STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and six months ended June 30, 2018, and June 30, 2017:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Cost of revenues	$	292	$	351	$	541	$	494
Research and development	2,271		2,351		4,110		3,985
Sales and marketing	1,126		1,189		2,402		2,286
General and administrative	2,426		2,436		4,687		4,531
Total stock-based compensation expense	$	6,115	$	6,327	$	11,740	$	11,296

Stock-based compensation expense in the three months ended June 30, 2018, was approximately $6.1 million (comprising approximately $3.9 million related to restricted stock unit (RSU) awards, $1.8 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). In the six months ended June 30, 2018, stock-based compensation expense was approximately $11.7 million (comprising approximately $8.2 million related to restricted stock unit (RSU) awards, $2.7 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $0.8 million related to the Company’s employee stock purchase plan).

Stock-based compensation expense in the three months ended June 30, 2017, was approximately $6.3 million (comprising approximately $3.7 million related to RSUs, $2.3 million related to PSUs and PRSUs and $0.3 million related to the Company’s employee stock purchase plan). In the six months ended June 30, 2017, stock-based compensation expense was approximately $11.3 million (comprising approximately $7.2 million related to RSUs, $3.5 million related to PSUs and PRSUs and $0.6 million related to the Company’s employee stock purchase plan).

Stock Options

A summary of stock options outstanding as of June 30, 2018, and activity during the six 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	(126	)	$	23.29
Forfeited or expired	—		—
Outstanding at June 30, 2018	385		$	30.92	1.87	$	16,220
Vested and exercisable at June 30, 2018	385				1.87	$	16,220

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 June 30, 2018, and activity during the six 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	88		$	62.82
Vested	(79	)	$	63.99
Forfeited	—		—
Outstanding at June 30, 2018	88		$	62.82	0.50	$	6,458
Outstanding and expected to vest at June 30, 2018	47				0.50	$	3,398

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.

In January 2018, it was determined that approximately 38,000 shares of the PRSUs granted in 2015, vested in aggregate and were released to the Company’s executives in the first quarter of 2018.

A summary of PRSUs outstanding as of June 30, 2018, and activity during the six 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 June 30, 2018	218		$	55.20	1.49	$	15,896
Outstanding and expected to vest at June 30, 2018	214				1.45	$	15,637

RSU Awards

A summary of RSUs outstanding as of June 30, 2018, and activity during the six 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	251		$	62.31
Vested	(282	)	$	53.80
Forfeited	(16	)	$	58.66
Outstanding at June 30, 2018	901		$	57.88	2.23	$	65,818
Outstanding and expected to vest at June 30, 2018	815				2.11	$	59,552