13.

Stock-Based Compensation

Stock-Based Compensation Expense

Total stock-based compensation expense in the Company’s Consolidated Statements of Income related to the Company’s long-term incentive award plans was as follows (

in thousands

	Years ended December 31,
		2018		2017		2016
Cost of services-compensation	$	7,421	$	7,354	$	3,805
Selling, general and administrative		14,086		16,789		9,472
Total	$	21,507	$	24,143	$	13,277

The total tax benefits recognized on stock-based compensation for the years ended

December 31, 2018,

2017

and

2016

was

$9.1

million,

$4.0

million and

$4.1

million, respectively.

Stock Options

Stock-based compensation expense related to stock options was approximately

$9.6

million,

$10.3

million and

$6.9

million for the years ended

December 31, 2018,

2017

and

2016,

respectively.

Presented below is a summary of stock option activity for the year ended

December 31, 2018 (

in thousands except for weighted average exercise price and weighted average remaining contractual terms

	Number of Options			Weighted Average Exercise Price	Weighted Average- Remaining Contractual Terms		Aggregate- Intrinsic Value
Outstanding balance at December 31, 2017	5,554		$	17.35
Granted	1,010			19.58
Exercised	(2,017	)		19.14
Forfeitures	(114	)		17.74
Expired	(31	)		22.34
Outstanding balance at December 31, 2018	4,402			17.07	5.80	$	48,339

Expected to vest at December 31, 2018	1,481		$	18.60	8.22	$	14,119
Exercisable at December 31, 2018	2,370		$	15.87	3.83	$	29,068

As of

December 31, 2018

and

2017,

the Company had

1,999,069

and

2,372,682,

respectively, in unvested options with a weighted-average-grant-date fair value of

$7.27

and

$6.39,

respectively. The weighted-average-grant-date fair value per share of the stock options granted during the years ended

December 31, 2018,

2017

and

2016

was

$7.52,

$7.66

and

$5.55,

respectively. The weighted-average-grant-date fair value per share of stock options vested during the year ended

December 31, 2018

was

$6.18.

The weighted-average-grant-date fair value per share of the stock options forfeited during the years ended

December 31, 2018,

2017

and

2016

was

$6.86,

$5.24

and

$6.26,

respectively.

HMS estimated the fair value of each stock option grant on the date of grant using a Black-Scholes option pricing model. Weighted–average assumptions are set forth in the following table:

	Year ended December 31,
		2018		2017		2016
Expected dividend yield		-		-		-
Risk-free interest rate		2.7	%	1.8	%	1.2	%
Expected volatility		42.4	%	44.2	%	44.0	%
Expected life (years)		6.0		5.0		4.9

HMS estimated the fair value of

2017

and

2016

market condition option grants on the date of grant using a Monte-Carlo simulation model. There were

market condition awards granted in

2018.

Assumptions are set forth in the following table:

	Year ended December 31,
		2018	2017		2016
Expected dividend yield		-	-		-
Risk-free interest rate		-	2.2	%	1.6	%
Expected volatility		-	52.5	%	40.5	%
Expected life (years)		-	6.5		4.9

During the years ended

December 31, 2018,

2017

and

2016,

the Company issued

2,017,442,

172,326

and

510,512

shares, respectively, of the Company’s common stock upon the exercise of outstanding stock options and received proceeds of

$38.3

million,

$2.7

million and

$2.9

million, respectively. The total intrinsic value of stock options exercised during the years ended

December 31, 2018,

2017

and

2016

was

$27.6

million,

$0.5

million and

$6.3

million, respectively.

As of

December 31, 2018,

there was approximately

$5.5

million of total unrecognized compensation cost related to stock options outstanding, which is expected to be recognized over a weighted average period of

0.9

years.

Restricted Stock Units

Stock-based compensation expense related to restricted stock units was

$11.9

million,

$13.8

million and

$6.4

million for the years ended

December 31, 2018,

2017

and

2016,

respectively.

Presented below is a summary of restricted stock units activity for the year ended

December 31, 2018 (

in thousands, except for weighted average grant date fair value per unit

	Number of Units			Weighted Average Grant Date Fair Value per Unit
Outstanding balance at December 31, 2017		1,346		$	17.65
Granted		766			16.80
Vesting of restricted stock units, net of units withheld for taxes		(371	)		17.06
Units withheld for taxes		(163	)		17.06
Forfeitures		(90	)		17.31
Outstanding balance at December 31, 2018		1,488		$	17.60

As of

December 31, 2018,

1,259,003

restricted stock units remained unvested and there was approximately

$9.2

million of unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted average vesting period of

0.87

years. During the years ended

December 31, 2018,

2017

and

2016,

the Company’s vested restricted stock units had a fair value

$9.9

million,

$9.5

million, and

$6.8

million, respectively. The weighted average grant date fair value per share of the restricted stock units vested during the years ended

December 31, 2018,

2017

and

2016

was

$17.06,

$15.39

and

$18.64,

respectively. The weighted average grant date fair value per share of the restricted stock units forfeited during the years ended

December 31, 2018,

2017

and

2016

was

$17.31,

$15.37

and

$16.95,

respectively.