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, 2018, and March 31, 2017:



	Three Months Ended
	March 31,
(In thousands)	2018		2017
Cost of revenues	$	249	$	143
Research and development	1,839		1,634
Sales and marketing	1,276		1,097
General and administrative	2,261		2,095
Total stock-based compensation expense	$	5,625	$	4,969

Stock-based compensation expense in the three months ended March 31, 2018, was approximately $5.6 million (comprising approximately $4.3 million related to restricted stock unit (RSU) awards, $0.9 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $0.4 million related to the Company’s employee stock purchase plan). Stock-based compensation expense in the three months ended March 31, 2017, was approximately $5.0 million (comprising approximately $3.5 million related to RSUs, $1.2 million related to PSUs and PRSUs 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, 2018, 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, 2018	511		$	29.03
Granted	—		—
Exercised	(84	)	$	23.32
Forfeited or expired	—		—
Outstanding at March 31, 2018	427		$	30.16	1.98	$	16,312
Vested and exercisable at March 31, 2018	427				1.98	$	16,312

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 2018, it was determined that approximately 79,000 shares of the PSUs granted in 2017, vested in aggregate and were released to the Company’s employees and executives in the first quarter of 2018.

A summary of PSUs outstanding as of March 31, 2018, 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, 2018	79		$	63.99
Granted	56		$	61.12
Vested	(79	)	$	63.99
Forfeited	—		—
Outstanding at March 31, 2018	56		$	61.12	0.75	$	3,841
Outstanding and expected to vest at March 31, 2018	23				0.75	$	1,576

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 2016, 2017 and 2018 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, 2018, 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, 2018	184		$	52.80
Granted	72		$	59.90
Vested	(38	)	$	52.45
Forfeited	—		—
Outstanding at March 31, 2018	218		$	55.20	1.74	$	14,873
Outstanding and expected to vest at March 31, 2018	214				1.70	$	14,631

RSU Awards

A summary of RSUs outstanding as of March 31, 2018, 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, 2018	948		$	55.51
Granted	117		$	60.03
Vested	(99	)	$	53.40
Forfeited	(3	)	$	56.42
Outstanding at March 31, 2018	963		$	56.27	2.40	$	65,787
Outstanding and expected to vest at March 31, 2018	880				1.86	$	60,173