4. Stockholders' Equity

Stock-based Compensation Expense

Stock-based compensation expense recognized during the three and six months ended June 30, 2017 and 2016 is included in our consolidated statements of operations as shown in the below table. Stock-based compensation expense includes both non-cash expense related to grants of stock-based awards as well as cash expense related to the employee discount applied to purchases of our common stock under our employee stock purchase plan. In addition, the three and six months periods ended June 30, 2017 and 2016 include stock-based compensation expense related to Netsmart’s time-based liability classified option awards. No stock-based compensation costs were capitalized during the three and six months ended June 30, 2017 and 2016.

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017		2016
Cost of revenue:
Software delivery, support and maintenance	$	988	$	1,061	$	2,113	$	2,230
Client services		993		1,138		2,565		2,628
Total cost of revenue		1,981		2,199		4,678		4,858
Selling, general and administrative expenses		7,050		6,342		10,600		11,508
Research and development		2,120		2,119		4,709		4,695
Total stock-based compensation expense	$	11,151	$	10,660	$	19,987	$	21,061

Allscripts Long-Term Incentive Plan

We measure stock-based compensation expense at the grant date based on the fair value of the award. We recognize the expense for service-based share awards over the requisite service period on a straight-line basis, net of estimated forfeitures. We recognize the expense for performance-based and market-based share awards over the vesting period under the accelerated attribution method, net of estimated forfeitures. In addition, we recognize stock-based compensation cost for awards with performance conditions if and when we conclude that it is probable that the performance conditions will be achieved.

The fair value of service-based and performance-based restricted stock units is measured at the underlying closing share price of our common stock on the date of grant. The fair value of market-based restricted stock units is measured using the Monte Carlo pricing model. No stock options were granted during the three and six months ended June 30, 2017 and 2016.

We granted stock-based awards as follows:

	Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
			Weighted-Average				Weighted-Average
			Grant Date				Grant Date
(In thousands, except per share amounts)	Shares		Fair Value		Shares		Fair Value
Service-based restricted stock units		128	$	11.93		1,897	$	12.38
Performance-based restricted stock units with a service condition		0	$	0.00		572	$	11.93
Market-based restricted stock units with a service condition		41	$	12.49		613	$	13.34
		169	$	12.06		3,082	$	12.48

During the six months ended June 30, 2017 and the year ended December 31, 2016, 1.1 million and 1.5 million shares of common stock, respectively, were issued in connection with the exercise of options and the release of restrictions on stock awards.

Net Share-settlements

Upon vesting, restricted stock units are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock. The majority of restricted stock units and awards that vested during the six months ended June 30, 2017 and year ended December 31, 2016 were net-share settled such that we withheld shares with fair value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total payments for the employees' minimum statutory tax obligations to the taxing authorities are reflected as a financing activity within the accompanying consolidated statements of cash flows. The total shares withheld for the six months ended June 30, 2017 and 2016 were 552 thousand and 564 thousand, respectively, and were based on the value of the restricted stock units on their vesting date as determined by our closing stock price. These net-share settlements had the effect of share repurchases by us as they reduced the number of shares that would have otherwise been issued as a result of the vesting.

Stock Repurchases

On November 17, 2016, we announced that our Board approved a new stock purchase program under which we may repurchase up to $200 million of our common stock through December 31, 2019. During the three and six months ended June 30, 2017, we repurchased 1.0 million shares of our common stock under the new program for a total of $12.1 million. Any future share repurchase transactions may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means, subject to market conditions. Any repurchase activity will depend on many factors such as our working capital needs, cash requirements for investments, debt repayment obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

Netsmart Stock-based Compensation Expense

Stock-based compensation expense (benefit) related to Netsmart’s time-based liability classified option awards was included in the following categories in our consolidated statements of operations:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017			2016
Cost of revenue:
Software delivery, support and maintenance	$	10	$	25	$	(25	)	$	25
Client services		13		37		(68	)		37
Total cost of revenue		23		62		(93	)		62
Selling, general and administrative expenses		478		1,328		(2,859	)		1,328
Research and development		15		36		(76	)		36
Total stock-based compensation expense (benefit)	$	516	$	1,426	$	(3,028	)	$	1,426

At June 30, 2017, the liability for outstanding awards was $2.8 million. As of June 30, 2017 the weighted average fair value per unit using the Black‑Scholes‑Merton option pricing model was estimated at $0.15, as compared to the estimated unit value of $1.00 at December 31, 2016. The significant decrease in unit value during the first quarter of 2017 resulted in the reversal of previously recognized stock-based compensation expense during the three months ended March 31, 2017 period, as required under the liability method of accounting.

No option unit awards were granted by Netsmart during the three and six months ended June 30, 2017.