STOCKHOLDERS’ EQUITY

Equity-Based Incentive Plans

In 2000, the Company established the 2000 Equity Incentive Plan (the 2000 Plan), which provided for granting incentive stock options, nonstatutory stock options, bonus awards and restricted stock awards to eligible employees, directors, and consultants of the Company. In December 2009, the Board of Directors approved the 2009 Equity Incentive Plan (the 2009 Plan) as the successor to and continuation of the 2000 Plan. As of the 2009 Plan effective date, remaining shares available for issuance under the 2000 Plan were cancelled and became available for issuance under the 2009 Plan. No additional stock awards will be granted under the 2000 Plan. The 2009 Plan provides for the grant of the following awards to eligible employees, directors, and consultants: incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other stock awards. Incentive stock options may only be granted to employees. Non-employee directors are eligible to receive restricted stock units (RSUs) automatically at designated intervals over their period of continuous service on the Board. The 2009 Plan, as amended, provides that the number of shares reserved for issuance under the 2009 Plan will increase on January 1 of each year for a period of up to five years by 4.5% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, which will begin on January 1, 2015 and continue through January 1, 2019. On January 1, 2016, an additional 3,166,714 shares were automatically reserved for issuance under the amended 2009 Plan.

The exercise price per share of all incentive stock options granted under the 2000 Plan and the 2009 Plan must be at least equal to the fair market value of the shares at the date of grant as determined by the Board of Directors. Options generally have a maximum contractual term of 10 years. Incentive stock options granted at 110% of the fair market value to stockholders who have greater than 10% ownership have a maximum term of five years. Options granted to non-employee directors in connection with an initial election or appointment generally vest at the rate of 33% of the total options one year after the grant date and 1/36 of the total options granted monthly thereafter. All other options granted to non-employee directors generally vest 100% one year from grant date. Before 2015, options granted to employees generally vest over four years with 25% of the total options vesting a year after the grant date and then the remaining options vest in monthly equal installments for three years thereafter. Starting in 2015, the options granted to newly hired employees generally vest at a rate of 25% of the total options a year after the grant date and then 1/16 of the total options granted on the 15th day of the second month of each calendar quarter thereafter. Options granted to existing employees generally vest at a rate of 1/16 of the total options granted on the 15th day of the second month of each calendar quarter following the grant date.

The Company has granted RSUs to members of the Board of Directors, certain executives and employees. These RSUs represent rights to receive shares of the Company’s common stock on satisfaction of applicable vesting conditions. The fair value of RSUs is equal to the fair value of the Company’s common stock on the date of grant. RSUs granted to newly elected or appointed non-employee directors generally vest on the first anniversary of the Company’s most recent annual grants. RSUs granted to non-employee directors in connection with an annual grant generally vest 100% one year from the grant date. RSUs granted to newly hired employees generally vest at a rate of 25% of the total RSUs one year after the grant date and then 1/16 of the total RSUs granted on the 15th day of the second month of each calendar quarter thereafter. RSUs granted to existing employees generally vest at a rate of 1/16 of the total RSUs granted on the 15th day of the second month of each calendar quarter following the grant date.

In March 2015, the Company granted performance-based restricted stock units (PSUs) to its executives intended to represent 33.3% of each executive’s annual long-term incentive compensation award value in 2015. These PSUs vest over three years based on the Company’s attainment of annual financial performance goals as well as the executive’s continued employment through each vesting date. The number of shares that ultimately vest each year will range from 0 to 200% of the annual target amount, based on the Company’s performance. Cumulative financial performance metrics and goals are established for these awards at the grant date and the tranche of each award related to that period’s performance goal is treated as a separate grant for accounting purposes. The financial performance metric established for the performance awards is cumulative annual growth rate in the Company’s net service revenues. These values are being recognized over the tranches’ 12-month, 24-month and 36-month service periods. The Company began recording stock-based compensation expense for these tranches in March 2015, when the financial performance goals were established.

Equity incentive plan activity for the three months ended March 31, 2016 is summarized as follows:



Equity Incentive Plan Activity	Shares Available for Grant
Balance at December 31, 2015	4,991,583
Authorized	3,166,714
Granted	(1,856,207	)
Forfeited	241,205
Shares withheld for taxes and not issued	51,106
Balance at March 31, 2016	6,594,401

The following table summarizes stock option activity under the Company’s equity-based plans for the three months ended March 31, 2016:



Stock Options Activity	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2015	4,446,149		$	8.96	7.56	$	52,108
Exercised	(190,608	)	2.64
Forfeited	(145,213	)	24.35
Balance at March 31, 2016	4,110,328		$	8.71	7.31	$	30,286

Exercisable at March 31, 2016	2,331,709		$	6.67	6.97	$	20,620
Vested and expected to vest at March 31, 2016	3,993,724		$	8.53	7.29	$	29,845

There were no stock options granted during the three months ended March 31, 2016. The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2015 was $13.55 per share. The total fair value of options vested for the three months ended March 31, 2016 and March 31, 2015 was $2.0 million and $4.4 million, respectively.

The total intrinsic value of options exercised for the three months ended March 31, 2016 and March 31, 2015 was $2.2 million and $30.2 million, respectively. Cash received from options exercised during the three months ended March 31, 2016 and March 31, 2015 was $0.5 million and $3.2 million, respectively. The exercise price of all options granted was equal to the fair value of the common stock on the date of grant.

As of March 31, 2016, unrecognized compensation expense, net of forfeitures, associated with nonvested options outstanding was $10.6 million and is expected to be recognized over a weighted-average period of 1.94 years.

The following table summarizes RSU activity under the Company’s equity-based plans for the three months ended March 31, 2016:



Restricted Stock Unit Activity	Number of Units		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2015	956,687		$	28.03
Granted	1,856,207		17.80
Vested	(207,496	)	26.50
Forfeited	(72,118	)	21.80
Nonvested at March 31, 2016	2,533,280		$	20.84

The total grant date fair value of RSUs granted in the three months ended March 31, 2016 and March 31, 2015 was $33.0 million and $24.6 million, respectively. The total grant date fair value of RSUs vested in the three months ended March 31, 2016 and March 31, 2015 was $5.5 million and de minimis, respectively. As of March 31, 2016, unrecognized compensation expense, net of forfeitures, associated with the nonvested RSUs outstanding was $46.2 million, and is expected to be recognized over a weighted-average period of 3.28 years.

The following table summarizes PSU activity under the Company’s equity-based plans for the three months ended March 31, 2016:



Performance Based Restricted Stock Unit Activity	Number of Units		Weighted-Average Grant Date Fair Value
Outstanding units at December 31, 2015	173,286		$	33.51
Forfeited	(23,874	)	$	33.51
Outstanding units at March 31, 2016	149,412		$	33.51

As of March 31, 2016, there was $0.6 million of total unrecognized compensation expense, net of estimated forfeitures, associated with nonvested PSUs outstanding, which is expected to be recognized over a period of 1.75 years.

Employee Stock Purchase Plan

The Company adopted the 2014 Employee Stock Purchase Plan (ESPP) in February 2014, which became effective on March 26, 2014. The ESPP was approved with a reserve of 1.1 million shares of common stock for future issuance under various terms provided for in the ESPP, which will automatically increase on January 1 of each year from 2015 through 2024 by the lesser of 1% of the total number of shares outstanding on December 31 of the preceding calendar year or 1,800,000 shares. On January 1, 2016, an additional 703,714 shares were automatically reserved for issuance under the ESPP. The purchase price is equal to the lesser of 85% of the fair market value of the common stock on the offering date and 85% of the fair market value of the common stock on the applicable purchase date. Offering periods are six months in duration and will end on or about May 15 and November 15 of each year. Employees may contribute a minimum of 1% and a maximum of 15% of their earnings.

Stock Repurchases

On June 29, 2015, the Board of Directors approved the repurchase of an additional $50.0 million of its outstanding common stock in the aggregate under the existing stock repurchase program. On February 29, 2016, the Board of Directors approved an additional $50.0 million incremental increase to its ongoing stock repurchase program. As of March 31, 2016, a total of approximately $81.6 million remained available for further repurchases of the Company’s common stock under the Company’s stock repurchase program.

Stock-Based Compensation

Stock-based compensation expense of $7.4 million and $3.9 million was recognized for the three months ended March 31, 2016 and 2015, respectively. Income tax benefit of $2.6 million and $1.2 million was recognized relating to stock-based compensation expense for the three months ended March 31, 2016 and 2015, respectively. The tax benefit realized from stock options exercised was $2.0 million and $10.2 million for the three months ended March 31, 2016 and 2015, respectively.

The fair value of stock-based awards is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



Stock Option Assumptions	Three Months Ended March 31,
	2016	2015
Expected term (in years)	N/A	6.08
Expected volatility	N/A	39	%
Risk-free interest rate	N/A	1.74	%
Expected dividend yield	N/A	0	%



ESPP Assumptions	Three Months Ended March 31,
	2016		2015
Expected term (in years)	0.50		0.50
Expected volatility	76	%	33	%
Risk-free interest rate	0.33	%	0.07	%
Expected dividend yield	0	%	0	%

Stock-based compensation expense for stock-based awards made to the Company’s employees pursuant to the equity plans was as follows (in thousands):



	Three Months Ended March 31,
	2016		2015
Cost of providing services	$	1,815	$	758
Sales and marketing	1,985		917
General and administrative	2,974		2,021
Systems development and programming costs	623		224
	$	7,397	$	3,920