10. Stock-Based Compensation

Stock Compensation Plans and General Award Terms

We have issued stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to our 2005 Stock Incentive Plan (the 2005 Plan) and our 2010 Equity Incentive Plan (the 2010 Plan). The 2005 Plan was approved by the stockholders on May 26, 2005 and expired on March 31, 2015.

Option awards are granted with an exercise price equal to the market closing price of our stock on the trading day prior to the grant date; 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-Based Compensation Accounting

We recognize stock-based compensation expense on a straight-line basis, net of forfeitures, over the requisite service period for time-vested awards. Our share-based awards are accounted for as equity instruments. Our policy is to issue new shares upon the exercise of stock awards.

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 post-vesting 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.

The weighted average estimated fair value of option awards granted during the three months ended March 31, 2016 and 2015 was $10.47 and $11.55, respectively. The weighted average estimated fair value of option awards granted during the nine months ended March 31, 2016 and 2015 was $13.19 and $13.44, respectively.

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

	Nine Months Ended
	March 31,
	2016		2015
Risk-free interest rate	1.4	%	1.5	%
Expected dividend yield	0.0	%	0.0	%
Expected life (in years)	4.7		4.6
Expected volatility factor	34.1	%	35.0	%

The stock-based compensation expense and its classification in the unaudited consolidated statements of operations for the three and nine months ended March 31, 2016 and 2015 are as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2016		2015		2016		2015
	(Dollars in Thousands)
Recorded as expenses:
Cost of services and other	$	343	$	336	$	1,049	$	1,014
Selling and marketing	1,797		778		3,547		2,282
Research and development	871		959		2,543		2,923
General and administrative	1,367		1,383		5,174		4,903

Total stock-based compensation	$	4,378	$	3,456	$	12,313	$	11,122

A summary of stock option and RSU activity under all equity plans for the nine months ended March 31, 2016 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, 2015	1,214,257		$	27.25	7.26	$	22,232	542,432		$	36.13
Granted	424,991		42.71					419,245		41.91
Settled (RSUs)	—							(268,231	)	35.69
Exercised	(136,528	)	20.94					—
Cancelled / Forfeited	(107,778	)	37.18					(111,928	)	36.70

Outstanding at March 31, 2016	1,394,942		$	31.81	7.39	$	10,627	581,518		$	40.39


Vested and exercisable at March 31, 2016	837,968		$	25.92	6.42	$	10,007	—

Vested and expected to vest as of March 31, 2016	1,336,466		$	31.39	7.33	$	10,568	520,439		$	40.33

The weighted average grant-date fair value of RSUs granted during the three months ended March 31, 2016 and 2015 was $31.97 and $35.23, respectively. The weighted average grant-date fair value of RSUs granted during the nine months ended March 31, 2016 and 2015 was $41.91 and $42.64, respectively. During the three months ended March 31, 2016 and 2015, the total fair value of shares vested from RSU grants was $3.6 million and $3.8 million, respectively, and during the nine months ended March 31, 2016 and 2015 was $9.8 million and $11.5 million, respectively.

At March 31, 2016, the total future unrecognized compensation cost related to stock options was $6.2 million and is expected to be recorded over a weighted average period of 2.7 years. At March 31, 2016, the total future unrecognized compensation cost related to RSUs was $20.7 million and is expected to be recorded over a weighted average period of 2.7 years.

The total intrinsic value of options exercised during the three months ended March 31, 2016 and 2015 was $0.3 million and $1.1 million, respectively. The total intrinsic value of options exercised during the nine months ended March 31, 2016 and 2015 was $2.6 million and $4.1 million, respectively. We received $2.9 million and $2.0 million in cash proceeds from option exercises during the nine months ended March 31, 2016 and 2015, respectively. We withheld $3.4 million and $3.9 million for withholding taxes on vested RSUs during the nine months ended March 31, 2016 and 2015, respectively.

At March 31, 2016, common stock reserved for future issuance or settlement under equity compensation plans was 5.5 million shares.