company. The expected term of the options is determined using the “simplified” method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. The risk-free interest rate is based on the implied yield of U.S. Treasury zero coupon bonds with a term comparable to the expected option term. Since the Company currently has no history or expectation of paying dividends on its common stock, a dividend yield of zero was used. Expected forfeitures are based on the Company’s historical experience.

The following table presents the weighted-average assumptions used to estimate the fair value of the stock options granted in the Company’s consolidated financial statements:


	Year Ended December 31,
	2014		2013		2012
Expected term (in years)	6.2		6.1		6.3
Risk-free interest rate	2.01	%	1.35	%	1.26	%
Dividend yield	None		None		None
Volatility rate	43	%	44	%	42	%

The Company’s stock option activity and related information was as follows:


		Weighted-			Exercisable
		Average			Weighted-
	Options	Exercise		Options	Average
	Outstanding	Price		Exercisable	Exercise Price
Outstanding as of December 31, 2013	6,045,912	$	7.72	3,195,701	$	3.64
Granted	1,407,572		25.07
Exercised*	(942,560)		3.57
Forfeited and cancelled	(378,283)		19.30
Outstanding as of December 31, 2014	6,132,641	$	11.62	3,534,370	$	7.43

* Note: exercised options in the table above differ from the issued common stock in the consolidated statements of stockholders’ equity primarily due to settlement timing.

The summary of options outstanding and options exercisable as of December 31, 2014 is shown below:


	Outstanding Options		Options Exercisable
		Weighted		Weighted
		Average		Average
		Remaining		Remaining
	Number	Contractual	Number	Contractual
Exercise Price (Range)	Outstanding	Life (Years)	Exercisable	Life (Years)

$ 0.00 - 3.00	1,055,390	1.69	1,055,390	1.69
4.48	1,190,830	4.64	1,094,967	4.52
6.84	1,323,232	6.88	568,877	6.48
12.72 - 14.12	831,004	7.92	355,319	7.52
17.92	7,500	9.28	—	—
20.82	295,157	8.19	106,591	8.03
22.68	78,813	9.41	—	—
25.38	186,628	8.27	69,731	7.79
26.52	1,017,499	8.62	237,493	7.23
33.19	146,588	8.78	46,002	8.73
	6,132,641	6.17	3,534,370	4.70

As of December 31, 2014, there were 6,081,114 options that had vested or were expected to vest with a weighted-average exercise price of $11.56 and a weighted-average contractual life of 6.2 years. As of December 31, 2013, there were 5,988,706 options that had vested or were expected to vest with a weighted-average exercise price of $7.67 and a weighted-average contractual life of 6.6 years.

The aggregate intrinsic value of options that had vested or were expected to vest was $50.3 million as of December 31, 2014. The aggregate intrinsic value of options that had vested or were expected to vest was $118.9 million as of December 31, 2013.

The aggregate intrinsic value of options outstanding was $50.4 million and the aggregate intrinsic value of options exercisable was $39.4 million as of December 31, 2014. The aggregate intrinsic value of options outstanding was $119.7 million and the aggregate intrinsic value of options exercisable was $75.8 million as of December 31, 2013.

The aggregate intrinsic value of options exercised was approximately $18.1 million, $28.3 million and $0.5 million for 2014, 2013 and 2012, respectively. The total grant date fair value of options vested was approximately $8.0 million, $3.6 million and $1.4 million for 2014, 2013 and 2012, respectively.

As of December 31, 2014, there was $17.5 million of total unrecognized compensation expense related to option grants, which is expected to be recognized over a weighted-average period of 2.7 years.

ii)

Restricted Stock Units

The Company began granting RSUs to its employees in January 2014. The fair value of the RSUs is determined using the fair value of the Company’s common stock on the date of grant. These RSUs typically vest and become exercisable annually over four years. Stock-based compensation expense is amortized on a straight-line basis over the requisite service period.

The following table shows a summary of RSU activity for the year ended December 31, 2014:


	Outstanding RSUs
		Weighted-
		Average
		Grant Date
	Shares	Fair Value
Unvested as of January 1, 2014	—	$	—
Granted	570,020		19.83
Vested	—		—
Forfeited and cancelled	(73,000)		22.80
Unvested as of December 31, 2014	497,020	$	19.40

The aggregate intrinsic value of RSUs outstanding was $8.7 million as of December 31, 2014.

The Company recorded stock-based compensation expense related to RSUs of $1.1 million for the year ended December 31, 2014.

As of December 31, 2014, there was $7.8 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 2.4 years.

(d) Stock Reserved

As of December 31, 2014, the Company has reserved 9,100,833 common shares for issuance on the exercise of outstanding options and RSUs to purchase common stock and for the options or RSUs still available for grant.

(e) Warrants

As of December 31, 2012, the Company had outstanding warrants to purchase 35,778 shares of common stock at a weighted-average exercise price of $4.84 per share. The warrants contained a customary cashless exercise feature, which allowed the warrant holder to pay the exercise price of the warrant by forfeiting a portion of the exercised warrant shares with a value equal to the aggregate exercise price. As part of the IPO in 2013, the warrants were exchanged for 24,955 shares of the Company’s common stock in a cashless exercise. The Company classified the warrants as equity in the consolidated balance sheet as of December 31, 2012.

As of December 31, 2014 and 2013, the Company had no outstanding warrants.