Stock-Based Compensation
 3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
Stock Options
A summary of our stock option activity for the three months ended March 31, 2018, is as follows (number of shares in thousands):
 
 
Number of
Shares
 
Weighted
Average
Exercise
Price per Share
 
Weighted
Average
Remaining
Contractual Life
in Years
Options outstanding as of December 31, 2017
 
1,692

 
$
10.81

 
7.3
Options granted
 
—

 
—

 
 
Options exercised
 
(98
)
 
4.81

 
 
Options cancelled/forfeited
 
(1
)
 
14.35

 
 
Options outstanding as of March 31, 2018
 
1,593

 
$
11.18

 
7.5

Included in the options outstanding as of March 31, 2018 are 172,000 and 250,000 PSOs granted in 2017 and 2016, respectively. Vesting of these PSOs is based on the achievement of pre-established performance target for each of the years ended December 31, 2018 and 2019, and continued employment throughout the performance period. Of the PSOs granted during 2017, 132,000 shares vest as to the maximum payout of 100% of the initial target award based on the maximum achievement of the 2019 free cash flow performance metric at 150% of the performance target. The remaining 40,000 PSOs granted during 2017 have a pre-established adjusted gross margin target for 2019. PSOs tied to the gross margin performance metric have two levels of vesting, with 50% vesting based upon the achievement of 110% of the targeted amount and the remaining 50% vesting upon the achievement of 115% of the targeted amount. The 250,000 PSOs granted in 2016 vest based on the achievement of a pre-established free cash flow performance metric for the year ended December 31, 2018, and assume achievement of the performance metric at the maximum level, which is 150% of the performance target.
During the three months ended March 31, 2018, 250,000 of the PSOs vested based on the achievement of 150% of the pre-established free cash flow performance target for the year ended December 31, 2017. No expense was recognized related to the PSOs that vested during the three months ended March 31, 2018, as all expense was recognized as of December 31, 2017.
We recognize expense for the PSOs based on the grant date fair value of the PSOs that we determine are probable of vesting. Adjustments to compensation expense are made each period based on changes in our estimate of the number of PSOs that are probable of vesting. Our stock-based compensation expense for stock options, including the PSOs, for the three months ended March 31, 2018 and 2017, was $0.3 million and $0.5 million, respectively.
The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. No stock options were granted during the three months ended March 31, 2018. The following table summarizes information relating to our stock options granted during the three months ended March 31, 2017: 
 
 
Three Months Ended
March 31, 2017
Stock options granted (in thousands)
 
132

Weighted average exercise price per share
 
$
23.80

Weighted average grant-date fair value per share
 
$
9.29

Weighted average Black-Scholes model assumptions:
 
 
Risk-free interest rate
 
2.04
%
Expected term (in years)
 
6.4

Expected volatility
 
35
%
Expected dividend yield
 
—



As of March 31, 2018, the total estimated remaining stock-based compensation expense for unvested stock options, including the PSOs, was $1.5 million, which is expected to be recognized over a weighted average period of 1.4 years.
Restricted Stock Units
A summary of activity in connection with our RSUs for the three months ended March 31, 2018 is as follows (number of shares in thousands):
 
 
Number of Shares
 
Weighted- Average Grant Date Fair Value per Share
Unvested as of December 31, 2017
 
598

 
$
19.75

Granted
 
191

 
40.24

Vested
 
(107
)
 
13.36

Forfeited
 
(4
)
 
30.43

Unvested as of March 31, 2018
 
678

 
$
26.49



During the three months ended March 31, 2018, we granted a total of 191,000 RSUs: 117,000 RSUs vest annually over four years; 59,000 PSUs vest based on the achievement of a pre-established consolidated net revenue growth target for each of the years ended December 31, 2018, 2019 and 2020; and 15,000 PSUs were granted and vested as a result of the achievement of the pre-established free cash flow performance metric for the year ended December 31, 2017. The number of PSUs granted, as included in the above table, assumes achievement of the performance metric at 100% of the performance target. The actual number of shares to be issued at the end of the performance period will range from 0% to 100% of the initial target awards. Achievement of the performance metric between 100% and 150% of the performance target will result in a performance based cash bonus payment between 100% and 165% of the initial target awards.

During the three months ended March 31, 2018, 30,000 of the PSUs vested based on the achievement of 150% of the pre-established free cash flow performance target for the year ended December 31, 2017, and an additional 15,000 PSUs were granted and vested as a result of the achievement of the 2016 performance metric as confirmed by our Board of Directors. No expense was recognized related to the PSUs that vested during the three months ended March 31, 2018, as all expense was recognized as of December 31, 2017.
Included in the unvested RSUs as of March 31, 2018 are 98,000 and 28,000 PSUs granted in 2017 and 2016, respectively. Vesting of these PSUs is based on the achievement of pre-established free cash flow performance metrics for each of the years ended December 31, 2018 and 2019, and continued employment throughout the performance period. The number of PSUs granted assumes achievement of the performance metric at 100% of the performance target. For the PSUs granted in 2017, the actual number of shares to be issued at the end of the performance period will range from 0% to 165% of the initial target award. For the PSUs granted in 2016, the actual number of shares to be issued at the end of the performance period will range from 0% to 150% of the initial target award.
We recognize expense for the PSUs based on the grant date fair value of the PSUs that we determine are probable of vesting. Adjustments to compensation expense are made each period based on changes in our estimate of the number of PSUs that are probable of vesting. Our stock-based compensation expense for the RSUs and PSUs for the three months ended March 31, 2018 and 2017, was $1.1 million and $0.6 million, respectively.
As of March 31, 2018, the total remaining estimated stock-based compensation expense for the RSUs and PSUs was $13.6 million, which is expected to be recognized over a weighted average period of 2.6 years.
Restricted Stock Awards
A summary of activity in connection with our restricted stock awards for the three months ended March 31, 2018, is as follows (number of shares in thousands): 
 
 
Number of
Shares
 
Weighted-Average
Grant Date
Fair Value per Share
Unvested as of December 31, 2017
 
16

 
$
20.93

Granted
 
—

 
—

Vested
 
(2
)
 
5.64

Forfeited
 
—

 
—

Unvested as of March 31, 2018
 
14

 
$
22.55


We have the right to repurchase any unvested restricted stock awards upon certain conditions. Restricted stock awards vest over a four-year period for employees and a one-year period for non-employee directors. We recognized stock-based compensation expense for restricted stock awards of $83,000 and $101,000 for the three months ended March 31, 2018 and 2017, respectively.
As of March 31, 2018, the total remaining stock-based compensation expense for unvested restricted stock awards with a repurchasing right was $102,000 which is expected to be recognized over a weighted average period of 0.4 years.