Employee Incentive and Retirement Plans

The Company’s equity incentive plans provide for granting stock options and restricted stock units (RSUs) to employees, consultants, officers and directors. In addition, the Company offers a retirement plan and an Employee Stock Purchase Plan (ESPP) to eligible employees.

Stock-based compensation expense was as follows for the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Stock options	$	8,101	$	6,996	$	23,314	$	19,484
ESPP	491		—		1,416		—
RSUs	3,037		—		5,262		—
Stock issued related to acquisition	1,850		3,541		7,566		6,405
Total stock-based compensation expense	$	13,479	$	10,537	$	37,558	$	25,889

The following table presents the Company's stock-based compensation expense recorded in the condensed consolidated statements of operations:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Sales and marketing	$	2,048	$	912	$	5,373	$	5,029
Origination and servicing	817		599		2,405		1,427
General and administrative:
Engineering and product development	2,554		1,492		6,392		3,487
Other	8,060		7,534		23,388		15,946
Total stock-based compensation expense	$	13,479	$	10,537	$	37,558	$	25,889

Additionally, we capitalized $1.3 million and $0.6 million of stock-based compensation expense associated with the cost of developing software for internal use during the third quarters of 2015 and 2014, respectively. We capitalized $3.1 million and $1.2 million of stock-based compensation expense associated with the cost of developing software for internal use during the first nine months of 2015 and 2014, respectively.

Stock Options

There were no significant changes to the Company's incentive plans or valuation methodology for stock options during the third quarter and first nine months of 2015.

The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fair value of stock options granted during the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Expected dividend yield	—		—		—		—
Weighted-average assumed stock price volatility	48.7	%	50.5	%	49.4	%	54.0	%
Weighted-average risk-free rate	1.67	%	1.87	%	1.61	%	1.91	%
Weighted-average expected life (in years)	6.25		6.25		6.25		6.38

The following table summarizes the activities for the Company's stock options during the first nine months of 2015:



	Number of Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2014	57,386,829		$	3.15
Options granted	1,164,929		$	20.00
Options exercised	(5,407,540	)	$	1.46
Options forfeited/expired	(1,844,875	)	$	6.45
Outstanding at September 30, 2015	51,299,343		$	3.59	7.3	$	503,203
Vested and expected to vest at September 30, 2015	50,807,451		$	3.54	7.3	$	500,401
Exercisable at September 30, 2015	26,216,233		$	1.58	6.5	$	306,781

For the first nine months of 2015, we granted service-based stock options to purchase 1,164,929 shares of common stock with a weighted average exercise price of $20.00 per share, a weighted average grant date fair value of $9.80 per option share and an aggregate estimated fair value of $11.4 million. For the first nine months of 2014, we granted service-based stock options to purchase 18,511,572 shares of common stock with a weighted average exercise price of $5.91 per option share, a weighted average grant date fair value of $4.37 per share and a total estimated fair value of $81.0 million.

Options to purchase 5,407,540 shares with a total intrinsic value of $75.3 million were exercised during the first nine months of 2015. Options to purchase 5,638,830 shares with a total intrinsic value of $40.4 million were exercised during the first nine months of 2014.

The total grant date fair value of stock options vested during the first nine months of 2015 and 2014 was $26.0 million and $14.7 million, respectively. For the first nine months of 2014, we incurred $3.0 million of expense for the accelerated vesting of stock options for a terminated employee that was accounted for as a stock option modification. We did not accelerate vesting of any stock options during the third quarter and first nine months of 2015.

As of September 30, 2015 total unrecognized compensation cost was $100.8 million, which is expected to be recognized over the next 2.6 years.

Since the Company holds a full valuation allowance against all deferred tax benefits, no income tax benefit has been recognized for stock-based compensation expense or for exercised stock options.

During the second quarter of 2015, the Company launched a rescission offer allowing certain holders of outstanding, unexercised options and shares of common stock to rescind the grant of options and sale of shares back to the Company. The rescission offer was required by the California Department of Business Oversight to address California securities laws compliance issues raised in connection with the Company's permit for qualification filed in July 2014. The offer expired on July 15, 2015 and there were no material acceptances of the rescission offer.

Restricted Stock Units

During the first quarter of 2015, the Company began issuing RSUs to certain employees, officers, and directors. The following table summarizes the activities for the Company's RSUs during the first nine months of 2015:



	Number of RSUs		Weighted- Average Grant Date Fair Value
Unvested at December 31, 2014	—		$	—
RSUs granted	3,518,967		$	16.60
RSUs vested	(99,300	)	$	20.29
RSUs forfeited/expired	(106,694	)	$	19.53
Unvested at September 30, 2015	3,312,973		$	16.39
Expected to vest after September 30, 2015	3,177,419		$	16.42

For the first nine months of 2015, we granted 3,518,967 RSUs with an aggregate fair value of $58.4 million.

As of September 30, 2015, there was $54.3 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over the next 3.6 years.

Employee Stock Purchase Plan

Under the Company’s ESPP, eligible employees can purchase shares of the Company’s common stock using amounts withheld through payroll deductions, subject to plan limitations. Payroll deductions are accumulated during six-month offering periods. The purchase price for each share of common stock is 85% of the lower of the fair market value of the common stock on the first business day of the offering period or on the last business day of the offering period. During the third quarter of 2015, the Company did not purchase any shares under the ESPP. The Company's employees purchased 211,256 shares under the ESPP during the first nine months of 2015. As of September 30, 2015, a total of 2,788,744 shares of common stock were reserved for issuance under the ESPP.

The fair value of stock purchase rights granted to employees under the ESPP is measured on the grant date using the Black-Scholes option pricing model. The compensation expense related to ESPP purchase rights is recognized on a straight-line basis, net of estimated forfeitures, over the six-month requisite service period. We used the following assumptions in estimating the fair value of the grant under the ESPP on June 11, 2015, which are derived using the same methodology applied to stock option assumptions:



Expected dividend yield	—
Weighted-average assumed stock price volatility	38.8	%
Weighted-average risk-free rate	0.10	%
Weighted-average expected life (in years)	0.42