STOCK-BASED COMPENSATION:

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
Cost of revenues	$	243	$	391	$	784	$	885
Research and development	1,634		2,173		5,744		6,158
Sales and marketing	1,105		1,441		3,507		3,727
General and administrative	1,416		2,521		6,103		7,052
Total stock-based compensation expense	$	4,398	$	6,526	$	16,138	$	17,822

Stock-based compensation expense in the three months ended September 30, 2018, was approximately $4.4 million (comprising approximately $4.2 million related to restricted stock unit (RSU) awards, a reduction to expense of $0.1 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $0.3 million related to the Company’s employee stock purchase plan). In the nine months ended September 30, 2018, stock-based compensation expense was approximately $16.1 million (comprising approximately $12.4 million related to RSUs, $2.6 million related to PSUs and PRSUs and $1.1 million related to the Company’s employee stock purchase plan).

Stock-based compensation expense in the three months ended September 30, 2017, was approximately $6.5 million (comprising approximately $4.0 million related to RSUs, $2.2 million related to PSUs and PRSUs and $0.3 million related to the Company’s employee stock purchase plan). In the nine months ended September 30, 2017, stock-based compensation expense was approximately $17.8 million (comprising approximately $11.2 million related to RSUs, $5.7 million related to PSUs and PRSUs and $0.9 million related to the Company’s employee stock purchase plan).

Stock Options

A summary of stock options outstanding as of September 30, 2018, and activity during the nine 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	(136	)	$	23.31
Forfeited or expired	—		—
Outstanding at September 30, 2018	375		$	31.11	1.64	$	12,036
Vested and exercisable at September 30, 2018	375				1.64	$	12,036

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 September 30, 2018, and activity during the nine 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	89		$	62.87
Vested	(79	)	$	63.99
Forfeited	—		—
Outstanding at September 30, 2018	89		$	62.87	0.25	$	5,588
Outstanding and expected to vest at September 30, 2018	27				0.25	$	1,677

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 September 30, 2018, and activity during the nine 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 September 30, 2018	218		$	55.20	1.24	$	13,752
Outstanding and expected to vest at September 30, 2018	161				1.01	$	10,144

RSU Awards

A summary of RSUs outstanding as of September 30, 2018, and activity during the nine 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	268		$	62.96
Vested	(288	)	$	53.77
Forfeited	(23	)	$	59.39
Outstanding at September 30, 2018	905		$	58.17	1.98	$	57,200
Outstanding and expected to vest at September 30, 2018	828				1.86	$	52,347