STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2020

STOCK-BASED COMPENSATION

Schedule of non-cash compensation expense related to equity awards

Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cost of revenue	$	372	$	208	$	947	$	558
Selling and marketing expense	1,678		835		4,431		4,867
General and administrative expense	10,356		8,627		29,208		30,534
Product development	1,755		1,127		4,650		4,873
Total non-cash compensation	$	14,161	$	10,797	$	39,236	$	40,832

Summary of changes in outstanding stock options

A summary of changes in outstanding stock options is as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(a)
			(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2020	777,871		$	69.87
Granted (b)	73,737		276.38
Exercised	(47,500	)	161.39
Forfeited	(717	)	291.12
Expired	(2,036	)	352.68
Options outstanding at September 30, 2020	801,355		82.54		3.87	$	180,661
Options exercisable at September 30, 2020	651,144		$	40.61	2.79	$	173,993

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $306.89 on the last trading day of the quarter ended September 30, 2020 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on September 30, 2020. The intrinsic value changes based on the market value of the Company's common stock.

(b)

During the nine months ended September 30, 2020, the Company granted stock options to certain employees and members of the board of directors with a weighted average grant date fair value per share of $138.75, calculated using the Black-Scholes option pricing model, which vesting periods include (a) immediate vesting on grant date (b) one year from grant date (c) three years from grant date and (d) four years from grant date

Schedule of stock option valuation assumptions

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions. The weighted average assumptions used are as follows:

Expected term (1)	5.00 - 6.25 years
Expected dividend (2)	—
Expected volatility (3)	52 - 60%
Risk-free interest rate (4)	0.33 - 0.96%

(1) The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.

(2) For all stock options granted in 2020, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.

(3) The expected volatility rate is based on the historical volatility of the Company's common stock.

(4)

The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

For purposes of determining stock-based compensation expense, the grant date fair value per share of the stock options was estimated using the Monte Carlo simulation model, which requires the use of various key assumptions. The assumptions used are as follows:

Expected term (1)	7.00 years
Expected dividend (2)	—
Expected volatility (3)	51%
Risk-free interest rate (4)	1.03%

(1) The expected term of stock options with a market condition granted was calculated using the midpoint between the time of vesting and the end of the contractual term.

(2) For all stock options with a market condition granted in 2020, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.

(3) The expected volatility rate is based on the historical volatility of the Company's common stock.

(4)

The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

Schedule of changes in outstanding stock options with market conditions

A summary of changes in outstanding stock options with market conditions at target is as follows:

	Number of Options with Market Conditions	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(a)
		(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2020	463,440	$	204.31
Granted (b)	19,126	275.82
Exercised	—	—
Forfeited	—	—
Expired	—	—
Options outstanding at September 30, 2020	482,566	207.14		7.02	$	50,162
Options exercisable at September 30, 2020	—	$	—	0.00	$	—

(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $306.89 on the last trading day of the quarter ended September 30, 2020 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on September 30, 2020. The intrinsic value changes based on the market value of the Company's common stock.

(b)

During the nine months ended September 30, 2020, the Company granted stock options with a grant date fair value per share of $196.07, calculated using the Monte Carlo simulation model, which has a vesting date of March 31, 2024.

Schedule of changes in outstanding non-vested RSUs and restricted stock

A summary of changes in outstanding nonvested restricted stock units ("RSUs") is as follows:

	RSUs
	Number of Units		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	144,939		$	267.85
Granted	130,518		286.40
Vested	(62,167	)	240.57
Forfeited	(10,333	)	279.95
Nonvested at September 30, 2020	202,957		$	287.54

Schedule of changes in outstanding nonvested RSUs and restricted stock with performance and market conditions

A summary of changes in outstanding nonvested restricted stock awards ("RSAs") with performance conditions is as follows:

	RSAs with Performance Conditions
	Number of Awards		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	47,608		$	340.25
Granted	—		—
Vested	(17,853	)	340.25
Forfeited	—		—
Nonvested at September 30, 2020	29,755		$	340.25

 

A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows:

	RSAs with Market Conditions
	Number of Awards	Weighted Average Grant Date Fair Value
		(per unit)
Nonvested at January 1, 2020	26,674	$	340.25
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at September 30, 2020	26,674	$	340.25

 

A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:

	RSUs with Performance Conditions
	Number of Units		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	14,647		$	210.55
Granted	—		—
Vested	(1,992	)	125.75
Forfeited	—		—
Nonvested at September 30, 2020	12,655		$	223.90