ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2017

Annual Depreciation Rates of Property, Plant and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:


		%
Computers, software and equipment		10-33
Office furniture and equipment		7-33
Leasehold improvements		10-25
		(the shorter of the expected lease term or useful economic life)

Assumptions Used to Estimate Fair Value of Stock Options Granted

The fair value for the Company’s stock options and SARs (other than share issuances in connection with the employee stock purchase plan, as detailed below) granted to employees and non-employees directors was estimated using the following assumptions (neither options nor SARs were granted during 2017):


	2015	2016 (*
Expected dividend yield	0%	0%
Expected volatility	33%-49%	38%-49%
Risk-free interest rate	0.2%-2.4%	0.5%-2.4%
Expected forfeiture (employees)	10%	—
Expected forfeiture (executives)	5%	5%
Contractual term of up to	10 years	10 years
Suboptimal exercise multiple (employees)	2.1	—
Suboptimal exercise multiple (executives)	2.4	2.4

(*	During 2016, the Company granted stock options only to its non-employee directors.

Assumptions Used to Estimate Fair Value of Employee Stock Purchase Plan

The fair value for rights to purchase shares of common stock under the Company’s employee stock purchase plan was estimated on the date of grant using the following assumptions:


	2015	2016	2017
Expected dividend yield	0%	0%	0%
Expected volatility	35%-36%	29%-57%	28%-46%
Risk-free interest rate	0.1%-0.3%	0.3%-0.5%	0.5%-1.1%
Expected forfeiture	0%	0%	0%
Contractual term of up to	24 months	24 months	24 months

Equity-Based Compensation Expenses Related to Stock Options, SARs, RSUs and Employee Stock Purchase Plan

During the years ended December 31, 2015, 2016 and 2017, the Company recognized equity-based compensation expense related to stock options, SARs, RSUs and employee stock purchase plan as follows:


	Year ended December 31,
	2015		2016		2017
Cost of revenue	$	155	$	246	$	459
Research and development, net		1,838		2,860		3,839
Sales and marketing		568		922		1,428
General and administrative		1,454		2,208		2,967

Total equity-based compensation expense	$	4,015	$	6,236	$	8,693

Calculation of Basic and Diluted Net Income Per Share

Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted net income per share is computed based on the weighted average number of shares of common stock outstanding during each year, plus dilutive potential shares of common stock considered outstanding during the year, in accordance with FASB ASC No. 260, “Earnings Per Share.”


	Year ended December 31,
	2015		2016		2017
Numerator:
Net income	$	6,267	$	13,100	$	17,028
Denominator (in thousands):
Basic weighted-average common stock outstanding		20,480		20,850		21,771
Effect of stock options, stock appreciation rights and restricted stock units		509		715		790

Diluted weighted-average common stock outstanding		20,989		21,565		22,561

Basic net income per share	$	0.31	$	0.63	$	0.78

Diluted net income per share	$	0.30	$	0.61	$	0.75