Pandora 2016 Annual Report Download - page 110

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industry that have similar vesting and contractual terms. The risk free interest rate is based on the implied yield currently
available on U.S. Treasury issues with terms approximately equal to the expected life of the option. We currently have no
history or expectation of paying cash dividends on our common stock.
During the eleven months ended December 31, 2013, the twelve months ended December 31, 2014 and the twelve
months ended December€31, 2015, we recorded stock-based compensation expense related to stock options of approximately
$10.6 million, $14.7 million and $10.7 million, respectively.
As of December€31, 2015, there was $32.2 million of unrecognized compensation cost related to outstanding employee
stock options. This amount is expected to be recognized over a weighted-average period of 2.47€years. To the extent the actual
forfeiture rate differs from our estimates, stock-based compensation related to these awards could differ from our expectations.
The weighted-average fair value of stock option grants made during the eleven months ended December 31, 2013, the
twelve months ended December 31, 2014 and the twelve months ended December€31, 2015 was $9.34, $19.74 and $9.08 per
share, respectively.
The total grant date fair value of stock options vested during the eleven months ended December 31, 2013, the twelve
months ended December 31, 2014 and the twelve months ended December€31, 2015 was $9.1 million, $16.0 million and $17.6
million, respectively.
The aggregate intrinsic value of stock options exercised during the eleven months ended December 31, 2013, the twelve
months ended December 31, 2014 and the twelve months ended December€31, 2015 was $93.8 million, $169.2 million and $9.5
million, respectively. The total fair value of options vested during the eleven months ended December 31, 2013, the twelve
months ended December 31, 2014 and the twelve months ended December€31, 2015 was $9.4 million, $16.5 million and $17.6
million, respectively.
Restricted Stock Units
The fair value of the restricted stock units is expensed ratably over the vesting period. RSUs vest annually on a cliff basis
over the service period, which is generally four years. During the eleven months ended December 31, 2013, the twelve months
ended December 31, 2014 and the twelve months ended December€31, 2015, we recorded stock-based compensation expense
related to restricted stock units of approximately $28.9 million, $69.9 million and $96.1 million, respectively. As of
December€31, 2015, total compensation cost not yet recognized of approximately $256.1 million related to non-vested restricted
stock units, is expected to be recognized over a weighted average period of 2.75 years.
The following table summarizes the activities for our RSUs for the twelve months ended December€31, 2015:
Number of RSUs
Weighted-Average Grant
Date Fair Value
Unvested as of December€31, 2014 11,024,068 $21.99
Granted 11,678,792 15.40
Vested (4,184,415)21.06
Forfeited (1,246,360)19.89
Unvested as of December€31, 2015 17,272,085 17.91
Expected to vest as of December 31, 2015 (1) 15,595,029 $17.90
(1) RSUs expected to vest reflect an estimated forfeiture rate.
MSUs
We implemented a market stock unit program in March 2015 for certain key executives. MSUs are earned as a function
of Pandora’s TSR performance measured against that of the Russell 2000 Index across three performance periods:
• One-third of the target MSUs are eligible to be earned for a performance period that is the first calendar year of the
MSU grant (the “One-Year Performance Period”);
Table of Contents
Pandora Media,€Inc.
Notes to Consolidated Financial Statements - Continued
99