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, 2019, and March 31, 2018:



	Three Months Ended
(In thousands)	March 31, 2019		March 31, 2018
Cost of revenues	$	271	$	249
Research and development	1,632		1,839
Sales and marketing	1,061		1,276
General and administrative	1,443		2,261
Total stock-based compensation expense	$	4,407	$	5,625

Stock-based compensation expense in the three months ended March 31, 2019, was approximately $4.4 million, comprising approximately $4.6 million related to restricted stock unit (RSU) awards, a reduction to expense of $0.6 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, 2018, was approximately $5.6 million, comprising approximately $4.3 million related to RSUs, $0.9 million related to PSUs and PRSUs and $0.4 million related to the Company’s employee stock purchase plan.

Stock Options

A summary of stock options outstanding as of March 31, 2019, 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, 2019	335		$	32.41
Granted	—		—
Exercised	(85	)	$	20.92
Forfeited or expired	—		—
Outstanding at March 31, 2019	250		$	36.33	1.73	$	8,404
Vested and exercisable at March 31, 2019	250				1.73	$	8,404

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 2019, it was determined that approximately 26,000 shares of the PSUs granted in 2018 vested in aggregate; the shares were released to the Company’s employees and executives in the first quarter of 2019.

A summary of PSUs outstanding as of March 31, 2019, 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, 2019	26		$	62.87
Granted	58		$	69.46
Vested	(26	)	$	62.87
Forfeited	—		—
Outstanding at March 31, 2019	58		$	69.46	0.75	$	4,043
Outstanding and expected to vest at March 31, 2019	38				0.75	$	2,648

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 2017, 2018 and 2019 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 2019, it was determined that approximately 70,000 shares of the PRSUs granted in 2016, vested in aggregate; the shares were released to the Company’s executives in the first quarter of 2019.

A summary of PRSUs outstanding as of March 31, 2019, 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, 2019	213		$	55.48
Granted	72		$	68.17
Vested	(70	)	$	43.26
Forfeited	—		—
Outstanding at March 31, 2019	215		$	63.70	1.75	$	15,023
Outstanding and expected to vest at March 31, 2019	93				2.41	$	6,534

RSU Awards

A summary of RSUs outstanding as of March 31, 2019, 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, 2019	895		$	58.19
Granted	119		$	67.51
Vested	(112	)	$	54.38
Forfeited	(4	)	$	56.81
Outstanding at March 31, 2019	898		$	59.91	2.20	$	62,796
Outstanding and expected to vest at March 31, 2019	827				1.71	$	57,871