SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Accounting policies are consistent for each operating segment.

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. In the opinion of the Company’s management, the financial statements reflect all adjustments necessary to present fairly the Company’s financial position at September 30, 2013, the results of its operations for the three and nine months ended September 30, 2013 and 2012, its comprehensive income for the three and nine months ended September 30, 2013 and 2012, and its cash flows for the nine months ended September 30, 2013 and 2012. These adjustments are of a normal recurring nature.

Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of future financial results.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain previously reported amounts in the condensed consolidated statements of operations and condensed consolidated statements of cash flows have been reclassified to conform to the Company’s current presentation.

Foreign Currency Translation

The Company’s functional currency in its foreign locations is the local currency. Assets and liabilities are translated into U.S. dollars as of the balance sheet dates. Revenues, expenses, gains and losses are translated at the average exchange rates in effect during each period. Gains and losses resulting from translation are included in accumulated other comprehensive income (loss). Net gains or losses resulting from foreign currency exchange transactions are included in the condensed consolidated statements of operations. There were no material gains or losses from foreign currency exchange transactions for the three and nine months ended September 30, 2013 and 2012.


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED)

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss were as follows (in thousands):



	September 30, 2013			December 31, 2012
Foreign currency translation adjustment	$	(4,593	)	$	(4,613	)
Accumulated net unrealized loss on investments, net of tax	(1,842		)	(1,905		)
Total accumulated other comprehensive loss	$	(6,435	)	$	(6,518	)

Net Income Per Share

Net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis. The Company’s potentially dilutive securities include stock options and restricted stock. Diluted net income per share considers the impact of potentially dilutive securities except in periods in which there is a net loss, as the inclusion of the potentially dilutive common shares would have an anti-dilutive effect.

The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share data):



	Three Months Ended September 30,				Nine Months Ended September 30,
Numerator:	2013		2012		2013		2012
Numerator:
Net income	$	11,052	$	6,779	$	16,935	$	5,201
Denominator:
Denominator for basic net income per share — weighted-average outstanding shares	27,758		27,243		27,607		26,279
Effect of dilutive securities:
Stock options and restricted stock	591		430		530		412
Denominator for diluted net income per share — weighted-average outstanding shares	28,349		27,673		28,137		26,691

Net income per share — basic	$	0.40	$	0.25	$	0.61	$	0.20
Net income per share — diluted	$	0.39	$	0.24	$	0.60	$	0.19

Employee stock options with exercise prices greater than the average market price of the Company’s common stock for the period are excluded from the calculation of diluted net income per share as their inclusion would be anti-dilutive. Additionally, shares of restricted common stock that vest based on Company performance conditions were not included in the computation of basic or diluted earnings per share. Other than the shares of restricted common stock that vest based on Company performance conditions, no other potential common shares were excluded from the calculation of diluted net income for the three and nine months ended September 30, 2013 and 2012.

Stock-Based Compensation

Equity instruments issued in exchange for employee services are accounted for using a fair-value based method, and the fair value of such equity instruments is recognized as expense in the condensed consolidated statements of operations.


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED)

Stock-Based Compensation — (Continued)

Stock-based compensation expense is measured at the grant date of the stock-based awards that vest over set time periods based on their fair values, and is recognized on a straight line basis as expense over the vesting periods of the awards, net of an estimated forfeiture rate. For equity instruments that vest based on performance, the Company assesses the probability of the achievement of the performance conditions at the end of each reporting period, or more frequently based upon the occurrence of events that may change the probability of whether the performance conditions would be met. If the Company's initial estimates of the achievement of the performance conditions change, the related stock-based compensation expense and timing of recognition may fluctuate from period to period based on those estimates. If the performance conditions are not met, no stock-based compensation expense will be recognized, and any previously recognized stock-based compensation expense will be reversed.

In 2012, the Company granted performance-based restricted common stock awards that vest upon the Company's achievement of $90.0 million of cumulative net income before interest, income taxes, depreciation and amortization ("EBITDA") over a period of four consecutive calendar quarters if such performance is achieved by March 31, 2017. As of September 30, 2013, the Company reassessed the probability of achieving this performance condition and determined that it was still probable that the performance condition for these awards would be met by the March 31, 2017 forfeiture date. As a result, the Company recorded a total of approximately $3.1 million and $0 of stock-based compensation expense related to the performance-based restricted common stock for the three months ended September 30, 2013 and 2012, respectively. The Company recorded approximately $17.5 million and $0 of stock-based compensation expense related to the performance-based restricted common stock for the nine months ended September 30, 2013 and 2012, respectively. The Company expects to record an additional estimated unrecognized stock-based compensation expense related to the performance-based restricted common stock of approximately $6.2 million during the remainder of 2013 and in 2014.

Cash flows resulting from excess tax benefits are classified as part of cash flows from operating and financing activities. Excess tax benefits represent tax benefits related to stock-based compensation in excess of the associated deferred tax asset for such equity compensation. Net cash proceeds from the exercise of stock options and the purchase of shares under the Employee Stock Purchase Plan (“ESPP”) were approximately $6.9 million and $2.6 million for the three months ended September 30, 2013 and 2012, respectively. Net cash proceeds from the exercise of stock options and the purchase of shares under the ESPP were approximately $15.8 million and $7.7 million for the nine months ended September 30, 2013 and 2012, respectively. The Company recorded an increase of approximately $5.7 million of excess tax benefits realized from stock options exercised and restricted stock awards vested for the three months ended September 30, 2013 compared to a reduction of approximately $57,000 to its realized excess tax benefit from stock options exercised and restricted stock awards vested for the three months ended September 30, 2012. The Company recorded an increase of approximately $15.4 million of excess tax benefits realized from stock options exercised and restricted stock awards vested for the nine months ended September 30, 2013 compared to a reduction of approximately $57,000 to its realized excess tax benefit from stock options exercised and restricted stock awards vested for the nine months ended September 30, 2012.

Stock-based compensation expense for stock options and restricted stock issued under equity incentive plans and stock purchases under the ESPP included in the Company’s results of operations were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Cost of revenues	$	1,061	$	849	$	3,353	$	1,784
Selling and marketing	944		493		3,763		1,331
Software development	1,608		809		5,439		1,565
General and administrative	4,175		1,588		19,715		3,987
Total stock-based compensation	$	7,788	$	3,739	$	32,270	$	8,667

Options to purchase 150,560 and 76,542 shares were exercised during the three months ended September 30, 2013 and 2012, respectively. Options to purchase 340,599 and 224,382 shares were exercised during the nine months ended September 30, 2013 and 2012, respectively.


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (CONTINUED)

Capitalized Product Development Costs

Product development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized. Costs are capitalized, to the extent that the capitalizable costs do not exceed the realizable value of such costs, until the product is available for general release to customers. The Company defines the establishment of technological feasibility as the completion of all planning, designing, coding and testing activities that are necessary to establish products that meet design specifications including functions, features and technical performance requirements. The Company's capitalized product development costs had a total net book value of approximately $159,000 and $302,000 as of September 30, 2013 and December 31, 2012, respectively. These capitalized product development costs are included in intangible and other assets in the Company’s condensed consolidated balance sheets. Amortization is computed using a straight-line method over the remaining estimated economic life of the product, typically three to five years after the software is ready for its intended use. The Company amortized capitalized product development costs of approximately $48,000 for each of the three months ended September 30, 2013 and 2012. The Company amortized capitalized product development costs of approximately $143,000 for each of the nine months ended September 30, 2013 and 2012.

Debt Issuance Costs

Costs incurred in connection with the issuance of long-term debt are capitalized and amortized as interest expense over the term of the related debt using the effective interest method. The Company had capitalized debt issuance costs of approximately $7.3 million and $9.6 million as of September 30, 2013 and December 31, 2012, respectively. The debt issuance costs are associated with the financing commitment received from JPMorgan Chase Bank, N.A. (“J.P. Morgan Bank”) on April 27, 2011 and the subsequent term loan facility and revolving credit facility established under a credit agreement dated February 16, 2012 (the “Credit Agreement”). See Note 8 for additional information regarding the financing commitment with J.P. Morgan Bank and the Credit Agreement. The Company amortized debt issuance costs of approximately $760,000 and $763,000 for the three months ended September 30, 2013 and 2012, respectively. The Company amortized debt issuance costs of approximately $2.3 million and $1.2 million for the nine months ended September 30, 2013 and 2012, respectively.

Recent Accounting Pronouncements

There have been no developments to the Recent Accounting Pronouncements discussion included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, including the expected dates of adoption and estimated effects on the Company’s condensed consolidated financial statements, except for the following:

In July 2012, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance to simplify how companies test indefinite-lived intangible assets for impairment. The guidance permits a company to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. This guidance did not have a material impact on the Company's results of operations or financial position.

In February 2013, the FASB issued authoritative guidance to improve the reporting of reclassifications out of accumulated other comprehensive income. This guidance requires a company to present, either on the consolidated statements of operations or in the notes to the consolidated financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. This guidance is effective prospectively for financial statements issued for interim and annual periods beginning after December 15, 2012. This guidance did not have a material impact on the Company's results of operations or financial position.