Chegg 2014 Annual Report Download - page 119

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Table of Contents
81
shares of our common stock by accumulating funds through periodic payroll deductions of up to 15% of base salary. Our 2013
ESPP is intended to qualify as an ESPP under Section 423 of the Code and employees will receive a 15% discount to the lesser
of the fair market value of our common stock on (i) the first trading day of the applicable offering period or (ii) the last day of
each purchase period in the applicable offering period. Each offering period may run for no more than six months. We have
reserved 4,000,000 shares of our common stock under our 2013 ESPP. The aggregate number of shares issued over the term of
our 2013 ESPP will not exceed 20,000,000 shares of our common stock. As of December 31, 2014, there were 4,476,465 shares
of common stock available for future issuance under the 2013 ESPP.
Note 14. Stockholders' Equity
Share-Based Compensation
Total share-based compensation expense recorded for employees and non-employees, is as follows (in thousands):
Year Ended December 31,
2014 2013 2012
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 617 $ 1,185 $ 542
Technology and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,451 9,414 7,657
Sales and marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,300 7,107 5,164
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,520 19,252 4,682
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,888 $ 36,958 $ 18,045
Fair Value of Stock Options
We estimate the fair value of each stock option award using the Black-Scholes-Merton option-pricing model, which
utilizes the estimated fair value of our common stock and requires the input of the following subjective assumptions:
Expected Term — The expected term for options granted to employees, officers, and directors is calculated as the
midpoint between the vesting date and the end of the contractual term of the options. The expected term for options
granted to consultants is determined using the remaining contractual life.
Expected Volatility — The expected volatility is based on the average volatility of similar public entities within our
peer group as our stock has not been publicly trading for a long enough period to rely on our own expected
volatility.
Expected Dividends — The dividend assumption is based on our historical experience. To date we have not paid
any dividends on our common stock.
Risk-Free Interest Rate — The risk-free interest rate used in the valuation method is the implied yield currently
available on the United States treasury zero-coupon issues, with a remaining term equal to the expected life term of
our options.
The following table summarizes the key assumptions used to determine the fair value of our stock options granted
to employees, officers, and directors:
Year Ended December 31,
2014 2013 2012
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 5.08-6.63 5.09-6.08
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.91%-56.83% 55.72%-73.18% 55.10%-58.77%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% 0.00% 0.00%
Risk-free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.88%-2.02% 0.81%-1.92% 0.65%-1.16%
Weighted-average grant-date fair value per share . . . . . . . . . . $ 3.82 $ 6.20 $ 3.86