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 March 31, 2014 was $17.09. There were no awards granted during the three months ended March 31, 2013. The weighted average estimated fair value of option awards granted during the nine months ended March 31, 2014 and 2013 was $11.55 and $9.76, respectively.

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

	Nine Months Ended
	March 31,
	2014		2013
Risk-free interest rate	1.3	%	0.6	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.6		4.8
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 and nine months ended March 31, 2014 and 2013 are as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2014		2013		2014		2013
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	282	$	325	$	910	$	984
Selling and marketing	832		994		2,653		2,943
Research and development	1,523		770		3,267		2,253
General and administrative	927		1,438		4,272		5,115
Total stock-based compensation	$	3,564	$	3,527	$	11,102	$	11,295

A summary of stock option and RSU activity under all equity plans for the nine months ended March 31, 2014 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		$	26,140	1,030,839		$	17.69
Granted	351,999		$	33.04				414,983		$	33.05
Settled (RSUs)	—		—					(451,051	)	$	18.34
Exercised	(623,494	)	$	11.99				—
Cancelled / Forfeited	(217,149	)	$	19.64				(247,004	)	$	20.17
Outstanding at March 31, 2014	1,363,474		$	19.86	7.20	$	30,708	747,767		$	25.01

Vested and exercisable at March 31, 2014	727,651		$	15.66	6.21	$	19,429	—

Vested and expected to vest as of March 31, 2014	1,252,853		$	19.37	7.09	$	28,803	617,435		$	24.87

The weighted average grant-date fair value of RSUs granted during the three and nine months ended March 31, 2014 was $43.70 and $33.05, respectively, and during the nine months ended March 31, 2013 was $23.40. There were no RSUs granted during the three months ended March 31, 2013. During the three months ended March 31, 2014 and 2013, the total fair value of shares vested from RSU grants was $4.8 million and $4.0 million, respectively, and during the nine months ended March 31, 2014 and 2013 was $17.0 million and $17.1 million, respectively.

At March 31, 2014, the total future unrecognized compensation cost related to stock options and RSUs was $4.6 million and $14.4 million, respectively, and is expected to be recorded over a weighted average period of 2.5 years and 2.6 years, respectively.

The total intrinsic value of options exercised during the three months ended March 31, 2014 and 2013 was $7.6 million and $22.6 million, respectively. The total intrinsic value of options exercised during the nine months ended March 31, 2014 and 2013 was $16.8 million and $45.8 million, respectively. We received $7.5 million and $15.4 million in cash proceeds from option exercises during the nine months ended March 31, 2014 and 2013, respectively. We paid $5.9 million and $5.8 million for withholding taxes on vested RSUs during the nine months ended March 31, 2014 and 2013, respectively.

At March 31, 2014, common stock reserved for future issuance or settlement under equity compensation plans was 6.7 million shares.