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STOCK-BASED COMPENSATION (Tables) | 6 Months Ended
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Jun. 30, 2019
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 June 30, |  | Six Months Ended June 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Cost of revenue | $ | 197 |  |  | $ | 79 |  |  | $ | 350 |  |  | $ | 137 |
Selling and marketing expense | 2,283 |  |  | 1,433 |  |  | 4,032 |  |  | 2,934 |
General and administrative expense | 11,686 |  |  | 8,490 |  |  | 21,907 |  |  | 17,229 |
Product development | 1,816 |  |  | 1,176 |  |  | 3,746 |  |  | 1,987 |
Total non-cash compensation | $ | 15,982 |  |  | $ | 11,178 |  |  | $ | 30,035 |  |  | $ | 22,287 |
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, 2019 | 940,533 |  |  | $ | 65.12 |  |  |  |  |  |
Granted (b) | 42,017 |  |  | 322.17 |  |  |  |  |  |
Exercised | (108,418 | ) |  | 41.36 |  |  |  |  |  |
Forfeited | (25,270 | ) |  | 334.52 |  |  |  |  |  |
Expired | — |  |  | — |  |  |  |  |  |
Options outstanding at June 30, 2019 | 848,862 |  |  | 72.86 |  |  | 4.82 |  | $ | 294,700 |
Options exercisable at June 30, 2019 | 701,319 |  |  | $ | 35.97 |  |  | 3.99 |  | $ | 269,348 |
(a) | The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $420.03 on the last trading day of the quarter ended June 30, 2019 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 June 30, 2019. The intrinsic value changes based on the market value of the Company's common stock.
(b) During the six months ended June 30, 2019, 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 $166.39, calculated using the Black-Scholes option pricing model, which vesting periods include (a) immediate vesting on grant date (b) 1 year from grant date (c) three years from grant date and (d) four years from grant date A summary of changes in outstanding stock options with performance conditions is as follows:
| Number of Options with Performance 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, 2019 | 37,877 |  |  | $ | 308.90 |  |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |  |
Exercised | — |  |  | — |  |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |  |
Expired | (11,876 | ) |  | 308.90 |  |  |  |  |  |
Options outstanding at June 30, 2019 | 26,001 |  |  | 308.90 |  |  | 1.08 |  | $ | 2,889 |
Options exercisable at June 30, 2019 | — |  |  | $ | — |  |  | 0.00 |  | $ | — |
(a) The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $420.03 on the last trading day of the quarter ended June 30, 2019 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 June 30, 2019. The intrinsic value changes based on the market value of the Company's common stock.
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) | 51 - 55% |
Risk-free interest rate (4) | 1.88% - 2.55% |
(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 2019, 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) | 2.54% |
(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 2019, 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, 2019 | 447,193 |  |  | $ | 200.51 |  |  |  |  |  |
Granted (b) | 16,247 |  |  | 308.96 |  |  |  |  |  |
Exercised | — |  |  | — |  |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |  |
Expired | — |  |  | — |  |  |  |  |  |
Options outstanding at June 30, 2019 | 463,440 |  |  | 204.31 |  |  | 8.17 |  | $ | 99,974 |
Options exercisable at June 30, 2019 | — |  |  | $ | — |  |  | 0.00 |  | $ | — |
(a) | The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $420.03 on the last trading day of the quarter ended June 30, 2019 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 June 30, 2019. The intrinsic value changes based on the market value of the Company's common stock.
(b) During the six months ended June 30, 2019, the Company granted stock options with a grant date fair value per share of $230.81, calculated using the Monte Carlo simulation model, which has
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, 2019 | 201,568 |  |  | $ | 225.48 |
Granted | 53,696 |  |  | 314.85 |
Vested | (66,751 | ) |  | 190.73 |
Forfeited | (21,905 | ) |  | 292.43 |
Nonvested at June 30, 2019 | 166,608 |  |  | $ | 259.40 |
Schedule of changes in outstanding nonvested RSUs and restricted stock with performance and market conditions | 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, 2019 | 26,674 |  |  | $ | 340.25 |
Granted | — |  |  | — |
Vested | — |  |  | — |
Forfeited | — |  |  | — |
Nonvested at June 30, 2019 | 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, 2019 | 92,481 |  |  | $ | 182.28 |
Granted | — |  |  | — |
Vested | (40,458 | ) |  | 204.78 |
Forfeited | (30,956 | ) |  | 212.35 |
Nonvested at June 30, 2019 | 21,067 |  |  | $ | 214.19 |
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, 2019 | 71,412 |  |  | $ | 340.25 |
Granted | — |  |  | — |
Vested | (11,902 | ) |  | 340.25 |
Forfeited | — |  |  | — |
Nonvested at June 30, 2019 | 59,510 |  |  | $ | 340.25 |

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