Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts) 

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Revenue 

$ 81,416

$ 68,436

$ 154,954

$ 128,497

Cost of revenue 

37,287

31,337

71,142

59,301

Gross profit 

44,129

37,099

83,812

69,196

Operating expenses:

  Research and development 

15,743

13,368

31,781

28,971

  Selling, general and administrative 

17,964

16,853

35,482

32,962

  Litigation expense (benefit), net

311

274

581

(8,426)

Total operating expenses 

34,018

30,495

67,844

53,507

Income from operations 

10,111

6,604

15,968

15,689

Interest and other income, net

235

295

877

485

Income before income taxes 

10,346

6,899

16,845

16,174

Income tax provision 

2,447

502

2,983

759

Net income 

$   7,899

$   6,397

$   13,862

$   15,415

 Net income per share:

          Basic

$     0.20

$     0.17

$       0.35

$       0.40

          Diluted

$     0.19

$     0.16

$       0.34

$       0.39

Weighted-average shares outstanding:

          Basic

39,570

38,684

39,337

38,577

          Diluted

40,745

39,608

40,670

39,563

Cash dividends declared per common share

$     0.20

$     0.15

$       0.40

$       0.15

SUPPLEMENTAL FINANCIAL INFORMATION 

STOCK-BASED COMPENSATION EXPENSE

(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Cost of revenue

$      284

$      219

$        526

$        424

Research and development

2,503

2,245

5,123

4,250

Selling, general and administrative

6,710

5,951

13,067

11,339

Total stock-based compensation expense

$   9,497

$   8,415

$   18,716

$   16,013

RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(Unaudited, in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net income 

$   7,899

$   6,397

$   13,862

$   15,415

   Net income as a percentage of revenue

9.7%

9.3%

8.9%

12.0%

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

    Stock-based compensation expense

9,497

8,415

18,716

16,013

    Amortization of acquisition-related intangible assets

367

-

733

-

    Acquisition-related expense

-

515

-

515

    Deferred compensation expense 

69

-

109

-

    Tax effect 

926

(685)

253

(1,694)

    Non-GAAP net income

$ 18,758

$ 14,642

$   33,673

$   30,249

        Non-GAAP net income as a percentage of revenue

23.0%

21.4%

21.7%

23.5%

Non-GAAP net income per share:

    Basic

$     0.47

$     0.38

$       0.86

$       0.78

    Diluted

$     0.46

$     0.37

$       0.83

$       0.76

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

    Basic

39,570

38,684

39,337

38,577

    Diluted

40,745

39,608

40,670

39,563

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Gross profit

$ 44,129

$ 37,099

$   83,812

$   69,196

   Gross margin

54.2%

54.2%

54.1%

53.9%

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

   Stock-based compensation expense

284

219

526

424

   Amortization of acquisition-related intangible assets

367

-

733

-

Non-GAAP gross profit

$ 44,780

$ 37,318

$   85,071

$   69,620

Non-GAAP gross margin

55.0%

54.5%

54.9%

54.2%

RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Total operating expenses

$ 34,018

$ 30,495

$   67,844

$   53,507

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

    Stock-based compensation expense

(9,213)

(8,196)

(18,190)

(15,589)

    Acquisition-related expense

-

(515)

-

(515)

    Deferred compensation plan income (expense)

146

-

(20)

-

Non-GAAP operating expenses

$ 24,951

$ 21,784

$   49,634

$   37,403

RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Total operating income

$ 10,111

$   6,604

$   15,968

$   15,689

   Operating income as a percentage of revenue

12.4%

9.6%

10.3%

12.2%

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

    Stock-based compensation expense

9,497

8,415

18,716

16,013

    Amortization of acquisition-related intangible assets

367

-

733

-

    Acquisition-related expense

-

515

-

515

    Deferred compensation plan expense (income)

(146)

-

20

-

    Non-GAAP operating income

$ 19,829

$ 15,534

$   35,437

$   32,217

Non-GAAP operating income as a percentage of revenue

24.4%

22.7%

22.9%

25.1%