TiVo 2015 Annual Report Download - page 99

Table of Contents
For awards subject to performance conditions that were granted in March 2015, the fair value per award is fixed at the grant date; however, the
amount of compensation expense will be adjusted throughout the performance period based on the probability of achievement of a target revenue
compound annual growth rate and an Adjusted EBITDA (see Note 14) margin, with final compensation expense recognized based on the number of shares
ultimately issued. For awards subject to a market condition, the fair value per award is fixed at the grant date and the amount of compensation expense is
not adjusted during the performance period based on changes in the level of achievement of the relative Total Shareholder Return metric.
Employee Stock Purchase Plan
The Company
’ s 2008 Employee Stock Purchase Plan (“ ESPP ” ) allows eligible employees to purchase shares of the Company ’ s common stock at a
discount through payroll deductions. The ESPP consists of a twenty - four month offering period with four six - month purchase periods in each offering
period. Employees purchase shares each purchase period at the lower of 85% of the market value of the Company ’ s common stock at either the beginning
of the offering period or the end of the purchase period.
As of
December 31, 2015 , the Company had 1.9 million shares of common stock reserved and available for issuance under the ESPP.
Valuation Techniques and Assumptions
The Company uses the Black
- Scholes - Merton option pricing formula to estimate the fair value of stock options and ESPP shares. The fair value of
stock options and ESPP shares is estimated on the grant date using complex and subjective inputs, such as the expected volatility of the Company's
common stock over the expected term of the award and projected employee exercise behavior. The Company estimates the fair value of restricted awards
subject to service or performance conditions as the market value of the Company's common stock on the date of grant and uses a Monte Carlo simulation to
estimate the fair value of restricted stock units subject to market conditions.
Assumptions used to estimate the fair value of equity
- based compensation awards for the years ended December 31, 2015, 2014 and 2013 were as
follows:
Expected volatility is estimated using a combination of historical volatility and implied volatility derived from publicly
- traded options on the
Company's common stock. When historical data is available and relevant, the expected term of the award is estimated by calculating the average term from
historical experience. When there is insufficient historical data to provide a reasonable basis on which to estimate the expected term, the Company uses an
average of the vesting period and the contractual term of the award to estimate the expected term of the award. The risk
- free interest rate is the yield on U.S.
Treasury zero
- coupon issues with remaining terms similar to the expected term of the award at the grant date. The Company does not anticipate paying cash
dividends in the foreseeable future and therefore uses an expected dividend yield of zero. The number of awards expected to be forfeited during the
requisite service period is estimated at the time of grant using historical
F - 33
Year Ended December 31,
2015
2014
2013
Stock options:
Expected volatility
45.1
%
47.0
%
46.0
%
Expected term
4.0 years
4.0 years
4.0 years
Risk - free interest rate
1.3
%
1.1
%
0.7
%
Expected dividend yield
0.0
%
0.0
%
0.0
%
ESPP shares:
Expected volatility
53.0
%
35.0
%
47.0
%
Expected term
1.3 years
1.3 years
1.3 years
Risk - free interest rate
0.4
%
0.3
%
0.2
%
Expected dividend yield
0.0
%
0.0
%
0.0
%
Restricted stock units subject to market conditions:
Expected volatility
41.0
%
N/A
N/A
Expected term
3.0 years
N/A
N/A
Risk - free interest rate
1.0
%
N/A
N/A
Expected dividend yield
0.0
%
N/A
N/A