Employee benefit plans

Equity incentive plans. The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan) and the 2014 Employee Stock Purchase Plan (ESPP). In 2014, the Company terminated the authority to grant new awards under the 2010 Plan and no new options or awards have been granted under the 2010 Plan since June 2014. Outstanding options and awards under the 2010 Plan continue to be subject to the terms and conditions of the 2010 Plan.

The 2014 Plan serves as the successor to the 2010 Plan and provides for the granting of incentive and nonqualified stock options, restricted stock awards (RSAs), restricted stock units (RSUs), stock appreciation rights, stock bonus awards and performance awards to qualified employees, non-employee directors and consultants. Options granted under the 2014 Plan generally expire within 10 years from the date of grant and generally vest over four years and are exercisable for shares of the Company's Class A stock. Options with performance or market-based conditions are generally subject to a required service period along with the performance or market condition. RSUs granted under the 2014 Plan generally vest annually over a four year period based upon continued service and are settled at vesting in shares of the Company's Class A common stock.

The ESPP allows eligible employees to purchase shares of the Company's Class A common stock through payroll deductions at a price equal to 85% of the lesser of the fair market values of the stock as of the first date or the ending date of each six-month offering period. The 2014 Plan and the ESPP also provides for automatic annual increases in the number of shares reserved for future issuance.

Employee retirement plan. The Company has a defined contribution retirement plan covering U.S. and other international full-time employees that provides for voluntary employee contributions from 1% to 86% of annual compensation, subject to a maximum limit allowed by Internal Revenue Service guidelines. The Company matches 100% of each employee’s contributions up to a maximum of 4% of the employee's eligible compensation. The Company's matching contributions to the plan were $7.2 million, $5.5 million and $2.7 million in 2016, 2015 and 2014, respectively.

Stock options

A summary of the Company’s stock option activity in 2016 is as follows:



	Options outstanding
	Shares (in thousands)		Weighted- average exercise price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2015:	13,081		$	11.82	6.70	$	108,846
Granted	2,573		11.27
Exercised	(1,733	)	2.05
Forfeited/Cancelled	(1,542	)	19.07
Outstanding at December 31, 2016:	12,379		$	12.17	5.97	$	32,772

Vested and expected to vest at December 31, 2016	12,245		$	12.12	5.95	$	32,772
Exercisable at December 31, 2016	8,952		$	10.37	5.36	$	32,771

The weighted average grant date fair value of all options granted and assumed were $4.84, $18.40 and $11.51 per share in 2016, 2015 and 2014, respectively. The total fair value of all options vested was $27.2 million, $26.9 million and $16.0 million in 2016, 2015 and 2014, respectively. The aggregate intrinsic value of the stock options outstanding as of December 31, 2016 represented the value of the Company's closing stock price on the last trading day of the year in excess of the exercise price multiplied by the number of options outstanding.

Restricted stock units

A summary of the Company’s RSU activity in 2016 and 2015 is as follows:



	Shares (in thousands)		Weighted- average grant date fair value
Non-vested shares at December 31, 2014	4,307		$	21.98
Granted	2,170		44.00
Vested	(1,735	)	19.84
Forfeited	(104	)	63.47
Non-vested shares at December 31, 2015	4,638		32.15
Granted	7,354		12.10
Vested	(2,075	)	23.87
Forfeited	(1,947	)	22.85
Non-vested shares at December 31, 2016	7,970		$	18.08

In June 2014, the Company granted an award of 4.5 million RSUs covering shares of the Company's Class B common stock to the Company's CEO (CEO RSUs), which included 1.5 million RSUs that vested immediately upon grant and 3.0 million RSUs that were subject to both a market-based vesting condition and a three-year service-based vesting condition. The market-based condition was achieved in January 2015. Stock-based compensation expense related to the CEO RSUs was $6.4 million, $29.4 million and $38.3 million for 2016, 2015 and 2014, respectively.

Employee stock purchase plan In 2016 and 2015, the Company issued 668,107 and 436,924 shares under its ESPP at weighted average prices of $9.15 and $26.88, respectively. The weighted-average fair value of each right to purchase shares of the Company's Class A common stock granted under the ESPP was $3.99, $15.76 and $7.16 in 2016, 2015 and 2014, respectively.

Fair value disclosures The fair value of stock options granted and purchases under the Company's ESPP is estimated using the Black-Scholes option pricing model. Expected term of stock options granted was estimated based on the simplified method. Expected stock price volatility was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term. Risk-free interest rate was based on the yields of U.S. Treasury securities with maturities similar to the expected term. Dividend yield was zero as the Company does not have any history of, nor plans to make, dividend payments.

The fair value of stock options granted was estimated as of the grant date using the following assumptions:



	Year ended December 31,
	2016	2015	2014
Volatility	44%–45%	43%–54%	54%–56%
Expected term (years)	5.2–6.1	5.5–7.0	5.3–6.3
Risk-free interest rate	1.2%–2.0%	1.6%–2.0%	1.7%–2.0%
Dividend yield	—%	—%	—%

The fair value of stock purchase rights granted under the ESPP was estimated using the following assumptions:



	Year ended December 31,
	2016	2015	2014
Volatility	43%–54%	39%–45%	45.5%
Expected term (years)	0.5	0.5	0.6
Risk-free interest rate	0.4%–0.5%	0.1%–0.2%	0.1%
Dividend yield	—%	—%	—%

During 2014, the Company used a Monte Carlo valuation model to calculate the fair value of the CEO RSUs subject to a market condition based on the following assumptions: expected term of 10 years, expected volatility of 50.9%, risk-free interest rate of 2.69%, and a grant date fair value of $18.40 for the underlying shares.

Stock-based compensation expense. The following table summarizes stock-based compensation included in the consolidated statements of operations:



	Year ended December 31,
(in thousands)	2016		2015		2014
Cost of revenue	$	1,616	$	1,492	$	835
Research and development	31,365		18,024		11,640
Sales and marketing	13,883		13,762		10,428
General and administrative	22,663		47,402		48,496
Total stock-based compensation expense	$	69,527	$	80,680	$	71,399

The income tax benefit related to stock-based compensation expense was zero, $28.0 million and $19.5 million for 2016, 2015 and 2014, respectively. There is no current year tax benefit due to a full valuation allowance on U.S. net deferred tax assets (see Note 9 below).

At December 31, 2016, total unearned stock-based compensation of $116.3 million related to stock options, RSUs and ESPP shares is expected to be recognized over a weighted average period of 2.6 years.