Share-Based Compensation

9 Months Ended

Sep. 30, 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 September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)
Share-based compensation expense:
Cost of revenues	$	43	$	18	$	106	$	52
Sales and marketing		153		149		439		400
Technology support		202		62		429		187
General and administrative (1)		287		142		922		389
Share-based compensation costs		685		371		1,896		1,028
Amount capitalized to internal use software		1		1		7		3
Total share-based compensation costs	$	684	$	370	$	1,889	$	1,025

(1)  Certain awards were modified in accordance with the Company’s former Chief Financial Officer’s 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 and nine months ended September 30, 2015 and 2014:  

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Number of service-based options granted		16,200		59,500		600,750		461,250
Weighted average grant date fair value	$	8.12	$	3.88	$	5.69	$	6.99
Weighted average exercise price	$	17.42	$	8.50	$	12.38	$	15.44

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 nine months ended September 30, 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 and nine months ended September 30, 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. No market condition options were exercised in the three and nine months ended September 30, 2015.  During the nine months ended September 30, 2014, 15,793 of these market condition stock options were exercised, respectively.  No market condition options were exercised in the three months ended September 30, 2014.

Stock option exercises.  The following stock options were exercised (inclusive of the market condition options exercised above) for the three and nine months ended September 30, 2015 and 2014:  

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Number of stock options exercised		—		—		19,074		118,996
Weighted average exercise price	$	—	$	—	$	5.92	$	4.20

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 September 30,					Nine Months Ended September 30,
	2015			2014		2015			2014
Dividend yield		—			—		—			—
Volatility		57	%		56%		56	%		56	%
Risk-free interest rate		1.4	%		1.5%		1.3	%		1.4	%
Expected life (years)		4.4			4.3		4.4			4.3

Restricted Stock Awards.  The Company granted an aggregate of 125,000 restricted stock awards (“RSAs”) on April 23, 2015 in connection with the promotion of one of its executive officers.  Of the 125,000 RSAs, 25,000 were service-based and the forfeiture restrictions lapse with respect to one-third of the restricted stock on each of the first, second and third anniversaries of the date of the award.  This executive officer was also awarded 100,000 shares of the Company’s common stock in the form of performance-based restricted stock.  The shares are subject to forfeiture upon the earlier of (such earliest date being referred to as the “Termination Date”) (i) a termination of the executive officer’s employment with the Company; (ii) March 31, 2018; and (iii) other events of forfeiture set forth in the award agreement, subject to the following: (i) the forfeiture restrictions with respect to 50,000 of the restricted shares will lapse if any time prior to the Termination Date the weighted average closing price of the Company’s common stock for the preceding 30 trading days is at or above $30.00 per share, and (ii) the forfeiture restrictions with respect to any of the restricted shares that remain subject to forfeiture restrictions will lapse if any time prior to the Termination Date the weighted average closing price of the Company’s common stock for the preceding 30 trading days is at or above $45.00 per share.  None of the forfeiture restrictions had lapsed during the nine months ended September 30, 2015.