Stock-Based Compensation

6 Months Ended

Dec. 31, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

7.  Stock-Based Compensation

General Award Terms

We issue stock options and restricted stock units to our employees and outside directors, pursuant to stockholder approved stock option plans. Option awards are generally granted with an exercise price equal to the market price of our stock at the date of grant; those options generally vest over four years and expire within 7 or 10 years of grant. Restricted stock units (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

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 over the requisite service period for time-vested awards.

The weighted average estimated fair value of awards granted during the three months ended December 31, 2011 and 2010 was $6.49 and $4.94 respectively.  The weighted average estimated fair value of awards granted during the six months ended December 31, 2011 and 2010 was $6.48 and $4.83, respectively.

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

	Six Months Ended December 31,
	2011			2010
Risk-free interest rate		1.2	%		1.3	%
Expected dividend yield		0.0	%		0.0	%
Expected life (in years)		4.57			4.49
Expected volatility factor		49.6	%		52.9	%

The stock-based compensation expense and its classification (dollars in thousands) in the unaudited condensed consolidated statements of operations for the three and six months ended December 31, 2011 and 2010 were as follows:

	Three Months Ended December 31,				Six Months Ended December 31,
Recorded as expense:	2011		2010		2011		2010
Cost of service and other	$	314	$	233	$	617	$	486
Selling and marketing		1,229		907		2,399		1,803
Research and development		353		287		701		576
General and administrative		1,175		918		3,062		2,177
Total stock-based compensation	$	3,071	$	2,345	$	6,779	$	5,042

A summary of stock option and RSU activity under all equity plans for the six months ended December 31, 2011 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, 2011		4,724,305		$	7.64			$	45,058		1,338,376		$	10.19
Granted		751,072			15.50						893,107			15.50
Settled (RSUs)		-			-						(248,703	)		11.78
Exercised		(243,024	)		9.17						-
Cancelled / Forfeited		(24,309	)		10.28						(37,552	)		10.73
Outstanding at September 30, 2011		5,208,044		$	8.69			$	34,434		1,945,228		$	12.41
Granted		11,275			16.45						12,550			16.52
Settled (RSUs)											(98,185	)		13.45
Exercised		(283,628	)		6.60
Cancelled / Forfeited		(19,868	)		12.98						(26,578	)		12.48
Outstanding at December 31, 2011		4,915,823		$	8.81		5.3	$	41,965		1,833,015		$	8.39
Exercisable at December 31, 2011		3,691,917		$	7.27		4.2	$	37,200
Vested and expected to vest as of December 31, 2011		4,752,764		$	8.65		5.2	$	41,334		1,600,876		$	7.79

The weighted average grant-date fair value of RSUs granted during the six months ended December 31, 2011 and 2010 was $15.52 and $10.94, respectively. During the three months ended December 31, 2011 and 2010, the total fair value of shares vested from RSU grants was $1.7 million and $0.5 million, respectively. During the six months ended December 31, 2011 and 2010, the total fair value of shares vested from RSU grants was $5.5 million and $3.0 million, respectively.

At December 31, 2011, the total future unrecognized compensation cost related to stock options and RSUs was $6.2 million and $17.9 million, respectively, and is expected to be recorded over a weighted average period of 3.1 years and 2.9 years, respectively.

The total intrinsic value of options exercised during the three months ended December 31, 2011 and 2010 was $3.2 million and $2.6 million, respectively. The total intrinsic value of options exercised during the six months ended December 31, 2011 and 2010 was $5.0 million and $2.7 million, respectively. We received $4.1 million and $3.4 million in cash proceeds from option exercises during the six months ended December 31, 2011 and 2010, respectively.  We paid $1.8 million and $1.0 million for withholding taxes on vested RSUs during the six months ended December 31, 2011 and 2010, respectively.

At December 31, 2011, common stock reserved for future issuance or settlement under equity compensation plans was 11.9 million shares.