STOCK-BASED COMPENSATION

The following costs related to the Company’s stock compensation plans were included in the consolidated statements of income and comprehensive income:



	For the Years Ended December 31,
	2015		2014		2013
Cost of revenues	$	13,695	$	8,648	$	4,823
Selling, general and administrative expenses - Acquisition related	18,690		8,829		4,417
Selling, general and administrative expenses - All other	13,448		7,143		3,910
Total	$	45,833	$	24,620	$	13,150

Equity Plans

2015 Long-Term Incentive Plan — On June 11, 2015, the Company’s stockholders approved the 2015 Long-Term Incentive Plan (“2015 Plan”) to be used to issue equity grants to company personnel. As of December 31, 2015, 6,657,370 shares of common stock remained available for issuance under the 2015 Plan. In addition, up to 6,277,028 shares that are subject to outstanding awards as of December 31, 2015 under the 2012 Plan and up to 1,039,861 shares that are subject to outstanding awards as of December 31, 2015 under the 2006 Plan and that expire or terminate for any reason prior to exercise or that would otherwise have returned to the respective Plan’s share pool under the terms of the Plan, will be available for awards to be granted under the 2015 Plan.

2012 Non-Employee Directors Compensation Plan — On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”) to be used to issue equity grants to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. As of December 31, 2015, 554,070 shares of common stock remained available for issuance under the 2012 Directors Plan. The 2012 Directors Plan will expire after 10 years and is administered by the Company’s Board of Directors.

2012 Long-Term Incentive Plan — On January 11, 2012, the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”) to be used to issue equity grants to company personnel. In June 2015, the 2012 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2012 Plan and any shares that are subject to an award that was previously granted under the 2012 or 2006 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the options issued pursuant to the 2012 Plan expire 10 years from the date of grant.

2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan permitted the granting of options to directors, employees, and certain independent contractors. In January 2012, the 2006 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2006 Plan and any shares that are subject to an option award that was previously granted under the 2006 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the options issued pursuant to the 2006 Plan expire 10 years from the date of grant. All the outstanding shares under 2006 Plan will expire in January 2016.

Stock Options

Stock option activity under the Company’s plans is set forth below:



	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2013	6,296,709		$	7.51	$	66,682
Options granted	1,987,952		23.60		22,543
Options exercised	(2,156,898	)	4.31		(66,066		)
Options forfeited/cancelled	(304,227	)	11.50		(7,131		)
Options outstanding at December 31, 2013	5,823,536		$	13.99	$	122,003
Options granted	2,400,500		32.51		36,584
Options exercised	(1,171,097	)	9.05		(45,321		)
Options forfeited/cancelled	(214,193	)	25.33		(4,802		)
Options outstanding at December 31, 2014	6,838,746		$	20.98	$	183,073
Options granted	2,219,725		62.18		36,492
Options exercised	(1,405,826	)	14.70		(89,860		)
Options forfeited/cancelled	(201,731	)	34.48		(8,904		)
Options outstanding at December 31, 2015	7,450,914		$	34.07	$	331,938

Options vested and exercisable at December 31, 2015	2,446,226		$	15.95	$	153,305
Options expected to vest	4,690,899		$	42.51	$	169,388

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

a. Expected volatility — the Company estimated the volatility of its common stock at the date of grant using historical volatility of peer public companies for the year ended December 31, 2011. In order to compare volatilities for different interval lengths, the Company expresses volatility in annual terms. During 2014, the Company began including the historical volatility for the Company in conjunction with peer public companies to formulate the estimated volatility regarding the stock options issued in 2015 and 2014. The expected volatility was 34.1% in the year ended December 31, 2015, and 45.9% in the years ended December 31, 2014 and 2013.

b. Expected term — the Company estimates the expected term of options granted using the simplified method of determining expected term as outlined in SEC Staff Accounting Bulletin 107 as the Company does not have sufficient history in order to develop a more precise estimate. The expected term was 6.25 years in 2015, 6.20 years in 2014, and 6.24 years in 2013.

c. Risk-free interest rate — the Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant. The risk-free rate was approximately 1.8%, 2.0% and 1.4% in 2015, 2014 and 2013, respectively.

d. Dividends — the Company uses an expected dividend yield of zero since it has never declared or paid any dividends on its common stock. The Company intends to retain any earnings to fund future growth and the operation of its business and, therefore, does not anticipate paying any cash dividends in the foreseeable future.

Additionally, the Company determines an annual forfeiture rate and records share-based compensation expense only for those awards that are expected to vest. The Company applies an estimated forfeiture rate at the time of grant and adjusts those estimated forfeitures to reflect actual forfeitures at least annually.

Aggregate grant-date fair value of stock options issued during the year ended December 31, 2015 was $47,973. The options are typically scheduled to vest over four years from the time of grant, subject to the terms of the applicable plan and stock option agreement. In general, in the event of the participant’s termination of service for any reason, unvested options are forfeited as of the date of such termination without any payment to the participant.

As of December 31, 2015, a total of 2,980 shares underlying options exercised through December 31, 2015, were in transfer with the Company’s transfer agent.

As of December 31, 2015, total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $64,816, and is expected to be recognized over a weighted-average period of 1.9 years. The weighted average remaining contractual term of the outstanding options as of December 31, 2015 was 5.7 years for fully vested and exercisable options and 8.4 years for options expected to vest, respectively.

Other Awards

Other awards include awards of restricted stock and restricted stock units (“RSUs”) under the Company’s 2012 Directors Plan, the 2012 Plan and the 2015 Plan, after its adoption. In addition, the Company has issued in the past, and may issue in the future its equity securities to compensate employees of acquired businesses for future services. These issuances are on such terms and at such prices as the Company deems appropriate. Equity-based awards granted in connection with acquisitions of businesses are generally issued in the form of service-based awards dependent on continuing employment only and performance-based awards, which are granted and vest only if certain specified performance conditions are met. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreement and acquisition documents.

Service-Based Awards

Summarized activity related to the Company’s service-based awards for the years ended December 31, 2015, 2014 and 2013 was as follows:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2013	659,872		$	17.92
Awards granted	15,524		23.69
Awards vested	(330,468	)	17.33
Unvested service-based awards outstanding at December 31, 2013	344,928		$	18.74
Awards granted	523,220		40.41
Awards vested	(217,668	)	17.84
Awards forfeited/cancelled	(17,038	)	21.14
Unvested service-based awards outstanding at December 31, 2014	633,442		$	36.88
Awards granted	113,614		67.38
Awards vested	(279,129	)	33.66
Awards forfeited/cancelled	(11,816	)	34.47
Unvested service-based awards outstanding at December 31, 2015	456,111		$	46.51

For the year ended December 31, 2015, the Company issued a total of 5,295 shares of unvested (“restricted”) common stock under its 2012 Directors Compensation Plan with an aggregate grant date fair value of $375. As of December 31, 2015, the aggregate unrecognized compensation expense related to unvested stock under the 2012 Directors Plan was $262. This cost is expected to be recognized over the next 1.2 years using the weighted average method.

For the year ended December 31, 2015, the Company issued a total of 84,000 RSUs to certain key management personnel under the 2012 and 2015 Plans. The fair value of these RSUs at the time of the grants was $5,492. As of December 31, 2015, the aggregate unrecognized compensation expense for all outstanding service-based RSUs was $5,691. This cost is expected to be recognized over the next 2.1 years using the weighted average method.

For the year ended December 31, 2015, the Company granted a total of 24,319 service-based awards to certain key management personnel of businesses acquired during that period. The aggregate grant date fair value of the awards was $1,789.

As of December 31, 2015, total unrecognized compensation cost related to unvested service-based awards was $11,090, which is expected to be recognized over the next 1.5 years using the weighted average method.

Performance -Based Awards

In 2014, the Company granted performance-based awards in connection with the acquisitions completed during that year. The total number of the awards varies based on attainment of certain performance targets pursuant to the terms of the relevant transaction documents. Typically, the vesting period is three years, with one third of the awards granted vesting in equal installments on the first, second and third anniversaries of the grant. If an eligible employee leaves the Company prior to a vesting date, the unvested portion of the award generally will be forfeited. The Company periodically evaluates the achievement of the related performance conditions during the applicable performance measurement period and the number of shares expected to be delivered, and resulting compensation expense is adjusted accordingly. During the year ended December 31, 2015, one-third of the performance-based awards issued in 2014 acquisitions, vested net of any forfeitures.

Summarized activity related to the Company’s performance-based awards for the years ended December 31, 2015, was as follows:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2014	—		$	—
Awards granted	387,058		38.18
Awards forfeited/cancelled	(2,550	)	36.57
Changes in the number of awards expected to be delivered	(12,998	)	5.47
Unvested performance-based awards outstanding at December 31, 2014	371,510		$	39.34
Awards granted	14,000		70.22
Awards vested	(117,749	)	40.39
Awards forfeited/cancelled	(1,360	)	36.57
Changes in the number of awards expected to be delivered	(19,105	)	31.70
Unvested performance-based awards outstanding at December 31, 2015	247,296		$	41.19

The aggregated grant date fair value of performance-based awards granted to certain key management personnel of businesses acquired during the year ended December 31, 2015 was $983.

As of December 31, 2015, total unrecognized compensation cost related to unvested performance-based awards was $12,679. That cost is expected to be recognized over the next 1.3 years using the weighted average method.