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, 2017, 2016 and 2015, as shown in the table below.



	Year Ended December 31,
	2017		2016		2015
	(amounts in thousands)
Product and content development	$	2,509	$	2,324	$	1,817
Sales and marketing	1,528		2,057		1,384
General and administrative	3,806		3,978		2,791
Total stock-based compensation	$	7,843	$	8,359	$	5,992

XO Group Stock-Based Incentive Plans

The Company’s 2017 Stock Incentive Plan (formerly referred to as the Amended and Restated 2009 Stock Incentive Plan, as amended, and referred to herein as the “Incentive Plan”) was originally adopted by the Board of Directors, and became effective in May 2009 following approval by the Company's 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 Incentive Plan. Initially, 1,000,000 shares of common stock of the Company were reserved for issuance in addition to the 4,829,344 shares that were incorporated from the 1999 Plan. Following approval by the stockholders, effective May 2014, an additional 2,700,000 shares were added to the shares reserved for the Incentive Plan. Thereafter, following approval by the stockholders, effective May 2017, the Amended and Restated 2009 Stock Incentive Plan was renamed the 2017 Stock Incentive Plan, an additional 3,700,000 shares were added to the shares reserved for the Incentive Plan, and the term remaining under the Incentive Plan was extended from May 20, 2019 to March 31, 2027.

The Incentive 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, 2017, there were 4,966,712 shares available for future grants under the Incentive Plan. Increases to the number of shares available for future grants under the Incentive 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 Plan and related information, without regard for estimated forfeitures, for the years ended December 31, 2017 and December 31, 2016:



	Shares		Weighted Average Exercise Price
	(in thousands)
Options outstanding at December 31, 2015	403		$	15.07
Options granted	472		16.20
Options exercised	(18	)	13.33
Options forfeited	(47	)	15.79
Options outstanding at December 31, 2016	810		15.72
Options granted	419		17.55
Options exercised	(67	)	15.28
Options forfeited	(56	)	16.65
Options outstanding at December 31, 2017	1,106		$	16.40

The fair value of the options granted during the year ended December 31, 2017 have been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



	Year Ended December 31,
	2017	2016	2015
Expected term	6.25 years	6.25 years	6.25 - 7.00 years
Risk-free rate	2.49%	1.54% - 1.91%	2.1% - 2.3%
Expected volatility	34.6%	35.0% - 36.3%	38.3% - 47.3%
Dividend yield	—%	—%	—%

The expected term of the options granted during the year ended December 31, 2017 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, 2017, 2016 and 2015, 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, 2017, 2016, and 2015 the Company recorded $1.7 million, $1.2 million, and $0.5 million of compensation expense related to options, respectively. The weighted average grant-date fair value of options granted during the years ended December 31, 2017, 2016, and 2015, was $6.79, $6.04, and $8.09, respectively. The intrinsic value of the options exercised during the years ended December 31, 2017 and December 31 2016, was $0.3 million and $0.1 million, respectively. No options were exercised during the year ended December 31, 2015.

The following table summarizes information about options outstanding and exercisable at December 31, 2017:



Options Outstanding				Options Exercisable
Number Outstanding as of December 31, 2017	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number Exercisable as of December 31, 2017	Weighted Average Remaining Contractual Life (in Years)	Weighted Average Exercise Price
(in thousands)				(in thousands)
1,106	7.56	$	16.40	410	5.64	$	15.37

The aggregate intrinsic value of stock options outstanding at December 31, 2017 was $2.3 million. The aggregate intrinsic value of exercisable options outstanding at December 31, 2017 was $1.3 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, 2017.

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, 2017 and December 31, 2016:



	Restricted Stock		Weighted Average Grant Date Fair Value (per share)
	(In Thousands)
Unvested as of December 31, 2015	1,014		$	13.11
Granted	559		16.49
Vested	(429	)	12.76
Forfeited	(164	)	14.06
Unvested as of December 31, 2016	980		15.05
Granted	422		17.77
Vested	(509	)	14.13
Forfeited	(157	)	15.99
Unvested as of December 31, 2017	736		$	17.04

For the years ended December 31, 2017, 2016 and 2015, the weighted average grant date fair value for service-based restricted stock granted was $17.77, $16.49 and $16.30, respectively. The fair value of service-based restricted stock that vested during these periods was $9.1 million, $5.5 million and $5.2 million, respectively. During the years ended December 31, 2017, 2016 and 2015, 198,043, 162,101 and 193,088 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, 2017 was $13.6 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, 2017.

As of December 31, 2017, there was $9.1 million of total unrecognized compensation cost related to non-vested service-based restricted shares, which is expected to be recognized over a weighted average period of 2.27 years. During the years ended December 31, 2017, 2016 and 2015, the Company recorded $5.9 million, $6.4 million and $5.1 million, respectively, of compensation expense related to service-based restricted shares.

Performance-Based Restricted Stock Awards

During each of the years ended December 31, 2016, and 2015, the Company granted 31,250 performance based restricted shares of common stock to its CEO, pursuant to his employment agreement. Vesting of these awards was 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 with 2016 being the final year. During the years ended 2016, and 2015, the Company incurred stock-based compensation expense related to these performance-based restricted stock awards of $0.6 million and $0.4 million, respectively. An immaterial amount of expense was recorded in 2017 in connection with marking the award to market. As of December 31, 2017, the award has fully vested and there is no remaining expense on non-vested shares outstanding. During the years ended December 31, 2017, 2016 and 2015, 11,803, 12,954, and 12,882 shares of performance-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 performance-based stock awards. For the year ended December 31, 2017 no additional performance-based awards were granted.

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 2009 ESPP was amended and restated in May 2016 (the "Amended 2009 ESPP") following the approval by the Company's stockholders. 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 Amended 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 Amended 2009 ESPP, 600,000 shares of common stock of the Company were reserved for issuance. As of December 31, 2017, there were 243,656 shares available for future grants under the 2009 Amended ESPP. Increases to the number of shares available for future grants under the Amended 2009 ESPP require approval by the Board of Directors and the Company's stockholders.

During the years ended December 31, 2017 and 2016, the Company issued shares of common stock under the 2009 ESPP and Amended 2009 ESPP, as follows:



Offering Period Purchase Date	Number of Shares	Purchase Price
	(In Thousands)
January 31, 2016	29	$12.61
July 31, 2016	25	12.77
Total 2016	54
January 31, 2017	24	16.01
July 31, 2017	26	$15.54
Total 2017	50

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,
	2017	2016	2015
	ESPP Rights	ESPP Rights	ESPP Rights
Expected term	6 months	6 months	6 months
Risk-free rate	.65% -1.15%	0.40% - 0.47%	0.05%
Expected volatility	10.3% - 12.6%	14.0% - 19.2%	17.4% - 23.8%
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 each of the years ended December 31, 2017, 2016 and 2015, the Company recorded $0.2 million 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 $3.48, $3.01 and $3.13 during the years ended December 31, 2017, 2016 and 2015, respectively. The fair value of 2009 ESPP rights that vested during the years ended December 31, 2017 and 2016 was $0.2 million, and $0.1 million, in 2015 respectively.

The intrinsic value of shares purchased through the 2009 ESPP during the year ended December 31, 2017 was $0.2 million. The intrinsic value of outstanding 2009 ESPP rights as of December 31, 2017 was $0.1 million. 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, 2017, there was approximately $14.9 thousand of unrecognized compensation cost for the 2009 ESPP rights related to a 2017 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 $1.8 million, $0.9 million and $0.5 million for the years ended December 31, 2017, 2016 and 2015, respectively, for which the Company issued new shares of common stock.

The tax benefit attributable to all recorded stock-based compensation was $3.1 million, $2.6 million and $2.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.