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,
	2017		2016		2015
Cost of revenues	$	20,868	$	16,619	$	13,695
Selling, general and administrative expenses — Acquisition related	8,139		12,884		18,690
Selling, general and administrative expenses — All other	23,400		19,741		13,448
Total	$	52,407	$	49,244	$	45,833

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 awards to company personnel. As of December 31, 2017, 5,818,622 shares of common stock remained available for issuance under the 2015 Plan. All of the awards issued pursuant to the 2015 Plan expire 10 years from the date of grant.

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, 2017, 539,772 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 Plan and that expire or terminate for any reason prior to exercise will become available for issuance under the 2015 Plan. All of the awards 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”) to grant stock 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 awards issued pursuant to the 2006 Plan expire 10 years from the date of grant.

Stock Options

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



	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Options outstanding at January 1, 2015	6,838,746		$	20.98	$	183,073
Options granted	2,219,725		$	62.18
Options exercised	(1,405,826	)	$	14.70
Options forfeited/cancelled	(201,731	)	$	34.48
Options outstanding at December 31, 2015	7,450,914		$	34.07	$	331,938
Options granted	313,088		$	70.27
Options exercised	(895,804	)	$	20.13
Options forfeited/cancelled	(227,759	)	$	47.89
Options expired	(3,200	)	$	1.52
Options outstanding at December 31, 2016	6,637,239		$	37.20	$	179,936
Options granted	261,373		$	73.40
Options exercised	(1,789,434	)	$	30.23
Options forfeited/cancelled	(200,210	)	$	57.09
Options expired	(7,220	)	$	4.63
Options outstanding at December 31, 2017	4,901,748		$	40.91	$	326,064	6.2

Options vested and exercisable at December 31, 2017	3,068,917		$	31.49	$	233,054	5.5
Options expected to vest	1,764,538		$	56.35	$	90,133	7.3

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 on a straight-line basis over the requisite service period (generally the vesting period). The Company estimates the volatility of its common stock at the date of grant using historical volatility of peer public companies. During 2014, the Company began including the historical volatility for the Company in conjunction with peer public companies to formulate estimated volatility regarding stock options. The expected term of the option is calculated 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 risk-free rate is based on the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant. The Company has not declared or paid any dividends on its common stock. The Company intends to retain any earnings to fund operations and future growth of its business and, therefore, does not anticipate paying any cash dividends in the foreseeable future.

The grant-date fair value for stock options granted was determined using a Black-Scholes model incorporating the following average assumptions:



	For the Years Ended December 31,
	2017		2016		2015
Expected volatility	30.5	%	31.9	%	34.1	%
Expected term (in years)	6.25		6.24		6.25
Risk-free interest rate	2.1	%	1.5	%	1.8	%
Expected dividends	—	%	—	%	—	%

Additionally, the Company 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 quarterly.

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $25.29, $24.26 and $24.21, respectively. The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $91,148, $39,577 and $89,860, respectively.

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 a 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, 2017, total remaining unrecognized compensation cost related to unvested stock options, net of estimated forfeitures, was approximately $24,354. The expense is expected to be recognized over a weighted-average period of 1.4 years. As of December 31, 2017, a total of 4,354 shares underlying options exercised through December 31, 2017, were in transfer with the Company’s transfer agent.

Restricted Stock and Restricted Stock Units

The Company grants restricted stock units (“RSUs”) to Company personnel and non-employee directors under the Company’s 2015 Plan (and prior to its approval, under the 2012 Plan) and 2012 Directors Plan, respectively. Prior to 2017, awards to non-employee directors were in the form of restricted stock. 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. 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 with typical vesting period of three years, with 33.3% of the awards granted vesting in equal installments on the first, second and third anniversaries of the grant.

Service-Based Awards

The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the years ended December 31, 2017, 2016 and 2015:



	Equity-Classified Equity-Settled Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units				Liability-Classified Cash-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2015	562,942		$	37.42	70,500		$	32.55	—		$	—
Awards granted	5,295		$	70.79	108,319		$	67.21	—		$	—
Awards vested	(261,504	)	$	33.74	(17,625	)	$	32.55	—		$	—
Awards forfeited/cancelled	106		$	36.57	(11,922	)	$	34.49	—		$	—
Unvested service-based awards outstanding at December 31, 2015	306,839		$	41.14	149,272		$	57.55	—		$	—
Awards granted	6,510		$	73.00	408,629		$	70.39	207,586		$	70.53
Awards vested	(156,535	)	$	42.64	(41,015	)	$	55.60	—		$	—
Awards forfeited/cancelled	(2,689	)	$	45.32	(31,698	)	$	70.44	(3,085	)	$	70.52
Unvested service-based awards outstanding at December 31, 2016	154,125		$	40.89	485,188		$	67.69	204,501		$	70.53
Awards granted	—		$	—	424,623		$	73.89	170,295		$	74.21
Awards modified	—		$	—	(2,570	)	$	26.85	2,570		$	73.27
Awards vested	(152,285	)	$	43.39	(140,043	)	$	66.54	(52,004	)	$	70.56
Awards forfeited/cancelled	—		$	—	(79,186	)	$	70.30	(10,533	)	$	71.72
Unvested service-based awards outstanding at December 31, 2017	1,840		$	54.37	688,012		$	71.60	314,829		$	72.50

The fair value of vested service-based awards (measured at the vesting date) for the years ended December 31, 2017, 2016 and 2015 was as follows:



	For the Years Ended December 31,
	2017		2016		2015
Equity-classified equity-settled
Restricted stock	$	12,607	$	11,431	$	19,305
Restricted stock units	10,620		2,932		1,092
Liability-classified cash-settled
Restricted stock units	3,811		—		—
Total fair value of vested service-based awards	$	27,038	$	14,363	$	20,397

As of December 31, 2017, $81 of total remaining unrecognized stock-based compensation costs related to service-based equity-classified restricted stock is expected to be recognized over the weighted-average remaining requisite service period of 1.6 years.

As of December 31, 2017, $32,100 of total remaining unrecognized stock-based compensation costs related to service-based equity-classified RSUs is expected to be recognized over the weighted-average remaining requisite service period of 1.9 years.

As of December 31, 2017, $19,691 of total remaining unrecognized stock-based compensation costs related to service-based liability-classified RSUs is expected to be recognized over the weighted-average remaining requisite service period of which is expected to be recognized over the next 1.9 years.

The liability associated with our service-based liability-classified RSUs as of December 31, 2017 and 2016 was $5,964 and $2,111, respectively, and was classified as Deferred compensation due to employees in the consolidated balance sheets.

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 varied based on attainment of certain performance targets pursuant to the terms of the relevant transaction documents. No performance-based awards are outstanding as of December 31, 2017.

Summarized activity related to the Company’s performance-based awards for the years ended December 31, 2017, 2016 and 2015 was as follows:



	Equity-Classified Equity-Settled Restricted Stock				Liability-Classified Equity-Settled Restricted Stock				Equity-Classified Equity-Settled Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2015	33,045		$	38.44	338,465		$	39.43	—		$	—
Awards granted	—		$	—	—		$	—	14,000		$	70.22
Awards vested	(12,145	)	$	39.92	(105,604	)	$	40.44	—		$	—
Awards forfeited/cancelled	(1,360	)	$	36.57	—		$	—	—		$	—
Changes in the number of awards expected to be delivered	2,550		$	36.57	(21,655	)	$	32.27	—		$	—
Unvested performance-based awards outstanding at December 31, 2015	22,090		$	37.52	211,206		$	39.65	14,000		$	70.22
Awards granted	—		$	—	—		$	—	—		$	—
Awards vested	(9,978	)	$	40.15	(105,604	)	$	40.44	(4,666	)	$	70.22
Awards forfeited/cancelled	(6,539	)	$	36.97	—		$	—	(4,667	)	$	70.22
Unvested performance-based awards outstanding at December 31, 2016	5,573		$	33.47	105,602		$	38.86	4,667		$	70.22
Awards granted	—		$	—	—		$	—	—		$	—
Awards vested	(5,573	)	$	33.47	(105,602	)	$	38.86	—		$	—
Awards forfeited/cancelled	—		$	—	—		$	—	(4,667	)	$	70.22
Unvested performance-based awards outstanding at December 31, 2017	—		$	—	—		$	—	—		$	—

The fair value of vested performance-based awards (measured at the vesting date) for the years ended December 31, 2017, 2016 and 2015 was as follows:



	For the Years Ended December 31,
	2017		2016		2015
Equity-classified equity-settled
Restricted stock	$	452	$	690	$	789
Restricted stock units	—		348		—
Liability-classified equity-settled
Restricted stock	8,633		7,955		7,363
Total fair value of vested performance-based awards	$	9,085	$	8,993	$	8,152