STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three months ended March 31, 2017, and March 31, 2016:



	Three Months Ended
	March 31,
(In thousands)	2017		2016
Cost of revenues	$	143	$	90
Research and development	1,634		1,469
Sales and marketing	1,097		1,027
General and administrative	2,095		1,830
Total stock-based compensation expense	$	4,969	$	4,416

Stock-based compensation expense in the three months ended March 31, 2017 was approximately $5.0 million (comprising approximately $1.2 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards, $3.5 million related to restricted stock unit (RSU) awards and $0.3 million related to the Company’s employee stock purchase plan). Stock-based compensation expense in the three months ended March 31, 2016, was $4.4 million (comprising approximately $0.1 million related to stock options, $0.7 million related to PSUs and PRSUs, $3.3 million related to RSUs and $0.3 million related to the Company’s employee stock purchase plan).

Stock Options

A summary of stock options outstanding as of March 31, 2017, and activity during the three months then ended, is presented below:



	Shares (In thousands)		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2017	697		$	28.62
Granted	—		—
Exercised	(51	)	$	34.13
Forfeited or expired	—		—
Outstanding at March 31, 2017	646		$	28.17	2.51	$	24,268
Vested and exercisable at March 31, 2017	646				2.51	$	24,268

PSU Awards

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The number of shares that are released at the end of the performance year can range from zero to 200% of the target number depending on the Company’s performance. The performance metrics of this program are annual targets consisting of a combination of net revenue, non-GAAP operating income and strategic goals.

As the net revenue, non-GAAP operating income and strategic goals are considered performance conditions, expense associated with these awards, net of estimated forfeitures, is recognized over the service period based on an assessment of the achievement of the performance targets. The fair value of these PSUs is determined using the fair value of the Company’s common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

In January 2017, it was determined that approximately 99,000 shares of the PSUs granted in 2016, vested in aggregate and were released to the Company’s employees and executives in the first quarter of 2017.

A summary of PSUs outstanding as of March 31, 2017, and activity during the three months then ended, is presented below:



	Shares (In thousands)		Weighted- Average Grant Date Fair Value Per Share		Weighted-Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2017	99		$	46.25
Granted	55		$	64.11
Vested	(99	)	$	46.25
Forfeited	—		—
Outstanding at March 31, 2017	55		$	64.11	0.75	$	3,616
Outstanding and expected to vest at March 31, 2017	46				0.75	$	3,020

PRSU Awards

The Company's PRSU program provides for the issuance of PRSUs which will vest based on the Company's performance measured against the PRSU program's established revenue targets. PRSUs are granted in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The actual number of shares the recipient receives is determined at the end of a three-year performance period based on results achieved versus the Company's performance goals, and may range from zero to 200% of the target number. The performance goals for PRSUs granted in fiscal 2015, 2016 and 2017 were based on the Company’s annual revenue growth over the respective three-year performance period.

Expense associated with these awards, net of estimated forfeitures, is recorded throughout the year depending on the number of shares expected to vest based on progress toward the performance target. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

A summary of PRSUs outstanding as of March 31, 2017, and activity during the three months then ended, is presented below:



	Shares (In thousands)		Weighted- Average Grant Date Fair Value Per Share		Weighted-Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2017	150		$	47.65
Granted	71		$	63.00
Vested	—		—
Forfeited	(7	)	$	47.89
Outstanding at March 31, 2017	214		$	52.75	1.76	$	14,083
Outstanding and expected to vest at March 31, 2017	183				1.96	$	12,002

RSU Awards

A summary of RSUs outstanding as of March 31, 2017, and activity during the three months then ended, is presented below:



	Shares (In thousands)		Weighted- Average Grant Date Fair Value Per Share		Weighted-Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2017	718		$	47.54
Granted	115		$	62.72
Vested	(110	)	$	45.14
Forfeited	(19	)	$	47.55
Outstanding at March 31, 2017	704		$	50.40	1.70	$	46,235
Outstanding and expected to vest at March 31, 2017	655				1.33	$	43,092