Stock Based Awards and Other Equity Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Summary of RSU Activity, Including Service Based Awards and Performance-Based Awards

				Weighted
				Average
				Grant-		Aggregate
	RSUs			Date Fair		Intrinsic
	Outstanding			Value Per Share		Value
	(in thousands)					(in millions)
Unvested RSUs outstanding as of December 31, 2017 (1)		6,015		$	48.14
Transfer (1)		(213	)		30.04
Granted		2,590			41.44
Vested and released (2)		(1,007	)		56.11
Cancelled		(160	)		47.26
Unvested RSUs outstanding as of March 31, 2018		7,225		$	45.18	$	295
Expected to vest after March 31, 2018 (3)		7,225		$	45.18	$	295

(1)

RSUs outstanding as of December 31, 2017 include 213,000 MSUs awarded to the Company’s CEO in November 2017. This award has been transferred to the MSU activity table below.

(2) Inclusive of 269,878 RSUs withheld due to net share settlement to satisfy required employee tax withholding requirements. Potential shares which had been convertible under RSUs that were withheld under net share settlement remain in the authorized but unissued pool under the 2011 Incentive Plan and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the unaudited condensed consolidated statements of cash flows.

(3)

The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore do not include a forfeiture rate in our expected to vest calculation unless necessary for a performance condition award.

Amount of Stock-Based Compensation Expense Related to Stock-Based Awards, Primarily Stock Options and RSUs

The following table presents the amount of stock-based compensation expense related to stock-based awards, primarily stock options and RSUs, on our unaudited condensed consolidated statements of operations during the periods presented:

	Three months ended
	March 31,
	2018			2017
	(in millions)
Selling and marketing	$	6		$	5
Technology and content		12			7
General and administrative		11			7
Total stock-based compensation		29			19
Income tax benefit from stock-based compensation		(7	)		(7	)
Total stock-based compensation, net of tax effect	$	22		$	12

Summary of Stock Option Activity

A summary of our stock option activity during the three months ended March 31, 2018, is presented below:

				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Options			Price Per		Contractual		Intrinsic
	Outstanding			Share		Life		Value
	(in thousands)					(in years)		(in millions)
Options outstanding at December 31, 2017		6,853		$	52.78
Granted		611			41.54
Exercised (1)		(196	)		28.21
Cancelled or expired		(72	)		47.80
Options outstanding at March 31, 2018		7,196		$	52.48		6.7	$	10
Exercisable as of March 31, 2018		3,428		$	54.81		4.7	$	5
Vested and expected to vest after March 31, 2018 (2)		7,196		$	52.48		6.7	$	10

(1)

Inclusive of 150,855 of options which were not converted into shares due to net share settlement in order to cover the aggregate exercise price and the required amount of employee withholding taxes. Potential shares that had been convertible under stock options that were withheld under net share settlement remain in the authorized but unissued pool under the 2011 Incentive Plan and can be reissued by the Company. Total payments for the employees’ tax obligations to the taxing authorities due to net share settlements are reflected as a financing activity within the unaudited condensed consolidated statements of cash flows.

(2)

The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures as allowed under GAAP and therefore do not include a forfeiture rate in our vested and expected to vest calculation unless necessary for a performance condition award.

Weighted-Average Assumptions of Estimated Fair Value of Stock Option Grants

The fair value of stock option grants under the 2011 Incentive Plan has been estimated at the date of grant using the Black–Scholes option pricing model with the following weighted average assumptions for the periods presented:

	Three months ended
	March 31,
	2018			2017
Risk free interest rate		2.66	%		1.91	%
Expected term (in years)		5.45			5.35
Expected volatility		42.29	%		41.53	%
Expected dividend yield	— %			— %

Summary of Unrecognized Stock-Based Compensation Expense and Weighted Average Period Remaining

A summary of our remaining unrecognized stock-based compensation expense and the weighted average remaining amortization period at March 31, 2018 related to our non-vested equity awards is presented below (in millions, except in years information):

	Stock
	Options		RSUs		MSUs
Unrecognized compensation expense	$	55	$	302	$	10
Weighted average period remaining (in years)		3.0		3.2	2.8

MSUs

Summary of RSU Activity, Including Service Based Awards and Performance-Based Awards

A summary of our RSU activity for MSUs, during the three months ended March 31, 2018 is presented below:

Weighted

Average

Grant-

Aggregate

MSUs

Date Fair

Intrinsic

Outstanding

Value Per Share

Value

(in thousands)

(in millions)

Unvested MSUs outstanding as of December 31, 2017 (1)

213

30.04

Granted (2)

59.40

Vested and released

―

Cancelled

―

Unvested MSUs outstanding as of March 31, 2018

284

37.41

(1)Represents 213,000 MSUs awarded to the Company’s CEO in November 2017.

(2)

MSUs provide for vesting based upon the Company’s total shareholder return, or TSR, performance over the period commencing January 1, 2018 through December 31, 2020 relative to the TSR performance of the Nasdaq Composite Total Return Index. A Monte-Carlo simulation model, which simulated the present value of the potential outcomes of future stock prices and TSR of the Company and the Nasdaq Composite Total Return Index over the performance period, was used to calculate the grant-date fair value of these awards. The estimated grant-date fair value of these awards is being amortized on a straight-line basis over the requisite service period through December 31, 2020. Based upon actual attainment relative to the target performance metric, the grantee has the ability to receive up to 200% of the target number of MSUs originally granted, or to be issued none at all. These MSUs were granted under the 2011 Incentive Plan.