Chegg 2014 Annual Report Download - page 120

Table of Contents
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Fair Value of Restricted Stock Units (RSUs)
Restricted stock units are converted into shares of Chegg common stock upon vesting on a one-for-one basis. Vesting
of restricted stock units is subject to the employee’s continuing service to the Company. The compensation expense related
to these awards is determined using the fair value of our common stock on the date of grant, and the expense is recognized
on a straight-line basis over the vesting period. Restricted stock units are typically fully vested at the end of four years.
Fair Value of Employee Stock Purchase Plan
Under the 2013 ESPP, rights to purchase shares are generally granted during the second and fourth quarter of each
year. The fair value of rights granted under the 2013 ESPP was estimated at the date of grant using the Black-Scholes-
Merton option-pricing model.
The following table summarizes the key assumptions used to determine the fair value of our ESPP:
Year Ended December 31,
2014 2013
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50 0.50
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.89% 45.00%
Dividend yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% 0.00%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.06% 0.10%
Weighted-average grant-date fair value per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.68 $ 3.44
There were 340,617 shares purchased under the 2013 ESPP for the year ended December 31, 2014 at an average
price per share of $4.46 with cash proceeds from the issuance of shares under the Company’s ESPPs of $1.5 million.
Stock Option Activity
Option activity under our option plans was as follows:
Options Outstanding
Number of
Options
Outstanding
Weighted-
Average
Exercise
Price per
Share
Weighted-
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,971,969 $ 8.35 8.15 $ 22,253,373
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,138 $ 7.09
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (663,333) $ 1.80
Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,986,675) $ 8.61
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,962,099 $ 8.53 7.11 $ 6,646,629
As of December 31, 2014
Options exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,773,822 $ 7.86 6.42 $ 6,567,295
Options vested and expected to vest . . . . . . . . . . . . . . . . . . . 14,308,608 $ 8.46 7.04 $ 6,631,775
The total intrinsic value of options exercised during 2014, 2013 and 2012, was approximately $3.1 million, $4.9
million and $3.3 million, respectively.
As of December 31, 2014, our total unrecognized compensation expense for stock options granted to employees,
officers, directors, and consultants was approximately $22.7 million, which will be recognized over a weighted-average
vesting period of approximately 1.9 years.
We recognize only the portion of the option award granted to employees that is ultimately expected to vest as
compensation expense. Estimated forfeitures are determined based on historical data and management’s expectation of
exercise behaviors. Forfeiture rates and the resulting compensation expense are revised in subsequent periods if actual
forfeitures differ from the estimate.