Employee Incentive and Retirement Plans

The Company’s equity incentive plans provide for granting stock options and RSUs to employees, consultants, officers and directors. In addition, the Company offers a retirement plan and an ESPP to eligible employees.

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



Year Ended December 31,	2015		2014		2013
Stock options	$	30,717	$	27,100	$	6,283
RSUs	1,904		—		—
ESPP	9,185		104		—
Stock issued related to acquisition	9,416		9,946		—
Total stock-based compensation expense	$	51,222	$	37,150	$	6,283

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



Year Ended December 31,	2015		2014⁽¹⁾		2013⁽¹⁾
Sales and marketing	$	7,250	$	5,476	$	1,147
Origination and servicing	2,735		1,653		424
Engineering and product development	11,335		6,445		2,336
Other general and administrative	29,902		23,576		2,376
Total stock-based compensation expense	51,222		37,150		6,283


⁽¹⁾	Prior period amounts have been reclassified to conform to the current period presentation. See “Note 1. Basis of Presentation” for additional information.

The Company capitalized $4.4 million, $1.9 million and $0.2 million of stock-based compensation expense associated with developing software for internal use during the years ended December 31, 2015, 2014 and 2013, respectively. In addition, the Company recognized $0.7 million tax benefits from exercised stock options and RSUs in 2015. There was no net income tax benefit recognized during 2014 or 2013 relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options and RSUs due to the full valuation allowance.

Stock-based compensation expense included $0.3 million and $3.0 million for the accelerated vesting of stock options that were accounted for as stock option modifications for the years ended December 31, 2015 and 2014, respectively. There was no expense recognized for the accelerated vesting of stock options in the year ended December 31, 2013.

Equity Incentive Plans

The Company has two equity incentive plans: the 2007 Stock Incentive Plan (2007 Plan) and the 2014 Equity Incentive Plan (2014 Plan). Upon the Company’s IPO in 2014, the 2007 Plan was terminated and all shares that remained available for future issuance under the 2007 Plan at that time were transferred to the 2014 Plan. As of December 31, 2015, 47,090,982 options to purchase common stock granted under the 2007 Plan remain outstanding. As of December 31, 2015, the total number of shares available for future grants under the 2014 Plan was 33,560,939 shares, including shares transferred from the 2007 Plan.

Stock Options

The following table summarizes the activities for the Company’s stock options during 2015:



	Number of Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2014	57,386,829		$	3.15
Granted	1,164,929		$	20.00
Exercised	(7,579,324	)	$	1.57
Forfeited/Expired	(2,763,523	)	$	6.57
Outstanding at December 31, 2015	48,208,911		$	3.60	7.1	$	370,388
Vested and expected to vest at December 31, 2015	47,784,071		$	3.58	6.9	$	368,127
Exercisable at December 31, 2015	27,290,693		$	1.93	6.3	$	250,057


⁽¹⁾	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s closing stock price of $11.05 as reported on the New York Stock Exchange on December 31, 2015.

For the year ended December 31, 2015, the Company 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 year ended December 31, 2014, the Company granted service-based stock options to purchase 22,081,243 shares of common stock with a weighted average exercise price of $6.74 per option share, a weighted average grant date fair value of $4.62 per share and an aggregate estimated fair value of $102.1 million.

For the year ended December 31, 2013, the Company granted service-based stock options to purchase 12,707,000 shares of common stock with a weighted average exercise price of $2.44 per option share, a weighted average grant date fair value of $2.71 per share and an aggregate estimated fair value of $34.4 million.

The aggregate intrinsic value of options exercised was $103.5 million, $48.6 million and $26.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. The total fair value of stock options vested for the years ended December 31, 2015, 2014 and 2013 was $36.8 million, $19.6 million and $4.5 million, respectively.

As of December 31, 2015, the total unrecognized compensation cost, net of forfeitures, related to outstanding stock options was $78.3 million, which is expected to be recognized over the next 2.4 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted with the following assumptions:



Year Ended December 31,	2015		2014		2013
Expected dividend yield	—		—		—
Weighted-average assumed stock price volatility	49.4	%	53.5	%	59.1	%
Weighted-average risk-free interest rate	1.61	%	1.88	%	1.46	%
Weighted-average expected life (in years)	6.25		6.35		6.30

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 year of 2015:



	Number of Units		Weighted- Average Grant Date Fair Value
Unvested at December 31, 2014	—		$	—
Granted	4,807,875		$	15.52
Vested	(155,725	)	$	19.92
Forfeited/expired	(208,751	)	$	18.44
Unvested at December 31, 2015	4,443,399		$	15.23
Expected to vest after December 31, 2015	4,251,011		$	15.25

As of December 31, 2015, the Company granted 4,807,875 RSUs with an aggregate fair value of $74.6 million.

As of December 31, 2015, there was $61.6 million of unrecognized compensation cost, net of forfeitures, related to unvested RSUs, which is expected to be recognized over the next 3.5 years.

Employee Stock Purchase Plan

The Company’s ESPP became effective on December 11, 2014. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount 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. As of December 31, 2015, the Company’s employees purchased 410,009 shares of common stock at an average exercise price of $12.42. The Company did not purchase any shares under the ESPP during the year ended December 31, 2014. As of December 31, 2015 and 2014, a total of 2,589,991 and 3,000,000 shares of common stock were reserved for issuance under the ESPP, respectively.

The fair value of stock purchase rights granted to employees under the ESPP is measured under the ESPP on the grant date using the Black-Scholes option pricing model. The Company used the following assumptions in estimating the fair value of grants under the ESPP, which are derived using the same methodology applied to stock option assumptions:



Year Ended December 31,	2015		2014
Expected dividend yield	—		—
Weighted-average assumed stock price volatility	43.7	%	48.2	%
Weighted-average risk-free rate	0.23	%	0.09	%
Weighted-average expected life (years)	0.46		0.50

Stock Issued Related to Acquisition

As part of the Springstone acquisition, the sellers received shares of the Company’s Series F convertible preferred stock having an aggregate value of $25.0 million (Share Consideration). $22.1 million of the Share Consideration is subject to certain vesting and forfeiture conditions over a three-year period for key continuing employees. This is accounted for as a compensation agreement and expensed over the three-year vesting period. In conjunction with the conversion of preferred stock upon the IPO, these preferred shares were converted into common shares.

Retirement Plan

Upon completing 90 days of service, employees may participate in the Company’s qualified retirement plan that is governed by section 401(k) of the IRS Code. Participants may elect to contribute a portion of their annual compensation up to the maximum limit allowed by federal tax law. In the second quarter of 2014, the Company approved an employer match of up to 3% of an employee’s eligible compensation with a maximum annual match of $5,000 per employee. The total expense for the employer match for the years ended December 31, 2015 and 2014 was $2.1 million and $0.9 million, respectively.