Stock Based Awards and Other Equity Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Amount of Stock-Based Compensation Expense Related to Stock-Based Awards, Primarily Stock Options and RSUs

The following table presents the amount of stock-based compensation expense related to stock-based awards, primarily stock options and RSUs, on our consolidated statements of operations during the periods presented:

	Year ended December 31,
	2019			2018			2017
	(in millions)
Cost of revenue	$	1		$	1		$	—
Selling and marketing		23			21			21
Technology and content		55			51			40
General and administrative		45			45			35
Total stock-based compensation expense		124			118			96
Income tax benefit from stock-based compensation    expense		(28	)		(27	)		(28	)
Total stock-based compensation expense, net of    tax effect	$	96		$	91		$	68

Summary of Stock Option Activity

A summary of our stock option activity, consisting primarily of service-based non-qualified stock options, is presented below:

				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Options			Price Per		Contractual		Intrinsic
	Outstanding			Share		Life		Value
	(in thousands)					(in years)		(in millions)
Options outstanding as of December 31, 2016		5,818		$	57.60
Granted (1)		2,333			40.03
Exercised (2)		(496	)		29.37
Cancelled or expired		(802	)		65.13
Options outstanding as of December 31, 2017		6,853			52.78
Granted		762			43.53
Exercised (2)		(1,162	)		37.26
Cancelled or expired		(412	)		61.46
Options outstanding as of December 31, 2018		6,041			54.00
Granted		752			48.30
Exercised (2)		(195	)		42.17
Cancelled or expired		(581	)		56.97
Options outstanding as of December 31, 2019		6,017		$	50.27		5.9	$	—
Exercisable as of December 31, 2019		3,425		$	57.27		4.2	$	—
Vested and expected to vest after December 31, 2019 (3)		6,017		$	50.27		5.9	$	—

(1) Inclusive of 780,000 stock options awarded to our Chief Executive Officer and President, or CEO, during November 2017. The estimated grant-date fair value per option, using a Black-Scholes option pricing model was $17.33. These stock options shall vest in equal installments on each of August 1, 2021 and August 1, 2022, subject to the CEO’s continuous employment with, or performance of services for, the Company. The estimated grant-date fair value of this award will be amortized on a straight-line basis over the requisite service period through August 1, 2022.

(2) Inclusive of 120,112, 814,635, and 294,410 stock options as of December 31, 2019, 2018 and 2017, respectively, which were not converted into shares due to net share settlement in order to cover the aggregate exercise price and the required amount of employee withholding taxes. Potential shares which had been convertible under stock options that were withheld under net share settlement remain in the authorized but unissued pool under the 2018 Plan and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the consolidated statements of cash flows.

(3) The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore do not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

Weighted-Average Assumptions of Estimated Fair Value of Stock Option Grants

The fair value of stock option grants has been estimated at the date of grant using the Black–Scholes option pricing model with the following weighted average assumptions for the periods presented:

	December 31,
	2019			2018			2017
Risk free interest rate		1.79	%		2.70	%		2.02	%
Expected term (in years)		5.19			5.45			6.13
Expected volatility		42.09	%		41.86	%		42.14	%
Expected dividend yield	—  %			—  %			—  %
Weighted-average grant date fair value	$	21.25		$	18.11		$	16.50

Summary of RSU Activity

A summary of our RSU activity is presented below:

				Weighted
				Average
				Grant-		Aggregate
	RSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested RSUs outstanding as of December 31, 2016		2,856		$	69.35
Granted (1)(2)		4,829			41.58
Vested and released (3)		(1,030	)		67.25
Cancelled		(853	)		52.64
Unvested RSUs outstanding as of December 31, 2017		5,802			48.81
Granted		3,302			43.04
Vested and released (3)		(1,617	)		54.22
Cancelled		(847	)		46.43
Unvested RSUs outstanding as of December 31, 2018		6,640			44.93
Granted (4)		4,688			47.35
Vested and released (3)		(2,002	)		48.11
Cancelled		(857	)		47.19
Unvested RSUs outstanding as of December 31, 2019 (5)		8,469		$	45.42	$	258

(1) Inclusive of 426,000 service-based RSUs awarded to our CEO during November 2017. The service-based RSU award provides for vesting in two equal annual installments on each of August 1, 2021 and August 1, 2022, subject to the CEO’s continuous employment with, or performance of services for, the Company. The estimated grant-date fair value per RSU, based on the quoted price of our common stock on the date of grant, was $34.71. The estimated grant-date fair value of this award will be amortized on a straight-line basis over the requisite service period through August 1, 2022.

(2) Excludes from the 2017 RSU grants, a performance-based RSU grant for 213,000 shares awarded to our CEO during November 2017. This award provides for vesting based on the extent to which the Company achieves

certain financial and/or the CEO achieves certain strategic performance metrics relative to the targets to be established by the Company’s Compensation Committee. One quarter of these RSUs may vest and settle annually based on actual performance relative to the targets established annually for each of the four fiscal years ending December 31, 2018, December 31, 2019, December 31, 2020, and December 31, 2021, of which 60,582 RSUs vested and settled during the year ending December 31, 2019 related to the achievement of 2018 annual performance targets. The estimated grant-date fair value per RSU will be calculated upon the establishment of annual performance targets and each tranche will be amortized on a straight-line basis over its requisite service period. At any point in time during the vesting period, the award’s expense to date will at least equal the portion of the grant-date fair value that is expected to vest at that date. Based upon actual attainment relative to the target performance metrics, the CEO has the ability to receive up to 125% of the target number originally granted, or to be issued none at all.  

(3) Inclusive of 532,164, 424,848, and 301,932 RSUs as of December 31, 2019, 2018 and 2017, respectively, withheld due to net share settlement to satisfy required employee tax withholding requirements. Potential shares which had been convertible under RSUs that were withheld under net share settlement remain in the authorized but unissued pool under the 2018 Plan and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the consolidated statements of cash flows.

(4) Inclusive of 843,426 dividend equivalents issued to employees holding non-vested RSU grant awards in conjunction with our special cash dividend declared on November 1, 2019, which will be payable to the holder subject to, and upon vesting of, the underlying awards.

(5) The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore do not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

Summary of Unrecognized Compensation Expense and Weighted Average Period Remaining

A summary of our remaining unrecognized compensation expense and the weighted average remaining amortization period at December 31, 2019 related to our non-vested equity awards is presented below (in millions, except in years information):

	Stock
	Options		RSUs/MSUs
Unrecognized compensation expense	$	32	$	248
Weighted average period remaining (in years)		2.6		2.5

MSUs

Summary of RSU Activity

A summary of our RSU activity for MSUs is presented below:

				Weighted
				Average
				Grant-		Aggregate
	MSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested MSUs outstanding as of December 31, 2017 (1)		213		$	30.04
Granted (2)		71			59.40
Vested and released		—
Cancelled		—
Unvested MSUs outstanding as of December 31, 2018		284			37.41
Granted (3)(4)		121			51.76
Vested and released		—			—
Cancelled		(16	)		58.63
Unvested MSUs outstanding as of December 31, 2019		389		$	40.99	$	12

(1) Represents 213,000 market-based RSU or MSUs awarded to the Company’s CEO in November 2017. The MSU award provides for vesting based upon the Company’s total shareholder return, or TSR, performance over the period commencing January 1, 2018 through December 31, 2020 relative to the TSR performance of the Nasdaq Composite Total Return Index. Based upon actual attainment relative to the target performance metric, the CEO has the ability to receive up to 125% of the target number of MSUs originally granted, or to be issued none at all.

(2) MSUs provide for vesting based upon the Company’s total shareholder return, or TSR, performance over the period commencing January 1, 2018 through December 31, 2020 relative to the TSR performance of the Nasdaq Composite Total Return Index. Based upon actual attainment relative to the target performance metric, the grantee has the ability to receive up to 200% of the target number of MSUs originally granted, or to be issued none at all. These MSUs were granted under the 2011 Plan.

(3) Inclusive of 78,050 MSUs which provide for vesting based upon the Company’s total shareholder return, or TSR, performance over the period commencing January 1, 2019 through December 31, 2021 relative to the TSR performance of the Nasdaq Composite Total Return Index. Based upon actual attainment relative to the

target performance metric, the grantee has the ability to receive up to 200% of the target number of MSUs originally granted, or to be issued none at all. These MSUs were granted under the 2018 Plan.

(4) Inclusive of 42,477 dividend equivalents issued to employees holding non-vested MSU grant awards in conjunction with our special cash dividend declared on November 1, 2019, which will be payable to the holder subject to, and upon vesting of, the underlying awards.