Stock-Based Compensation
 12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
On October 26, 2011, the Board of Directors approved the 2011 Equity Incentive Plan ("2011 Plan"). A total of 4,225,648 shares of common stock were reserved for future issuance under the 2011 Plan, which became effective on November 17, 2011. The Company has a 2004 Equity Incentive Plan ("2004 Plan"), but no longer grants stock options under this plan. Cancelled or forfeited stock option grants under the 2004 Plan will be added to the total amount of shares available for grant under the 2011 Plan. In addition, shares authorized but unissued as of November 17, 2011 under the 2004 Plan were added to shares available for grant under the 2011 Plan. The 2011 Plan contains an "evergreen" provision, pursuant to which the number of shares available for issuance under the 2011 Plan may be increased on the first day of the fiscal year, in an amount equal to the least of (a) 2,535,389 shares, (b) 4.5% of the outstanding Shares on the last day of the immediately preceding fiscal year or (c) such number of shares determined by the Board of Directors. During 2013 the Company registered an additional 1,982,113 shares under its 2011 Plan.
The 2011 Plan allows the Company to award stock options (incentive and non-qualified), restricted stock, restricted stock units, stock appreciation rights, deferred stock awards, dividend equivalents, performance awards, stock payments, performance shares and other incentive awards, or any combination thereof to employees, officers, directors and consultants of the Company. The exercise price of incentive stock options, which may only be granted to employees, granted under the 2011 Plan to participants with less than 10% voting power of all classes of stock of the Company or any parent or subsidiary company may not be less than 100% of the fair market value of the Company's common stock on the date of the grant. The exercise price of incentive stock options granted under the 2011 Plan to participants with 10% or more voting power of all classes of stock of the Company or any parent or subsidiary company may not be less than 110% of the fair market value of the Company's common stock on the date of the grant. Options granted under the 2011 Plan generally expire ten years from the date of grant and are generally exercisable at any time after the date of grant when the shares are vested. Incentive and nonstatutory stock options granted generally vest at a rate of 25% on the first anniversary of the commencement or grant date and 1/48th each month thereafter. Incentive stock options granted to participants with 10% or more of the voting power of all classes of the Company's common stock on the date of grant have a maximum term of five years from the date of grant.
Option activity for the periods presented is as follows:
 
Options Outstanding
 
Number of
Stock Options
Outstanding
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Life (Years)
 
Aggregate
Intrinsic
Value
(in thousands)
Balance as of December 31, 2010
7,268,909

 
$
1.48

 
6.9
 
$
13,937

Granted
1,570,684

 
7.13

 
 
 
 

Exercised
(368,194
)
 
1.26

 
 
 
2,854

Cancelled
(241,802
)
 
3.28

 
 
 
 

Balance as of December 31, 2011
8,229,597

 
2.52

 
6.6
 
50,541

Granted
1,339,129

 
8.12

 
 
 
 

Exercised
(1,747,213
)
 
1.39

 
 
 
9,558

Cancelled
(395,096
)
 
6.63

 
 
 
 
Balance as of December 31, 2012
7,426,417

 
3.57

 
6.4
 
40,040

Granted
1,720,242

 
7.53

 
 
 
 
Exercised
(2,031,903
)
 
1.31

 
 
 
11,816

Cancelled
(646,013
)
 
7.40

 
 
 
 
Balance as of December 31, 2013
6,468,743

 
$
4.96

 
6.7
 
$
8,991

Exercisable as of December 31, 2013
3,957,414

 
$
3.40

 
5.4
 
$
8,839

Vested and expected to vest as of December 31, 2013
6,028,954

 
$
4.77

 
6.6
 
$
8,983





Restricted stock award and restricted stock unit ("RSUs") activity for the periods presented is as follows:
 
Number of
Stock RSUs
Outstanding
 
Weighted-Average Grant Date Fair Value
Balance as of December 31, 2011
—

 
$
—

Granted
274,070

 
6.48

Vested
—

 
—

Forfeited
(19,207
)
 
6.49

Balance as of December 31, 2012
254,863

 
6.48

Granted
814,000

 
8.47

Vested
(74,985
)
 
—

Forfeited
(143,527
)
 
8.56

Balance as of December 31, 2013
850,351

 
$
7.99

Vested and expected to vest as of December 31, 2013
695,488

 
 


Typically, vesting of RSUs occurs over four years and is subject to the employee's continuing service to the Company. The aggregate intrinsic value of RSUs outstanding at December 31, 2013 and 2012 was $4.2 million and $2.3 million, respectively.
RSUs that vested during 2013 had fair values of $0.5 million as of the vesting date. No RSUs vested during 2012.
The following table presents details on grants made by the Company for the following periods: 
 
Years Ended
 
Years Ended
 
December 31, 2013
 
December 31, 2012
 
Shares Granted
 
Weighted-
Average Grant
Date Fair Value
 
Shares Granted
 
Weighted-
Average Grant
Date Fair Value
Stock options
1,720,242

 
$
4.16

 
1,339,129

 
$
4.50

RSUs
814,000

 
$
8.47

 
274,070

 
$
6.48



As of December 31, 2013 and December 31, 2012, the Company had reserved shares of common stock for issuance as follows:
 
December 31, 2013
 
December 31, 2012
Number of stock options outstanding
6,468,743
 
7,426,417
Number of RSUs outstanding
850,351
 
254,863
Shares available for future grant
5,238,699
 
5,001,956
Number of warrants outstanding
912,368
 
912,368
Total shares reserved
13,470,161
 
13,595,604
 

The Company recognized stock-based compensation expense for awards granted to its employees and nonemployees as follows (in thousands):
 
Years Ended
 
December 31,
 
2013
 
2012
 
2011
Cost of revenue
$
1,453

 
$
1,011

 
$
622

Research and development
1,301

 
872

 
462

Sales and marketing
1,175

 
774

 
770

General and administrative
1,554

 
995

 
588

Total stock-based compensation
$
5,483

 
$
3,652

 
$
2,442



The following table presents stock-based compensation expense, net of estimated forfeitures, by grant type (in thousands):
 
Years Ended
 
December 31,
 
2013
 
2012
 
2011
Stock options
$
3,906

 
$
3,369

 
$
2,442

Restricted stock awards and restricted stock units (RSUs)
1,577

 
283

 
—

Total stock-based compensation
$
5,483

 
$
3,652

 
$
2,442



The following table presents unrecognized compensation expense, net of estimated forfeitures, related to the Company’s equity compensation plans as of December 31, 2013, which is expected to be recognized over the following weighted-average periods, (in thousands, except for weighted-average period): 
 
Unrecognized
Compensation
Expense
 
Weighted-
Average Period
(in years)
Stock options
$
7,298

 
2.7
RSUs
$
4,219

 
2.9


There were no capitalized stock-based compensation costs or recognized stock-based compensation tax benefits during the years ended December 31, 2013 and 2012.
Additional information regarding options outstanding as of December 31, 2013 is as follows:
 
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices
 
Options
Outstanding
 
Weighted-Average
Remaining
Contractual
Life (Years)
 
Weighted-Average
Exercise Price
per Share
 
Exercisable
 
Weighted-Average
Exercise Price
per Share
$0.00 - $1.50
 
637,991

 
2.0
 
$
0.58

 
637,991

 
$
0.58

$1.51 - $3.00
 
2,225,689

 
5.2
 
2.18

 
2,168,575

 
2.17

$3.01 - $4.50
 
89,468

 
6.9
 
3.40

 
67,622

 
3.40

$4.51 - $6.00
 
607,140

 
9.8
 
5.55

 
9,564

 
5.34

$6.01 - $7.50
 
1,300,259

 
8.0
 
6.35

 
656,966

 
6.35

$7.51 - $9.00
 
888,200

 
8.5
 
8.76

 
276,590

 
8.84

$9.01 - $11.50
 
629,996

 
8.8
 
9.58

 
87,400

 
9.81

$11.51 - $12.00
 
90,000

 
7.6
 
11.96

 
52,706

 
11.96

 
 
6,468,743

 
6.7
 
$
4.96

 
3,957,414

 
$
3.40


Determining Fair Value of Stock Options
The fair value of each grant of stock options was determined by the Company and its board of directors using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.
Valuation Method—The Company estimates the fair value of its stock options using the Black-Scholes option-pricing model.
Expected Term—The expected term represents the period that the stock-based awards are expected to be outstanding. For option grants that are considered to be "plain vanilla," the Company used the simplified method to determine the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.
Expected Volatility—The expected volatility was based on the historical stock volatilities of several of the Company's publicly listed peers over a period approximately equal to the expected term of the options as the Company did not have a sufficient trading history to use the volatility of its own common stock.
Fair Value of Common Stock—The fair value of the common stock underlying the stock options, prior to our initial public offering in November 2011, had been determined by the Company's board of directors. Because there was no public market for the Company's common stock prior to November 2011, the board of directors determined the fair value of the common stock at the time of the option grant by considering a number of objective and subjective factors including valuations of comparable companies, sales of redeemable convertible preferred stock to unrelated third parties, operating and financial performance, lack of liquidity of capital stock and general and industry-specific economic outlook, amongst other factors.
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the options.
Expected Dividend—The expected dividend has been zero as the Company has never paid dividends and does not expect to pay dividends.
Summary of Assumptions—The fair value of the employee stock options were estimated on the grant dates using a Black-Scholes option-pricing model with the following weighted average assumptions:
 
Years Ended
 
December 31,
 
2013
 
2012
 
2011
Expected term (in years)
6.0

 
6.0

 
6.0

Risk-free interest rate
1.4
%
 
1.1
%
 
2.1
%
Expected volatility
59
%
 
60
%
 
57
%
Expected dividend rate
—
%
 
—
%
 
—
%