STOCK-BASED COMPENSATION

Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Cost of revenue	$	11	$	4	$	24	$	9
Selling and marketing expense	205		242		664		765
General and administrative expense	1,292		976		3,281		2,885
Product development	278		190		854		619
Restructuring and severance	—		—		36		—
Total non-cash compensation	$	1,786	$	1,412	$	4,859	$	4,278

Stock Options

A summary of changes in outstanding stock options is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
			(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2014	1,038,999		$	8.98
Granted ^(b)	1,106,265		26.72
Exercised	(4,620	)	12.07
Forfeited	—		—
Expired	(675	)	13.42
Options outstanding at September 30, 2014	2,139,969		18.14		6.68	$	37,974
Options exercisable at September 30, 2014	983,703		$	9.04	3.87	$	26,409

(a)

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $35.89 on the last trading day of the quarter ended September 30, 2014 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2014. The intrinsic value changes based on the market value of the Company's common stock.

(b)

During the first nine months ended September 30, 2014, the Company granted stock options (a) to certain executives with weighted average grant date fair values per share ranging from $10.68 to $17.13, of which some vest over a period of three years from the grant date and others vest 25% and 75% over a period of 2.5 years and 3.5 years, respectively, and (b) to non-employee members of the board of directors with a weighted average grant date fair value per share of $13.08 that vest over a period of two years from the grant date.

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions. The weighted average assumptions used are as follows:



Expected term ⁽¹⁾	5.75 - 6.63 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	36% - 54%
Risk-free interest rate ⁽⁴⁾	1.85% - 2.13%


(1)	The expected term of stock options granted was calculated using the 'Simplified Method', which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.


(2)	For all stock options granted in 2014, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.


(3)	The expected volatility rate is based on the historical volatility of the Company's common stock or a blended rate which includes the historical volatility of the Company's common stock and that of a peer group.


(4)	The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

Restricted Stock Units and Restricted Stock

A summary of the changes in outstanding nonvested restricted stock units ("RSUs") and restricted stock is as follows:



	RSUs				RSUs Performance Condition
	Number of Units		Weighted Average Grant Date Fair Value		Number of Units	Weighted Average Grant Date Fair Value
			(per unit)			(per unit)
Nonvested at January 1, 2014	599,122		$	14.15	—	$	—
Granted	128,760		32.00		500	33.59
Vested	(244,080	)	13.25		—	—
Forfeited	(47,624	)	15.83		—	—
Nonvested at September 30, 2014	436,178		$	19.79	500	$	33.59



	Restricted Stock				Restricted Stock Market Condition
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
			(per share)				(per share)
Nonvested at January 1, 2014	119,500		$	22.47	62,500		$	13.93
Granted	43,389		25.14		—		—
Vested	(20,833	)	17.49		(62,500	)	13.93
Forfeited	—		—		—		—
Nonvested at September 30, 2014	142,056		$	24.02	—		$	—