Stock-Based Compensation Expense

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Expense

Stock-Based Compensation Expense

(a) General

Stock-based compensation expense for restricted stock, restricted stock units, stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	202	$	137
Research and development	1,513		1,493
Sales and marketing	1,403		2,901
General and administrative	1,161		988
Total stock-based compensation expense	$	4,279	$	5,519

We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years.

(b) Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock unit activity during the three months ended March 31, 2017 was as follows:

	Restricted Stock				Restricted Stock Units
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2016	585,004		$	18.05	734,577		$	13.47
Granted	—		—		1,308,940		13.83
Vested	(78,441	)	19.05		(48,312	)	13.21
Forfeited	(860	)	23.01		(40,554	)	12.73
Unvested balance as of March 31, 2017	505,703		$	17.89	1,954,651		$	13.73

As of March 31, 2017, the unrecognized compensation expense related to our unvested restricted stock and restricted stock units expected to vest was $32.8 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 3.1 years.

During the three months ended March 31, 2017, we repurchased 4,975 shares of our common stock in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

(c) Stock Options

Stock option activity during the three months ended March 31, 2017 was as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2016	4,580,375		$	8.20
Granted	1,138,566		12.93
Exercised	(120,479	)	6.43			$	1,000
Forfeited/cancelled	(97,442	)	12.10
Outstanding as of March 31, 2017	5,501,020		9.15		7.3	$	32,817
Vested and exercisable as of March 31, 2017	2,926,282		5.91		5.6	$	26,759
Vested and expected to vest as of March 31, 2017	5,501,020		9.15		7.3	$	32,817

As of March 31, 2017, the unrecognized compensation expense related to our unvested stock options expected to vest was $14.7 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 3.1 years.

The total fair value of stock options vested in the three months ended March 31, 2017 was $1.0 million. The weighted-average grant date fair value of stock options granted in the three months ended March 31, 2017 was $6.46 per share.

(d) Employee Stock Purchase Plan

Under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (ESPP), employees may set aside up to 15% of their gross earnings, on an after-tax basis, to purchase our common shares at a discounted price, which is calculated at 85% of the lesser of: (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date.

On March 15, 2017, we issued 138,085 shares of common stock to employees for aggregate proceeds of $1.5 million. The purchase prices of the shares of common stock were $10.60 and $12.79 per share, which were discounted in accordance with the terms of the ESPP from the closing prices of our common stock on March 16, 2016 of $12.47 and on March 15, 2017 of $15.05, respectively.