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Equity Incentive Plans and Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Equity Incentive Plans and Stock-Based Compensation
Equity Incentive Plans and Stock-Based Compensation

Equity Incentive Plans

2014 Equity Incentive Plan

The 2014 Equity Incentive Plan (the “2014 Plan”) provides for the granting of stock options, restricted stock awards, restricted stock units (“RSUs”), performance-based RSUs (“PSUs”), stock appreciation rights, performance units and performance shares to our employees, consultants and members of our board of directors. In June 2015, our board of directors adopted and our stockholders approved an amendment and restatement of the 2014 Plan, which increased the number of shares available for issuance under the 2014 Plan by the number of shares granted under the 2008 Stock Plan (the “2008 Plan”) that were or may in the future be canceled or otherwise forfeited or repurchased after March 20, 2014. As of December 31, 2019, we had 10,738,780 shares available for future grant under the 2014 Plan.

The shares authorized for the 2014 Plan increase annually by the least of (i) 8,000,000 shares, (ii) 5% of the outstanding shares of common stock on the last day of our immediately preceding fiscal year, or (iii) such other amount as determined by our Board of Directors. Accordingly, on January 1, 2020, the number of shares in the 2014 Plan increased by 3,879,002 shares, representing 5% of the common stock outstanding as of December 31, 2019.

To date, we have granted stock options, RSUs and PSUs under the 2014 Plan. Stock options expire no more than 10 years from the grant date and generally vest over four years. In the case of an incentive stock option granted to an employee, who at the time of grant, owns stock representing more than 10% of the total combined voting power of all classes of stock, the per share exercise price will be no less than 110% of the fair market value per share on the date of grant, and the incentive stock option will expire no later than five years from the date of grant. For incentive stock options granted to any other employees and nonstatutory stock options granted to employees, consultants, or members of our Board of Directors, the per share exercise price will be no less than 100% of the fair market value per share on the date of grant. RSUs and PSUs generally vest from one to four years.

2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan (the “2014 Purchase Plan”) was suspended effective March 16, 2018 due to the delay of the Form 10-K filing for the year ended December 31, 2017. In October 2018, the Board of Directors approved amending the 2014 Purchase Plan (the “Amended 2014 Purchase Plan”) in order to, among other things, reduce the maximum contribution participants can make under the plan from 15% to 10% of eligible compensation. The Amended 2014 Purchased Plan also reflects revised offering periods, which were changed from 24 months to six months in duration and that begin on or about December 1 and June 1 each year, starting in December 2018. The Amended 2014 Purchase Plan permits eligible employees to purchase shares of our common stock through payroll deductions with up to 10% of their pre-tax eligible earnings subject to certain Internal Revenue Code limitations. The purchase price of the shares is 85% of the lower of the fair market value of our common stock on the first day of a six-month offering period or the relevant purchase date. In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period. 

Employees purchased 662,362 shares at an average price of $5.14 and intrinsic value of $0.8 million during the year ended December 31, 2019. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. During 2018, there were no stock purchases by employees under the Amended 2014 Purchase Plan or the 2014 Purchase Plan. As of December 31, 2019, we had 2,402,820 shares available for future issuance under the Amended 2014 Purchase Plan.

Stock-Based Compensation

A summary of our stock-based compensation expense is as follows (in thousands):
 
Years Ended December 31,
 
2019
 
2018
 
2017
Stock-based compensation by type of award:
 
 
 
 
 
Stock options
$
648

 
$
1,353

 
$
2,705

Stock awards
14,882

 
10,445

 
11,421

Employee stock purchase rights (1)
999

 
5,240

 
3,077

Total
$
16,529

 
$
17,038

 
$
17,203

 
 
 
 
 
 
Stock-based compensation by category of expense:
 
 
 
 
 
Cost of revenue
$
1,500

 
$
1,602

 
$
1,362

Sales and marketing
5,765

 
5,667

 
6,075

Research and development
6,039

 
6,631

 
6,343

General and administrative
3,225

 
3,138

 
3,423

Total
$
16,529

 
$
17,038

 
$
17,203

 
 
 
 
 
 

 

(1)
Amount for the year ended December 31, 2018 includes $4.1 million of accelerated stock-based compensation expense. In March 2018, as a result of a suspension of the 2014 Purchase Plan due to our non-timely filing status, all unrecognized stock-based compensation expense related to ESPP under the 2014 Purchase Plan was accelerated and recognized within the consolidated statement of operations.

As of December 31, 2019, we had $29.5 million of unrecognized stock-based compensation expense related to unvested stock-based awards, including ESPP under our Amended 2014 Purchase Plan, which will be recognized over a weighted-average period of 2.6 years.

Fair Value Determination:

The fair values of stock options and employee stock purchase rights were estimated as of the grant date using the Black-Scholes option-pricing model with the following assumptions: 

 
Stock Options
 
Employee Stock Purchase Rights
 
Years Ended December 31,
 
Years Ended December 31,
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Expected term (in years)
 
4.8
 
4.7
 
0.5
 
0.5
 
1.3
Risk-free interest rate
—%
 
3.1%
 
2.0%
 
2.3%
 
2.6%
 
1.4%
Expected volatility
—%
 
37%
 
43%
 
34%
 
28%
 
39%
Dividend rate
—%
 
—%
 
—%
 
—%
 
—%
 
—%


Expected Term. We estimate the expected life of options based on an analysis of our historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option. The expected term for the employee stock purchase rights is based on the term of the purchase period.

Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected terms of stock options and the employee stock purchase rights.

Expected Volatility. For stock options, due to the limited trading history of our own common stock, we determined the share price volatility factor based on a combination of the historical volatility of our own common stock and the historical volatility of our peer group for the stock options. For employee stock purchase rights, we used the historical volatility of our own common stock.

Dividend Rate. The expected dividend was assumed to be zero as we have never paid dividends and do not anticipate paying any dividends in the foreseeable future.

Stock Options

The following tables summarize our stock option activities and related information:
 
Number of Shares
(thousands)
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Term
(years)
 
Aggregate Intrinsic Value (1)
(thousands)
Outstanding as of December 31, 2018
4,674

 
$
5.19

 
 
 
 
Granted

 
$

 
 
 
 

Exercised
(842
)
 
$
2.84

 
 
 
 
Canceled
(130
)
 
$
9.41

 
 
 
 

Outstanding as of December 31, 2019
3,702

 
$
5.57

 
3.52
 
$
6,395

Vested and exercisable as of December 31, 2019
3,427

 
$
5.49

 
3.56
 
$
6,210

 
 
 
 
 
 
 
 

 

(1)
The aggregate intrinsic value represents the excess of the closing price of our common stock of $6.87 as of December 31, 2019 over the exercise price of the outstanding in-the-money options.

Following is additional information pertaining to our stock option activities (in thousands, except per share data):
 
Years Ended December 31,
 
2019
 
2018
 
2017
Weighted-average grant date fair value of options granted (per share)
$

 
$
2.19

 
$
3.14

Intrinsic value of options exercised (1)
$
1,930

 
$
2,629

 
$
8,013

 
(1)
Intrinsic value of options exercised is the difference between the closing price of our common stock at the time of exercise and the exercise price paid.

Stock Awards

We have granted RSUs to our employees, consultants and members of our Board of Directors, and PSUs to certain executives.

In February 2016, we granted 547,000 PSUs with certain financial and operational targets. Actual performance, as measured at the time and prior to the restatement of the 2016 financial statements, resulted in participants achieving 80% of target. Given the PSUs did not contain explicit or implicit claw back rights, there was no change to stock-based compensation expense for the impact of the previously disclosed restatement of the 2016 consolidated financial statements. As of December 31, 2019, 253,203 shares had vested, 200,297 shares had been forfeited, and the remaining 93,500 shares will vest (as to 80%) in annual tranches through February 2020 subject to continued service vesting requirements.

In October 2018, we granted 464,888 PSUs with certain financial targets. These PSUs will become eligible to vest at 75% upon the achievement of the performance targets by December 31, 2020, and are subject to service condition vesting requirements. The remaining 25% of these PSUs will become eligible to vest on the first anniversary of the initial vesting date. None of these PSUs were vested as of December 31, 2019.

In April 2019, we granted 346,453 PSUs with certain financial targets. These PSUs will become eligible to vest at 75% on the second month following achievement of certain performance targets by December 31, 2021, with the remaining 25% of the PSUs to vest on the first anniversary of the initial vesting date, subject to continued service vesting requirements. None of these PSUs were vested as of December 31, 2019.

In December 2019, we granted 375,000 PSUs with certain market performance-based targets to be achieved between December 2019 and December 2023. One-third of each tranche of these PSUs will become eligible to vest on each of the three anniversaries of the date the performance-based target is achieved, subject to continued service vesting requirements. The grant date fair values of each tranche of these PSUs were estimated to be $4.59, $4.06 and $3.59 and determined using the Monte Carlo simulation model with the following assumptions: expected term of 4.0 years, expected volatility of 38.45%, risk-free interest rate of 1.7% and expected dividend yield of 0.0%. None of these PSUs were vested as of December 31, 2019.

The following table summarizes our stock award activities and related information:
 
Number of Shares
(thousands)
 
Weighted-Average Grant Date Fair Value
 
Weighted-Average Remaining Vesting Term
(years)
Nonvested as of December 31, 2018
5,974

 
$
6.51

 
 
Granted
3,288

 
$
6.74

 
 
Released
(1,774
)
 
$
6.60

 
 
Canceled
(1,340
)
 
$
6.57

 
 
Nonvested as of December 31, 2019
6,148

 
$
6.59

 
1.81
 
 
 
 
 
 

Following is additional information pertaining to our RSU activities (in thousands, except per share data):
 
Years Ended December 31,
 
2019
 
2018
 
2017
Weighted-average grant date fair value of stock awards granted (per share)
$
6.74

 
$
5.95

 
$
8.55

Total fair value of stock awards released (vested) during the period
$
12,183

 
$
9,714

 
$
13,961