Employee Incentive and Retirement Plans

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

There were no significant changes to the Company's retirement plan or to the stock issued related to the Springstone acquisition during the three months ended March 31, 2015.

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



	Three Months Ended March 31,
	2015		2014
Stock options	$	7,086	$	7,033
ESPP	479		—
RSUs	481		—
Stock issued related to acquisition	3,547		—
Total stock-based compensation expense	$	11,593	$	7,033

This stock-based compensation expense was recorded in the consolidated statement of operations as follows:



	Three Months Ended March 31,
	2015		2014
Sales and marketing	$	1,519	$	3,502
Origination and servicing	721		358
General and administrative:
Engineering and product development	1,406		737
Other	7,947		2,436
Total stock-based compensation expense	$	11,593	$	7,033

We capitalized $0.8 million and $0.3 million of stock-based compensation expense associated with the cost of developing software for internal use during the three months ended March 31, 2015 and 2014, respectively.

Stock Options

There were no significant changes to the Company's incentive plans or methodology related to stock options valuation during the three months ended March 31, 2015.

We use the Black-Scholes option pricing model to estimate the fair value of stock options granted with the following assumptions during the periods presented:



	Three Months Ended March 31,
	2015		2014
Expected dividend yield	—		—
Weighted-average assumed stock price volatility	49.9	%	54.7	%
Weighted-average risk-free rate	1.56	%	1.90	%
Weighted-average expected life (in years)	6.25		6.33

The following table summarizes the activities for our options for the three months ended March 31, 2015:



	Number of Shares		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	768,500		$	20.81
Options exercised	(531,822	)	$	1.62
Options forfeited/expired	(390,152	)	$	7.11
Outstanding at March 31, 2015	57,233,355		$	3.37	7.81	$	932,931
Vested and expected to vest at March 31, 2015	56,450,213		$	3.29	7.77	$	924,352
Exercisable at March 31, 2015	24,343,206		$	0.92	6.65	$	461,441

For the three months ended March 31, 2015, we granted service-based stock options to purchase 768,500 shares of common stock with a weighted average exercise price of $20.81 per share, a weighted average grant date fair value of $10.27 per share and an aggregate estimated fair value of $7.9 million. For the three months ended March 31, 2014, we granted service-based stock options to purchase 14,218,940 shares of common stock with a weighted average exercise price of $4.99 per share, a weighted average grant date fair value of $4.20 per share and a total estimated fair value of $59.7 million.

Options to purchase 531,822 shares with a total intrinsic value of $10.8 million were exercised during the three months ended March 31, 2015. Options to purchase 1,439,124 shares with a total intrinsic value of $6.4 million were exercised during the three months ended March 31, 2014.

The total grant date fair value of stock options vested during the three months ended March 31, 2015 and 2014 was $6.1 million and $3.9 million, respectively. For the three months ended March 31, 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 for the three months ended March 31, 2015.

As of March 31, 2015 total unrecognized compensation cost was $115.0 million and these costs are expected to be recognized over the next 3.06 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.

Restricted Stock Units

During the three months ended March 31, 2015, the Company began issuing RSUs to certain employees, officers, and directors. The following table summarizes the activities for our RSUs for the three months ended March 31, 2015:



	Number of Shares		Weighted- Average Grant Date Fair Value
Unvested at December 31, 2014	—		$	—
RSUs granted	975,763		$	20.51
RSUs vested	—		$	—
RSUs forfeited/expired	(2,746	)	$	20.51
Unvested at March 31, 2015	973,017		$	20.51
Expected to vest after March 31, 2015	796,360		$	20.51

For the three months ended March 31, 2015, we granted 975,763 RSUs with an aggregate fair value of $20.0 million.

As of March 31, 2015, there was $19.5 million of unrecognized compensation cost related to unvested RSUs. This amount is expected to be recognized over a weighted-average period of 3.9 years.

Employee Stock Purchase Plan

There were no significant changes to the terms of the Company's ESPP during the three months ended March 31, 2015.

As of March 31, 2015, a total of 3,000,000 shares of common stock were reserved for issuance under the ESPP. As of March 31, 2015, employees had not purchased any shares under the ESPP and all 3,000,000 shares remain available for future issuance.

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 6-month requisite service period. We used the following assumptions in estimating the fair value of the grant under the ESPP in December 2014, which are derived using the same methodology applied to stock option assumptions:



Expected dividend yield	—
Weighted-average assumed stock price volatility	48.2	%
Weighted-average risk-free rate	0.09	%
Weighted-average expected life (in years)	0.5

There were no grants under the ESPP during the three months ended March 31, 2015.