Employee Stock Benefit Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Employee Stock Benefit Plans

Our stock option program is a long-term retention program that is intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. Currently, we grant options from our 2015 Equity Incentive Plan. Our 2006 Incentive Plan was terminated by our board of directors in 2015 and our 2001 Stock Incentive Plan was terminated by our board of directors in 2008. As such, share-based awards are no longer granted under either the 2006 Incentive Plan and the 2001 Stock Incentive Plan. Under the 2015 Equity Incentive Plan, share-based awards can be granted to all employees, including executive officers, outside consultants, and non-employee directors. Vesting periods for share-based awards are generally three or four years for both plans. Awards granted under each plan expire in five or ten years from the effective date of grant. As of April 2010, the Company began routinely granting awards with ten years expiration period.

The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model. The company did not grant options in 2019 and 2018. The assumptions used to value options in 2017 is as follows:



	2017
Risk-free interest rate	1.95-2.18%
Expected stock price volatility	46.19-47.59%
Dividend yield	0.00	%
Expected life (in years)	6.25

We estimated the volatility of our stock using historical volatility of our common stock in accordance with guidance in FASB ASC 718, “Compensation-Stock Compensation”. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding, which we derive based on our historical settlement experience. As we historically have not paid dividends, we utilize a dividend yield of 0%.

We also issue restricted performance stock units with vesting that is contingent on both TSR compared to members of our peer group and continued service. For the market-based restricted performance stock units issued during the year ended December 31, 2019 and 2018, the payouts at vesting which are linearly interpolated between the percentiles specified below are as follows:



Payout Schedule
Percentile Ranking				% of Target Earned
Greater than			80%				200%
50	%	—	80%	100	%	—	200%
30	%	—	50%	50	%	—	100%
Less than			30%	—	%		—%

Notwithstanding the foregoing, if our TSR is negative for the performance period, then the vesting percentage shall not exceed 100%. In addition, we reduce the shares available for grant to cover the potential payout of 200%.

To value these market-based restricted performance stock units, we used a Monte Carlo simulation model on the date of grant. Compensation expense for restricted stock units with performance and market conditions is recognized over the requisite service period using the straight-line method.

The assumptions used to value these market based restricted performance stock units are as follows:



	2019		2018		2017
Risk-free interest rate	2.40	%	2.38	%	1.54	%
Expected stock price volatility	39.95	%	36.72	%	35.99	%
Dividend yield	0.00	%	0.00	%	0.00	%
Expected term (in years)	2.79		2.79		2.79

Our stock incentive plans as of December 31, 2019 are summarized as follows (in thousands):



	Shares Authorized	Shares Available for Grant	Stock Options Outstanding	Non-vested Restricted Stock and Restricted Stock Units
Options assumed from acquisition	2,227	296	219
2006 Incentive Plan	71,669		3,650	34
2015 Incentive Plan	42,731	23,145	1,077	10,355
Total as of December 31, 2019	116,627	23,441	4,946	10,389

2015 Equity Incentive Plan

On June 3, 2015, we adopted our 2015 Equity Incentive Plan which replaced the 2006 Incentive Plan. Shares issued under the plan may be authorized and unissued shares or may be issued shares that we have reacquired. Shares covered by awards that are forfeited, canceled or otherwise expire without having been exercised or settled, or that are settled by cash or other non-share consideration, will become available for issuance pursuant to a new award. Shares that are tendered or withheld to pay the exercise price of an award or to satisfy tax withholding obligations will not be available for issuance pursuant to new awards. Our 2015 Equity Incentive Plan will terminate on June 3, 2025. At December 31, 2019, there are 23,145 shares available for future grant under the 2015 Equity Incentive Plan.

The 2015 Equity Incentive Plan permits the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, annual awards, and other awards based on, or related to, shares of our common stock. Options awarded under our 2015 Equity Incentive Plan may be non-qualified stock options or may qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. For purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, the maximum number of shares of common stock that may be subject to stock options, stock appreciation rights, performance-based restricted stock awards, performance-based restricted stock units and performance-based stock awards granted to any participant other than a non-employee director during any calendar year will be limited to 10,000 shares of common stock for each such award type individually. The maximum number of shares of common stock that may be subject to stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards granted to any non-employee director during any calendar year will be limited to 10,000 shares of common stock for all such award types in the aggregate. Further, the maximum amount that may become payable to any one Participant during any one calendar year under all Cash Performance Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended, is limited to $5,000.

Stock Options

The following table summarizes the activity and changes related to stock options during the year:



	Stock Options Outstanding
	Units		Weighted Average Exercise Price Per Unit
	(in thousands)
Outstanding at December 31, 2018	5,935		$	3.79
Stock options granted	—		—
Stock options exercised	(948	)	2.62
Stock options canceled	(41	)	4.04
Outstanding at December 31, 2019	4,946		$	4.01
Exercisable at December 31, 2019	4,425		$	3.73

There were no options granted in 2019 and 2018. The weighted average exercise price of options granted was $6.46 for the years ended December 31, 2017. The aggregate intrinsic value of exercised stock options for the years ended December 31, 2019, 2018, and 2017 was $7,616, $38,248, and $38,958, respectively.

The weighted average grant date fair market value of stock options granted was $3.04 for the years ended December 31, 2017.

Restricted Stock and Restricted Stock Units

The following table summarizes the activity and changes related to restricted stock and restricted stock units during the year:



	Restricted Stock and Restricted Stock Units Outstanding
	Units		Weighted Average Grant Date Fair Market Value Per Unit
	(in thousands)
Non-vested at December 31, 2018	9,906		$	8.81
Restricted stock and restricted stock units granted	7,696		11.29
Restricted stock and restricted stock units vested	(4,917	)	6.69
Restricted stock and restricted stock units canceled	(2,296	)	10.31
Non-vested at December 31, 2019	10,389		$	10.58

The weighted average grant date fair market value of restricted stock and restricted stock units granted was $11.29, $10.55, and $6.79 per unit during the year ended December 31, 2019, 2018, and 2017, respectively. The fair value of restricted stock and restricted stock units that vested during the years ended December 31, 2019, 2018, and 2017 was $32,872, $44,812, and $41,057, respectively. The aggregate intrinsic value of restricted stock units outstanding was $76,986 as of December 31, 2019.

Supplemental Information

Total share-based compensation expense recognized for the years ended December 31, 2019, 2018, and 2017 was $45,242, $33,799, and $37,482, respectively, which were recorded to cost of services and general and administrative expense in the consolidated statement of income. As of December 31, 2019, total unamortized share-based compensation was $51,602, accounting for forfeitures when they occur, which is expected to be amortized over the remaining weighted average recognition period of 2.1 years. Compensation costs for all share-based awards are amortized on a straight-line basis over the requisite service period. Our current policy is to issue new shares to settle the exercise of stock options and prospectively, the vesting of restricted stock units.

Information regarding the options outstanding as of December 31, 2019 is summarized below:



	Stock Options Outstanding					Stock Options Exercisable
Range of Exercise Prices	Stock Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Aggregate Intrinsic Value		Stock Options Vested and Exercisable	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Aggregate Intrinsic Value
	(in thousands)	(in years)		(in thousands)		(in thousands)	(in years)		(in thousands)
$0.69 to $1.99	268		1.22			264		1.22
$2.00 to $4.00	3,337		3.41			3,337		3.41
$4.01 to $7.25	1,341		6.06			824		5.83
	4,946	5.13	4.01	$	16,804	4,425	4.87	3.73	$	16,281

Retirement Plan

In March 2001, we established a 401(k) Retirement Plan, or the Retirement Plan, available to employees who meet the plan’s eligibility requirements. Participants may elect to contribute a percentage of their compensation to the Retirement Plan up to a statutory limit. We may make a contribution to the Retirement Plan in the form of a matching contribution. The employer matching contribution is 50% of each employee’s contributions not to exceed $6 in 2017, 2018, and 2019. Our expense related to the Retirement Plan was $8,750, $6,756, and $5,411 in 2019, 2018, and 2017, respectively.