Stock-Based Compensation

The Company maintains several stock-based compensation plans, which are more fully described below. The Company includes total stock-based compensation expense related to all its stock awards in various operating expense categories for the years ended December 31, 2015, 2014 and 2013, as shown in the table below. Stock based compensation expense included $0.5 million related to liability awards for the year ended December 31, 2014. There was no material expense related to liability award for the years ended December 31, 2015 and 2013.



	Year Ended December 31,
	2015		2014		2013
	(In Thousands)
Product and content development	$	1,817	$	2,020	$	2,391
Sales and marketing	1,384		1,533		1,591
General and administrative	2,791		2,586		2,715
Total stock-based compensation	$	5,992	$	6,139	$	6,697

XO Group Stock-Based Incentive Plans

The 2009 Stock Incentive Plan (the “2009 Plan”) was adopted by the Board of Directors, and became effective in May 2009 following approval by the stockholders, as a successor plan to the Company’s 1999 Stock Incentive Plan (the “1999 Plan”). All incentive stock options, nonqualified stock options (incentive and nonqualified stock options are collectively referred to as “options”), stock appreciation rights, stock issuances which may be subject to the attainment of designated performance goals or service requirements (“restricted stock”), or any combination thereof outstanding under the 1999 Plan have been incorporated into the 2009 Plan. Under the terms of the 2009 Plan, 1,000,000 shares of common stock of the Company were initially reserved for issuance in addition to the 3,190,737 shares that were incorporated from the 1999 Plan. Following approval by the stockholders, effective August 2014, an additional 2,700,000 shares were added to the shares reserved for the 2009 Plan. The 2009 Plan provides that awards may be granted to such non-employee directors, officers, employees and consultants of the Company as the Compensation Committee of the Board of Directors shall select in its discretion. Only employees of the Company are eligible to receive grants of incentive stock options. Options are granted at the fair market value of the stock on the date of grant. Options vest over periods up to four years and have terms not to exceed ten years. Restricted stock awards vest over periods ranging from one year to four years.

As of December 31, 2015, there were 2,853,104 shares available for future grants under the 2009 Plan. Increases to the number of shares available for future grants under the 2009 Plan require approval by the Board of Directors and the Company's stockholders.

Options

The following table represents a summary of the Company’s stock option activity under the 2009 and 2000 Plans and related information, without regard for estimated forfeitures, for the years ended December 31, 2015 and 2014:



	Shares		Weighted Average Exercise Price
	(In Thousands)
Options outstanding at December 31, 2013	281		$	8.79
Options granted	100		10.28
Options exercised	(131	)	4.00
Options forfeited	(100	)	10.28
Options outstanding at December 31, 2014	150		12.97
Options granted	280		16.35
Options exercised	—		—
Options forfeited	(27	)	16.66
Options outstanding at December 31, 2015	403		$	15.07

The fair value of the options granted during the year ended December 31, 2015 have been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



	Year Ended December 31,
	2015	2014	2013
Expected term	6.25 - 7.00 years	3.75 years	3.75 years
Risk-free rate	2.1% - 2.3%	1.4% - 1.7%	1.4% - 1.6%
Expected volatility	38.3% - 47.3%	36.7% - 37.1%	37.0% - 37.1%
Dividend yield	—%	—%	—%

The expected term of the options granted during the year ended December 31, 2015 was generally determined using the "simplified method" as prescribed by SAB Topic 14D.2, which is presumed to be the midpoint between the vesting date and the end of the contractual term. The simplified method was used to determine the expected term of the options granted during the years ended December 31, 2015, 2014 and 2013, due to the extended period of time that has lapsed since the Company's last granted options, as well as differences in the contractual terms of the option awards compared to options granted in prior periods, such that our historical share option experience does not provide a reasonable basis to estimate the expected term. The risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the expected term of the options. Expected volatility is based on the historical volatility of the market price of the Company’s stock.

During the years ended December 31, 2015, 2014, and 2013 the Company recorded $0.5 million, $0.2 million, and $0.1 million of compensation expense related to options, respectively. The weighted average grant-date fair value of options granted during the years ended December 31, 2015, 2014, and 2013 was $8.09, $3.09, and $3.89, respectively. During each of the years ended December 31, 2015 and 2014, 37,500 options, with a weighted average exercise price of $12.97, vested. No options vested during the year ended December 31, 2013. The intrinsic value of options exercised during the years ended December 31, 2014 and 2013 was $1.0 million and $0.8 million, respectively. During the year ended December 31, 2015, there were no options exercised. During the year ended December 31, 2015, 27,000 options, with a weighted average exercise price of $16.66, were forfeited. During the year ended December 31, 2014, 100,000 options, with a weighted average exercise price of $10.28, were forfeited.

The following table summarizes information about options outstanding and exercisable at December 31, 2015:



Options Outstanding				Options Exercisable
Number Outstanding as of December 31, 2015	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number Exercisable as of December 31, 2015	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price
(In Thousands)				(In Thousands)
403	6.83	$	15.07	75	2.73	$	12.97

The aggregate intrinsic value of stock options outstanding at December 31, 2015 was $0.4 million. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the quoted closing price of the Company’s common stock as of December 31, 2015.

Service-Based Restricted Stock Awards

The following table summarizes the activity for awards of restricted stock with service-based vesting terms for the years ended December 31, 2015 and December 31, 2014:



	Restricted Stock		Weighted Average Grant Date Fair Value (per share)
	(In Thousands)
Unvested as of December 31, 2013	2,310		$	10.01
Granted	412		11.73
Vested	(931	)	9.67
Forfeited	(526	)	9.97
Unvested as of December 31, 2014	1,265		10.84
Granted	457		16.30
Vested	(470	)	11.15
Forfeited	(238	)	11.07
Unvested as of December 31, 2015	1,014		$	13.11

For the years ended December 31, 2015, 2014 and 2013, the weighted average grant date fair value for service-based restricted stock granted was $16.30, $11.73 and $10.21, respectively. The fair value of service-based restricted stock that vested during these periods was $5.2 million, $9.0 million and $4.8 million, respectively. During the years ended December 31, 2015, 2014 and 2013, 193,088, 383,811 and 186,778 shares of service-based restricted stock, respectively, were repurchased by the Company in connection with the surrender of these shares by employees to satisfy tax withholding obligations related to the vesting of the service-based stock awards. The aggregate intrinsic value of unvested service-based restricted shares as of December 31, 2015 was $16.3 million. The intrinsic value for service-based restricted shares is calculated based on the par value of the underlying shares and the quoted price of the Company’s common stock as of December 31, 2015.

As of December 31, 2015, there was $7.5 million of total unrecognized compensation cost related to non-vested service-based restricted shares, net of estimated forfeitures, which is expected to be recognized over a weighted average period of 2.04 years. During the years ended December 31, 2015, 2014 and 2013, the Company recorded $5.1 million, $4.9 million and $6.0 million, respectively, of compensation expense related to service-based restricted shares.

Performance-Based Restricted Stock Awards

During each of the years ended December 31, 2015, 2014 and 2013, the Company granted 31,250 restricted shares of common stock to its CEO, pursuant to his employment agreement. Vesting of these awards is based upon (1) the achievement of performance goals established by the Compensation Committee of the Board and (2) continued employment with the Company through the vesting date. The performance period for these awards ended on December 31 of each year. There were 31,250 of unvested performance-based restricted stock as of December 31, 2015 that were remeasured using the closing market price of $16.06 on December 31, 2015. The grant date fair value of this unvested performance-based restricted stock award was $16.66, which was determined using the fair market value of the Company's stock on the grant date. During the year ended December 31, 2015, the Compensation Committee of the Board determined that the performance goals related to the award granted during the year ended December 31, 2014 were achieved and therefore the award vested. During the years ended December 31, 2015, 2014 and 2013, the Company incurred stock-based compensation expense related to these performance-based restricted stock awards of $0.4 million, $0.6 million and $0.5 million. As of December 31, 2015, there was $0.1 million of unrecognized compensation cost related to unvested performance-based restricted stock award.

Employee Stock Purchase Plan ("ESPP")

The 2009 Employee Stock Purchase Plan (the “2009 ESPP”) was adopted by the Board of Directors, and was approved by the stockholders in May 2009, as a successor plan to the Company’s 1999 Employee Stock Purchase Plan (the “1999 ESPP”). The first offering period under the 2009 ESPP began August 1, 2009 and shares were first purchased under this plan on January 31, 2010. The Compensation Committee of the Board of Directors administers the ESPP. The 2009 ESPP permits a participating employee to make contributions to purchase shares of common stock by having withheld from his or her salary an amount between 1% and 15% of compensation. Under the 2009 ESPP, eligible employees of the Company may elect to participate before the start date of a semi-annual offering period. On each purchase date during an offering period, a participating employee’s contributions will be used to purchase up to 1,000 shares of the Company’s common stock for such participating employee at a 15% discount from the fair market value, as defined in the 2009 ESPP, of such stock. In addition to the 1,000 share purchase limit, the cost of shares purchased under the plan by a participating employee cannot exceed $25,000 in any plan year.

Under the terms of the 2009 ESPP, 300,000 shares of common stock of the Company were reserved for issuance. As of December 31, 2015, there were 48,174 shares available for future grants under the 2009 ESPP. Increases to the number of shares available for future grants under the 2009 ESPP require approval by the Board of Directors and the Company's stockholders.

During the years ended December 31, 2015 and 2014, the Company issued shares of common stock under the 2009 ESPP, as follows:



Offering Period Purchase Date	Number of Shares	Purchase Price
	(In Thousands)
January 31, 2014	18	$	10.26
July 31, 2014	20	$	10.31
Total 2014	38
January 31, 2015	20	$	9.36
July 31, 2015	25	$	12.61
Total 2015	45

The fair value of 2009 ESPP rights have been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



	Year Ended December 31,
	2015	2014	2013
	ESPP Rights	ESPP Rights	ESPP Rights
Expected term	6 months	6 months	6 months
Risk-free rate	0.05%	0.05% - 0.06%	0.08% - 0.11%
Expected volatility	17.4 - 23.8%	25.2% - 29.3%	19.9% - 20.3%
Dividend yield	—%	—%	—%

Expected volatility is based on the historical volatility of the market price of the Company’s stock. The expected lives of ESPP rights granted are based on the period of time between the offering date and the exercise date. The risk-free interest rates are based on the quoted U.S. Treasury rates for securities with maturities approximating the expected term. The fair value for 2009 ESPP rights includes the option exercise price discount from market value provided for under the 2009 ESPP.

During the years ended December 31, 2015, 2014 and 2013, the Company recorded $158,000, $104,000 and $84,000, respectively, of compensation expense related to 2009 ESPP rights. The weighted average grant-date fair value of 2009 ESPP rights arising from elections made by ESPP participants was $3.13, $2.63 and $2.24 during the years ended December 31, 2015, 2014 and 2013, respectively. The fair value of 2009 ESPP rights that vested during the years ended December 31, 2015, 2014 and 2013 was $139,000, $102,000 and $67,000, respectively.

The intrinsic value of shares purchased through the 2009 ESPP during the year ended December 31, 2015 was $127,000. The intrinsic value of outstanding 2009 ESPP rights as of December 31, 2015 was $59,000. The intrinsic value of the shares of 2009 ESPP rights is calculated as the discount from the quoted price of the Company’s common stock, as defined in the 2009 ESPP, which was available to employees as of the respective dates.

As of December 31, 2015, there was approximately $16,000 of unrecognized compensation cost for the 2009 ESPP rights related to a 2015 offering period, which is expected to be recognized over a period of one month.

The Company received cash from the exercise of options and 2009 ESPP rights of $0.5 million, $0.9 million and $0.5 million for the years ended December 31, 2015, 2014 and 2013, respectively, for which the Company issued new shares of common stock.

The tax benefit attributable to all recorded stock-based compensation was $2.4 million, $2.6 million and $3.0 million for the years ended December 31, 2015, 2014 and 2013, respectively. For the years ended December 31, 2015, the Company also recorded increases of $1.0 million, $1.3 million and $0.3 million, respectively, to additional paid-in-capital, for tax benefits attributable to tax deductions generated from the exercise of employee stock options and vesting of restricted stock in excess of related stock-based compensation recorded for financial reporting purposes. The tax benefits for these deductions are recognized when they result in a reduction to current taxes payable and are accounted for as additional paid-in-capital.