Stock Compensation Plans

The Company provides stock-based compensation awards to its employees under the 2015 Omnibus Incentive Plan (stock plan), which the Company adopted in conjunction with its initial public offering (IPO) on October 15, 2015. The total number of shares of Class A common stock that may be issued under the stock plan is 71 million, plus any shares of Class B common stock subject to outstanding awards granted under the Company's 2007 Equity Plan that are forfeited, terminated, canceled, expired unexercised, withheld in payment of the exercise price, or withheld to satisfy tax withholding obligations which automatically converted on a one-for-one basis into shares of Class A common stock. The stock plan allows for the Company to award an equity interest in the Company or an award that can be settled in cash measured by reference to the value of the Company's Class A common stock.

Stock-based compensation expense for awards that vest based solely on service conditions are recognized over the requisite service period. As discussed in note 1 "Summary of Significant Accounting Policies" of these consolidated financial statements, on October 15, 2015, the Company filed its Prospectus with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) and started trading on the New York Stock Exchange, therefore all shares are subject to vesting.

Total stock-based compensation expense recognized in the "Cost of services" and “Selling, general, and administrative” line items of the consolidated statements of operations resulting from stock options, non-vested restricted stock awards, and non-vested restricted stock units was as follows for the periods presented:



Year ended December 31, (in millions)	Cost of services		Selling, general, and administrative		Total
2016 ^(a)	$	112	$	151	$	263
2015 ^(b)	130		199		329
2014 ^(c)	2		49		51


(a)	Approximately $52 million of stock-based compensation expense was recognized in conjunction with the IPO.

(b) Approximately $254 million was recognized in conjunction with the IPO and $14 million of stock-based compensation expense was recognized as a result of the departure of certain executive officers.


(c)	Approximately $37 million of stock-based compensation expense was recognized as a result of the departure of certain executive officers.

On September 28, 2015, the Company authorized the grant of restricted stock awards, restricted stock units, and options to certain executives in connection with the consummation of its initial public offering and these awards were valued at approximately $120 million, resulting in incremental unrecognized compensation expense. Two-thirds of these grants are subject to time-based vesting conditions over the next five years and one-third are subject to a market-based vesting condition. Subject to the recipient’s continued service with the Company through the applicable vesting event, shares subject to market-based stock options and market-based restricted stock will fully vest on the date immediately following the date on which the closing trading price of a share of Class A common stock on the NYSE or other such primary exchange on which shares of Class A common stock are listed and traded has equaled or exceeded two times the per share price to the public in the offering for ten consecutive trading days.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan under which the sale of 6.3 million shares of the Company's common stock is authorized. The price for shares purchased under the plan is 95% of the market value on the last day of each calendar quarter. As of December 31, 2016 the amount of shares issued under the plan is not material.

Stock Options

During the years ended December 31, 2016, 2015, and 2014, time-based options were granted under the stock plan. The time-based options have a contractual term of 10 years. Time-based options vest equally over a three to five year period from the date of issuance. The outstanding time-based options also have certain accelerated vesting provisions that became effective upon the Company's initial public offering.

As of December 31, 2016, there was approximately $84 million of total unrecognized compensation expense related to stock options to be recognized over a weighted-average period of approximately two years.

The fair value of stock options granted for the years ended December 31, 2016, 2015, and 2014 were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:



	Year ended December 31,
	2016			2015			2014
Risk-free interest rate	2.08		%	1.87		%	2.24		%
Dividend yield	—			—			—
Expected volatility	41.33		%	55.15		%	50.45		%
Expected term (in years)	7			7			7
Fair value of stock	$	12.62		$	15.53		$	12.64
Fair value of options	$	5.33		$	8.68		$	6.76

Risk-free interest rate—The risk-free rate for stock options granted during the period was determined by using a zero-coupon U.S. Treasury rate for the periods that coincided with the expected terms listed above.

Expected dividend yield—No routine dividends are currently being paid, or are expected to be paid in future periods.

Expected volatility—As the Company does not have sufficient historical data due to its relatively short history of being publicly traded, the expected volatility is based on the historical volatilities of a group of guideline companies.

Expected term—The Company estimated the expected term by utilizing the “simplified method” as allowed by the SEC.

Fair value of stock—The Company determined the fair value based on discounted cash flows and comparison to a group of guideline companies prior to being publicly traded on October 15, 2015 and the Company's closing stock price thereafter.

A summary of stock option activity for the years ended December 31, 2016 and 2015 was as follows:



(options in millions)	Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2014	32		$	10.75
Granted	11		15.53
Exercised	(1	)	9.86
Canceled / Forfeited	(1	)	11.25
Outstanding as of December 31, 2015	41		$	11.94	7 years	$	166
Granted	2		12.62
Exercised	(2	)	9.86
Canceled / Forfeited	(2	)	15.39
Outstanding as of December 31, 2016 (a)	39		$	12.00	6 years	$	98
Options exercisable as of December 31, 2016 (a)	22		$	10.78	5 years	$	76


(a)	Includes 2 million of outstanding options subject to the market conditions described above. There are no exercisable options subject to these market conditions.

The total intrinsic value related to stock options exercised for the years ended December 31, 2016, 2015, and 2014 was $6 million, $4 million, and $2 million, respectively.

Restricted Stock Awards and Restricted Stock Units

Restricted stock awards and units were granted during 2016, 2015, and 2014. Grants were made as incentive awards. As of December 31, 2016, there was approximately $210 million of total unrecognized compensation expense related to restricted stock be recognized over the respective service period of approximately one year.

During 2016, 2015, and 2014, the Company did not pay any significant cash amounts to repurchase stock awards from employees that terminated employment with the Company.

A summary of restricted stock award and restricted stock unit activity for the years ended December 31, 2016 and 2015 is as follows:



(awards/units in millions)	Awards/Units		Weighted-Average Grant-Date Fair Value
Non-vested as of December 31, 2014	15		$	11.98
Granted	19		14.96
Vested	(1	)	15.04
Canceled / Forfeited	(1	)	14.02
Non-vested December 31, 2015	32		$	14.30
Granted	18		12.49
Vested	(10	)	13.91
Canceled / Forfeited	(6	)	13.74
Non-vested as of December 31, 2016 (a)	34		$	13.59


(a)	Includes 1 million of shares subject to the market conditions described above.

The total fair value of shares vested (measured as of the date of vesting) during the twelve months ended December 31, 2016, 2015, and 2014 was $137 million, $11 million, and $15 million, respectively.