10.

Stock-Based Compensation

(a)

Stock-Based Compensation Expense

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

(in thousands):

	Three Months Ended March 31,
	2019		2018
Cost of services-compensation	$	4,124	$	2,563
Selling, general and administrative		6,855		6,931
Total	$	10,979	$	9,494

(b)

Stock Options

Stock-based compensation expense related to stock options was approximately

$4.8

million and

$4.0

million for the

three

months ended

March 31, 2019

and

2018,

respectively.

Presented below is a summary of stock option activity for the

three

months ended

March 31, 2019 (

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, 2018	4,402		$	17.07
Granted	560			39.52
Exercised	(1,443	)		16.03
Forfeitures	(134	)		18.99
Expired	-			-
Outstanding balance at March 31, 2019	3,385		$	21.19	6.85	$	33,767
Expected to vest at March 31, 2019	1,061		$	27.50	9.14	$	6,486
Exercisable at March 31, 2019	1,899		$	16.67	5.14	$	24,582

During the

three

months ended

March 31, 2019

and

2018,

the Company issued

1,443,685

and

9,043

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

$23.1

million and

$0.1

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

three

months ended

March 31, 2019

and

2018

was

$25.8

million and

$0.01

million respectively.

As of

March 31, 2019,

there was approximately

$8.4

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

1.44

years.

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

three

months ended

March 31, 2019

and

2018

was

$13.82

and

$6.83,

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

	Three Months Ended March 31,
		2019		2018
Expected dividend yield		0	%	0	%
Risk-free interest rate		2.5	%	2.7	%
Expected volatility		40.9	%	42.5	%
Expected life (years)		6.4		6.0

The total tax benefits recognized on stock-based compensation related to stock options for the

three

months ended

March 31, 2019

and

2018

was

$11.3

million and

$2.1

million, respectively.

(c)

Restricted Stock Units

Stock-based compensation expense related to restricted stock units was approximately

$6.1

million and

$5.5

million for the

three

months ended

March 31, 2019

and

2018,

respectively.

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

three

months ended

March 31, 2019

(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, 2018	1,488		$	17.60
Granted	408			34.43
Vesting of restricted stock units, net of units withheld for taxes	(377	)		16.88
Units withheld for taxes	(193	)		16.88
Forfeitures	(63	)		17.58
Outstanding balance at March 31, 2019	1,263		$	25.43

As of

March 31, 2019,

1,027,186

restricted stock units remained unvested and there was approximately

$16.7

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

1.43

years.