Note 10—Stock-based Compensation

In February 2014, the Company’s Board of Directors adopted an equity-based incentive plan (“the 2014 Plan”), which authorizes stock options to be granted for up to 3,000,000 shares of the Company’s common stock, Under the 2014 Plan, which became effective in May 2014 upon stockholder approval, the exercise price of stock options is set on the grant date and may not be less than the fair market value per share on such date. Generally, stock options expire ten years from the date of grant. The Company has granted time-based stock options under the 2014 Plan.

In April 2008, the Company’s Board of Directors adopted, and its stockholders approved, an equity-based incentive plan (“the 2008 Plan”), which authorizes equity awards to be granted for up to 10,914,967 shares of the Company’s common stock, which is calculated based on an initial authorization of 1,416,661 shares of the Company’s common stock and an annual increase to be added on the first day of each of the Company’s fiscal years during the term of the 2008 Plan beginning in fiscal 2009 equal to the lesser of (i) 1,416,661 shares of common stock, (ii) 2% of the outstanding shares on such date or (iii) an amount determined by the Company’s board of directors. Under the 2008 Plan, which became effective in July 2008, the exercise price of awards is set on the grant date and may not be less than the fair market value per share on such date. Generally, awards expire ten years from the date of grant. The Company has granted time-based options and RSUs under the 2008 Plan.

In August 2006, the Company’s Board of Directors adopted an equity-based incentive plan (“the 2006 Plan”), which authorizes equity awards to be granted for up to 11,173,819 shares of the Company’s common stock. Under the 2006 Plan, the exercise price of awards is set on the grant date and may not be less than the fair market value per share on such date. Generally, awards expire ten years from the date of grant. The Company has granted RSAs of its common stock and both time-based and performance-based options under the 2006 Plan.

The Company generally settles stock option exercises with newly issued common shares.

Restricted stock units. During the year ended December 31, 2015, the Company granted 10,395 RSUs under the 2008 Plan, which vest 25% on the first anniversary of the grant date and continue to vest 1/12th of the remaining balance each quarter thereafter for three years. The RSUs vest in full upon a change in control, subject to certain conditions. At December 31, 2015, there was approximately $17.8 million of unearned non-cash stock-based compensation related to the RSUs that the Company expects to recognize as expense over a remaining period of 3.5 years.

Restricted stock awards. During the years ended December 31, 2015 and 2013, the Company granted 1,500 and 25,000 RSAs of its common stock, respectively, under the 2006 Plan, which vest 25% on the first anniversary of the grant date and continue to vest 1/12th of the remaining balance each quarter thereafter for three years. The RSAs vest in full upon a change in control, subject to certain conditions. During 2014, there were no RSAs granted. At December 31, 2015, there was approximately $0.4 million of unearned non-cash stock-based compensation related to the RSAs that the Company expects to recognize as expense over a remaining period of 22 months. At December 31, 2014, there was approximately $0.6 million of unearned non-cash stock-based compensation related to the RSAs that the Company expects to recognize as expense over a remaining period of 32 months.

Time-based options. Time-based options granted under the 2006 Plan, the 2008 Plan or the 2014 Plan generally vest 25% on the first anniversary of the grant date and 1/36th of the remaining balance each month thereafter for 36 months. All outstanding time-based options vest upon a change in control, subject to certain conditions. Time-based options granted during 2015, 2014 and 2013 have a weighted-average grant date fair value of $14.57, $12.77 and $9.86 per share, respectively, based on the Black-Scholes option pricing model. Compensation expense is recorded on a straight-line basis over the requisite service period. The fair value of time-based options vested during the years ended December 31, 2015, 2014 and 2013 was approximately $43.5 million, $11.3 million and $8.2 million, respectively. At December 31, 2015, there was approximately $109.6 million of unearned non-cash stock-based compensation related to time-based options that the Company expects to recognize as expense over a weighted average remaining period of approximately three years.

For the time-based options valued using the Black-Scholes option-pricing model, the Company used the following weighted-average assumptions:

	Time-Based awards
	2015			2014			2013
Expected term to exercise (years)		4.0			4.0			4.0
Expected volatility		26.63	%		29.04	%		28.04	%
Risk-free interest rate		1.42	%		1.36	%		1.16	%
Expected dividend yield		0.74	%		0.84	%		0	%

Expected volatility prior to March 2014 was based on a combination of the Company’s historical volatility as a public company and historical volatility of the Company’s peer group. Beginning in March 2014 on the four-year anniversary of the Company’s initial public offering, expected volatility is based on the Company’s historical volatility as a public company. Expected term to exercise is based on the Company’s historical stock option exercise experience.

Total stock options, SARs, RSUs and RSAs. The amount of stock-based compensation expense recognized in the Company’s Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013 was as follows (in thousands):

	2015								2014 (1)						2013 (1)
Statement of Comprehensive Income Classification	Options, SARs		RSUs		RSAs		Total		Options, SARs		RSAs		Total		Options, SARs		RSAs		Total
Cost of software-enabled services	$	6,460	$	372	$	17	$	6,849	$	3,940	$	—	$	3,940	$	2,925	$	—	$	2,925
Cost of maintenance and term licenses		1,022		366		—		1,388		282		—		282		273		—		273
Cost of recurring revenues		7,482		738		17		8,237		4,222		—		4,222		3,198		—		3,198
Cost of professional services		1,166		222		—		1,388		443		—		443		338		—		338
Cost of non-recurring revenues		1,166		222		—		1,388		443		—		443		338		—		338
Total cost of revenues		8,648		960		17		9,625		4,665		—		4,665		3,536		—		3,536
Selling and marketing (2)		10,637		3,806		222		14,665		2,043		222		2,265		1,385		90		1,475
Research and development		5,676		2,912		—		8,588		1,165		—		1,165		901		—		901
General and administrative		8,270		2,931		—		11,201		3,388		—		3,388		2,331		143		2,474
Total operating expenses		24,583		9,649		222		34,454		6,596		222		6,818		4,617		233		4,850
Total stock-based compensation expense	$	33,231	$	10,609	$	239	$	44,079	$	11,261	$	222	$	11,483	$	8,153	$	233	$	8,386

(1)	There was no stock-based compensation expense associated with RSUs in 2014 and 2013.

(2)	For the year ended December 31, 2013, includes stock-based compensation expense of $0.1 million associated with restricted Class A stock. At December 31, 2013, there was no unearned non-cash stock based compensation related to the RSAs.

The associated future income tax benefit recognized was $20.7 million, $3.8 million and $2.7 million for the years ended December 31, 2015, 2014 and 2013, respectively.

For the year ended December 31, 2015, the amount of cash received from the exercise of stock options was $30.1 million, with an associated tax benefit realized of $44.2 million. The intrinsic value of options exercised during the year ended December 31, 2015 was approximately $120.9 million. For the year ended December 31, 2014, the amount of cash received from the exercise of stock options was $24.1 million, with an associated tax benefit realized of $18.8 million. The intrinsic value of options exercised during the year ended December 31, 2014 was approximately $56.1 million. For the year ended December 31, 2013, the amount of cash received from the exercise of stock options was $27.8 million, with an associated tax benefit realized of $31.8 million. The intrinsic value of options exercised during the year ended December 31, 2013 was approximately $87.8 million.

In connection with its acquisition of Advent, the Company assumed Advent’s outstanding unvested equity awards which were converted into 2.5 million unvested stock options and SARs and 0.7 million unvested RSUs. The awards were converted into rights to receive SS&C common stock. All other terms and conditions of the awards remained unchanged. During the year ended December 31, 2015, the Company recognized stock-based compensation expense of $26.3 million related to these assumed awards, of which $11.5 million related to one-time charges for the accelerated vesting of certain awards.

The following table summarizes stock option and SAR activity as of and for the years ended December 31, 2015, 2014 and 2013:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at December 31, 2012		13,411,130		$	12.47
Granted(1)		2,024,170			40.81
Cancelled/forfeited		(332,327	)		20.27
Exercised		(3,587,331	)		7.75
Outstanding at December 31, 2013		11,515,642			18.70
Granted(2)		2,198,825			55.74
Cancelled/forfeited		(203,586	)		30.51
Exercised		(1,790,233	)		13.47
Outstanding at December 31, 2014		11,720,648			26.24
Equity awards assumed from Advent		2,480,953			50.27
Granted(3)		3,818,295			67.91
Cancelled/forfeited		(630,844	)		50.50
Exercised		(2,249,870	)		15.45
Outstanding at December 31, 2015		15,139,182			41.28

(1)	Of the grants during 2013, 1,798,420 were granted under the 2008 Plan and 225,750 were granted under the 2006 Plan.

(2)	Of the grants during 2014, 450,000 were granted under the 2014 Plan, 1,632,825 were granted under the 2008 Plan and 116,000 were granted under the 2006 Plan.

(3)	Of the grants during 2015, 515,000 were granted under the 2014 Plan, 2,739,845 were granted under the 2008 Plan and 563,450 were granted under the 2006 Plan.

The following table summarizes RSU activity as of and for the year ended December 31, 2015 is as follows (in thousands):

	Number of Shares
Outstanding at January 1, 2015		—
Equity awards assumed from Advent		660,017
Granted		10,395
Cancelled/forfeited		(69,194	)
Vested		(122,492	)
Outstanding at December 31, 2015		478,726

The following table summarizes information about stock options outstanding that are expected to vest and stock options outstanding that are exercisable at December 31, 2015:

Outstanding, Vested Options Currently Exercisable

Outstanding Options Expected to Vest

Weighted

Average

Weighted

Average

Aggregate

Remaining

Average

Aggregate

Remaining

Exercise

Intrinsic

Contractual

Exercise

Intrinsic

Contractual

Price

Value

Term

Price

Value

Term

(In thousands)

(Years)

(In thousands)

(Years)

6,788,912

21.20

319,682

4.66

8,350,270

57.61

89,728

9.12