Share-Based Compensation

3 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-based compensation expense is included in costs and expenses in the accompanying Unaudited Consolidated Condensed Statements of Income and Comprehensive Income as follows:

	Three Months Ended March 31,
	2015		2014
	(in thousands)
Share-based compensation expense:
Cost of revenues	$	25	$	17
Sales and marketing		140		109
Technology support		74		57
General and administrative [1]		417		104
Share-based compensation costs		656		287
Amount capitalized to internal use software		3		1
Total share-based compensation costs	$	653	$	286

[1] Certain awards were modified in accordance with Curtis DeWalt’s, the Company's former Chief Financial Officer, consulting agreement and their vesting accelerated in accordance with the terms of the applicable option agreements.  The total expense related to these modifications and acceleration of vested awards was approximately $0.2 million in the three months ended March 31, 2015.

Service-Based Options.  The Company granted the following service-based options for the three months ended March 31, 2015 and 2014.  

	Three Months Ended March 31,
	2015		2014
Number of service-based options granted		315,050		401,750
Weighted average grant date fair value	$	4.65	$	7.46
Weighted average exercise price	$	10.22	$	16.47

These options are valued using a Black-Scholes option pricing model and generally vest one-third on the first anniversary of the grant date and ratably over twenty-four months thereafter.  The vesting of these awards is contingent upon the employee’s continued employment with the Company during the vesting period.

Performance-based Options.  During the three months ended March 31, 2014, the Company granted 40,000 performance-based inducement stock options in connection with the acquisition of AutoUSA (“2014 AutoUSA Inducement Options”), with a weighted average grant date fair value of $6.08, using a Black-Scholes option pricing model, and weighted average exercise price of $13.62.  The 2014 AutoUSA Inducement Options are subject to two vesting requirements and conditions: (i) level of achievement of performance goals based on revenue and gross margin of the Company’s retail dealer services group and (ii) service based vesting.  Based on the performance of the Company’s retail dealer services group for 2014, all 40,000 of the 2014 AutoUSA Inducement Options were awarded under the performance vesting conditions, with one-third vesting on January 21, 2015 and the remainder vesting ratably over twenty-four months from that date thereafter.  No performance options were granted during the three months ended March 31, 2015.

Market Condition Options.  In 2009, the Company granted 213,650 stock options to substantially all employees with an exercise price of $1.75 and grant date fair value of $0.97, using a Black-Scholes option pricing model.  One-third of these options cliff vested on the first anniversary following the grant date and the remaining two-thirds vesting ratably over twenty-four months thereafter.  In addition, the remaining two-thirds of the awards were subject to satisfaction of market price conditions for the Company’s common stock, which conditions have been satisfied. During the three months ended March 31, 2015, no market condition options were exercised.  During the three months ended March 31, 2014, 10,793 of these market condition stock options were exercised, respectively.  

Stock option exercises.  The following stock options were exercised (inclusive of the market condition options exercised above) for the three months ended March 31, 2015 and 2014:  

	Three Months Ended March 31,
	2015		2014
Number of stock options exercised		253		73,603
Weighted average exercise price	$	7.17	$	4.25

The grant date fair value of stock options granted during these periods was estimated using the Black-Scholes option pricing model using the following weighted average assumptions:

	Three Months Ended March 31,
	2015			2014
Dividend yield		—			—
Volatility		56	%		56	%
Risk-free interest rate		1.2	%		1.3	%
Expected life (years)		4.4			4.3