8. Stock-Based Compensation

General Award Terms

We issue stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to stockholder-approved equity compensation plans. Option awards are granted with an exercise price equal to the market closing price of our stock on the trading day prior to the date of grant; those options generally vest over four years and expire within 7 or 10 years of grant. RSUs generally vest over four years. Historically, our practice has been to settle stock option exercises and RSU vesting through newly-issued shares.

Stock Compensation Accounting

Our stock-based compensation is principally accounted for as awards of equity instruments. Our policy is to issue new shares upon the exercise of stock awards. We adopted the simplified method related to accounting for the tax effects of share-based payment awards to employees under ASC Topic 718, Compensation—Stock Compensation (ASC 718). We use the “with-and-without” approach for determining if excess tax benefits are realized under ASC 718.

We utilize the Black-Scholes option valuation model for estimating the fair value of options granted. The Black-Scholes option valuation model incorporates assumptions regarding expected stock price volatility, the expected life of the option, the risk-free interest rate, dividend yield and the market value of our common stock. The expected stock price volatility is determined based on our stock’s historic prices over a period commensurate with the expected life of the award. The expected life of an option represents the period for which options are expected to be outstanding as determined by historic option exercises and cancellations. The risk-free interest rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of the options granted. The expected dividend yield is zero, based on our history and expectation of not paying dividends on common shares. We recognize compensation costs on a straight-line basis, net of estimated forfeitures, over the requisite service period for time-vested awards.

The weighted average estimated fair value of option awards granted during the three months ended September 30, 2013 and 2012 was $11.34 and $9.76, respectively.

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:

	Three Months Ended
	September 30,
	2013		2012
Risk-free interest rate	1.3	%	0.6	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.6		4.9
Expected volatility factor	39.4	%	48.9	%

The stock-based compensation expense and its classification in the unaudited consolidated statements of operations for the three months ended September 30, 2013 and 2012 are as follows:

	Three Months Ended
	September 30,
	2013		2012
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	301	$	343
Selling and marketing	1,111		977
Research and development	856		741
General and administrative	2,119		2,254
Total stock-based compensation	$	4,387	$	4,315

A summary of stock option and RSU activity under all equity plans for the three months ended September 30, 2013 is as follows:

	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in 000’s)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2013	1,852,118		$	14.68				1,030,839		$	17.69
Granted	333,986		32.54					393,366		32.54
Settled (RSUs)	—		—					(217,529	)	17.21
Exercised	(273,351	)	10.73					—		—
Cancelled / Forfeited	(17,508	)	19.07					(17,984	)	20.29
Outstanding at September 30, 2013	1,895,245		$	18.35	7.34	$	30,698	1,188,692		$	22.65

Vested and exercisable at September 30, 2013	854,284		$	13.85	5.99	$	17,688	—		$	—

Vested and expected to vest as of September 30, 2013	1,589,347		$	17.91	7.14	$	26,443	839,132		$	23.30

The weighted average grant-date fair value of RSUs granted during the three months ended September 30, 2013 and 2012 was $32.54 and $23.38, respectively. During the three months ended September 30, 2013 and 2012, the total fair value of shares vested from RSU grants was $7.2 million and $6.3 million, respectively.

At September 30, 2013, the total future unrecognized compensation cost related to stock options and RSUs was $6.7 million and $20.0 million, respectively, and is expected to be recorded over a weighted average period of 2.8 years and 2.9 years, respectively.

The total intrinsic value of options exercised during the three months ended September 30, 2013 and 2012 was $6.4 million and $10.7 million, respectively. We received $2.9 million and $4.0 million in cash proceeds from option exercises during the three months ended September 30, 2013 and 2012, respectively. We paid $2.4 million and $2.0 million for withholding taxes on vested RSUs during the three months ended September 30, 2013 and 2012, respectively.

At September 30, 2013, common stock reserved for future issuance or settlement under equity compensation plans was 7.2 million shares.