Condensed Consolidated Statement of Operations
(Unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

2015

2014

Revenue 

$                 73,538

$                 60,061

Cost of revenue 

33,855

27,964

Gross profit 

39,683

32,097

Operating expenses:

  Research and development 

16,038

15,603

  Selling, general and administrative 

17,518

16,109

  Litigation expense (benefit), net

270

(8,700)

Total operating expenses 

33,826

23,012

Income from operations 

5,857

9,085

Interest and other income, net

642

190

Income before income taxes 

6,499

9,275

Income tax provision 

536

257

Net income 

$                   5,963

$                   9,018

    Net income per share:

          Basic

$                     0.15

$                     0.23

          Diluted

$                     0.15

$                     0.23

Weighted-average shares outstanding:

          Basic

39,105

38,470

          Diluted

40,596

39,517

Cash dividends declared per common share

$                     0.20

$                           -

SUPPLEMENTAL FINANCIAL INFORMATION 

STOCK-BASED COMPENSATION EXPENSE

(Unaudited, in thousands)

Three Months Ended March 31,

2015

2014

Cost of revenue

$                      242

$                   205

Research and development

2,620

2,005

Selling, general and administrative

6,357

5,388

Total stock-based compensation expense

$                   9,219

$                7,598

RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(Unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

2015

2014

Net income 

$                   5,963

$                   9,018

   Net income as a percentage of revenue

8.1%

15.0%

Adjustments to reconcile net income to non-GAAP net income:

    Stock-based compensation expense

9,219

7,598

    Amortization of acquisition-related intangible assets

367

-

    Deferred compensation expense (income), net

40

(24)

    Tax effect 

(673)

(1,007)

    Non-GAAP net income

$                 14,916

$                 15,585

        Non-GAAP net income as a percentage of revenue

20.3%

25.9%

Non-GAAP net income per share:

    Basic

$                     0.38

$                     0.41

    Diluted

$                     0.37

$                     0.39

Shares used in the calculation of non-GAAP net income per share:

    Basic

39,105

38,470

    Diluted

40,596

39,517

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)

Three Months Ended March 31,

2015

2014

Gross profit

$                 39,683

$                 32,097

   Gross margin

54.0%

53.4%

Adjustments to reconcile gross profit to non-GAAP gross profit:

   Stock-based compensation expense

242

205

   Amortization of acquisition-related intangible assets

367

-

Non-GAAP gross profit

$                 40,292

$                 32,302

Non-GAAP gross margin

54.8%

53.8%

RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)

Three Months Ended March 31,

2015

2014

Total operating expenses

$                 33,826

$                 23,012

Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:

    Stock-based compensation expense

(8,977)

(7,392)

    Deferred compensation plan expense

(166)

(13)

Non-GAAP operating expenses

$                 24,683

$                 15,607

RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)

Three Months Ended March 31,

2015

2014

Total operating income

$                   5,857

$                   9,085

   Operating income as a percentage of revenue

8.0%

15.1%

Adjustments to reconcile total operating income to non-GAAP total operating income:

    Stock-based compensation expense

9,219

7,598

    Amortization of acquisition-related intangible assets

367

-

    Deferred compensation plan expense 

166

13

    Non-GAAP operating income

$                 15,609

$                 16,696

Non-GAAP operating income as a percentage of revenue

21.2%

27.8%

RECONCILIATION OF OTHER INCOME TO NON-GAAP OTHER INCOME

(Unaudited, in thousands)

Three Months Ended March 31,

2015

2014

Total interest and other income, net

$                      642

$                      190

Adjustments to reconcile other income to non-GAAP other income:

    Deferred compensation plan income

(126)

(36)

    Non-GAAP interest and other income, net

$                      516

$                      154