10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number 001-35338

Imperva, Inc.

(Exact name of the Registrant as Specified in its Charter)

Delaware	03-0460133
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

3400 Bridge Parkway

Redwood Shores, California 94065

(Address of Principal Executive Offices, including Zip Code)

(650) 345-9000

(Registrant’s Telephone Number, including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Shares of Imperva, Inc. common stock, $0.0001 par value per share, outstanding as of July 31, 2017: 33,814,837 shares.

IMPERVA, INC.

FORM 10-Q

Quarterly Period Ended June 30, 2017

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016	5
	Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2017 and 2016	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59
Signatures		60

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

IMPERVA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	June 30, 2017			December 31, 2016
	Unaudited			*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	147,427		$	107,343
Short-term investments		172,460			153,749
Restricted cash		52			68
Accounts receivable, net of allowance of $1,641 and $ 1,784 as of June 30, 2017 and    December 31, 2016, respectively		59,333			62,571
Inventory		436			590
Prepaid expenses and other current assets		11,340			7,922
Insurance recoveries receivable		19,000			-
Total current assets		410,048			332,243
Property and equipment, net		24,788			21,496
Goodwill		36,389			37,448
Acquired intangible assets, net		3,449			8,393
Severance pay fund		6,280			5,070
Restricted cash		2,054			1,884
Deferred tax assets		2,813			1,220
Other assets		6,162			1,065
TOTAL ASSETS	$	491,983		$	408,819
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,044		$	5,529
Accrued compensation and benefits		21,342			20,840
Accrued and other current liabilities		8,898			7,683
Accrued legal settlement		19,000			-
Deferred revenue		106,332			104,042
Total current liabilities		161,616			138,094
Other liabilities		8,282			6,637
Deferred revenue		27,818			26,429
Accrued severance pay		7,152			5,696
TOTAL LIABILITIES		204,868			176,856
Commitments and Contingencies (Note 6)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value - 5,000,000 shares authorized, no shares issued and    outstanding as of June 30, 2017 and December 31, 2016, respectively		-			-
Common stock, $0.0001 par value - 145,000,000 shares authorized, 33,813,897    and 33,088,990 shares issued and outstanding as of June 30, 2017    and December 31, 2016, respectively		3			3
Additional paid-in capital		546,205			510,257
Accumulated deficit		(259,813	)		(276,819	)
Accumulated other comprehensive income (loss)		720			(1,478	)
TOTAL STOCKHOLDERS' EQUITY		287,115			231,963
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	491,983		$	408,819

The accompanying notes are an integral part of these condensed consolidated financial statements.

* The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

3

IMPERVA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Net revenue:
Products and license	$	20,012		$	14,830		$	39,590		$	35,671
Services		54,423			43,043			107,153			81,975
Total net revenue		74,435			57,873			146,743			117,646
Cost of revenue:
Products and license		1,823			1,814			3,755			3,998
Services		13,751			10,703			26,771			21,487
Total cost of revenue		15,574			12,517			30,526			25,485
Gross profit		58,861			45,356			116,217			92,161
Operating expenses:
Research and development		14,528			15,576			31,978			31,595
Sales and marketing		36,388			40,977			73,512			81,717
General and administrative		12,375			12,245			25,911			26,131
Restructuring charges		-			-			667			-
Amortization of acquired intangible assets		132			352			449			704
Total operating expenses		63,423			69,150			132,517			140,147
Loss from operations		(4,562	)		(23,794	)		(16,300	)		(47,986	)
Gain on sale of business		-			-			35,871			-
Other income (expense), net		158			(241	)		66			(158	)
(Loss) income before provision for income taxes		(4,404	)		(24,035	)		19,637			(48,144	)
(Benefit) provision for income taxes		(914	)		681			44			579
Net (loss) income	$	(3,490	)	$	(24,716	)	$	19,593		$	(48,723	)
Earnings per share:
Basic	$	(0.10	)	$	(0.77	)	$	0.59		$	(1.52	)
Diluted	$	(0.10	)	$	(0.77	)	$	0.58		$	(1.52	)
Shares used in computing earnings per share:
Basic		33,640			32,163			33,425			31,984
Diluted		33,640			32,163			33,984			31,984

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

IMPERVA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017		2016
Net Income (loss)	$	(3,490	)	$	(24,716	)	$	19,593	$	(48,723	)
Other comprehensive gain (loss) (net of tax):
Net change in net unrealized gain (loss) on investments		22			37			50		206
Net change in unrealized gain (loss) on hedging instruments		419			(654	)		2,148		262
		441			(617	)		2,198		468
Comprehensive income (loss)	$	(3,049	)	$	(25,333	)	$	21,791	$	(48,255	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

IMPERVA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited) 

	Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Capital			Deficit			Income(Loss)			Equity
For the six months ended June 30, 2017
Balance as at January 1, 2017		33,088,990	$	3	$	510,257		$	(276,819	)	$	(1,478	)	$	231,963
Cumulative effect of a change in accounting principle						2,601		$	(2,587	)					14
Issuance of common stock under employee equity    plans, net of repurchases		724,907		-		14,851			-			-			14,851
Stock-based compensation		-		-		25,117			-			-			25,117
Shares withheld for tax withholding on vesting of    restricted stock units		-		-		(6,621	)		-			-			(6,621	)
Components of other comprehensive income (loss),    net of tax
Change in unrealized gain (loss) on investments		-		-		-			-			50			50
Change in unrealized gain (loss) on hedging instruments		-		-		-			-			2,148			2,148
Net income		-		-		-			19,593			-			19,593
Comprehensive income															21,791
Balance as at June 30, 2017		33,813,897	$	3	$	546,205		$	(259,813	)	$	720		$	287,115

	Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Capital			Deficit			Income(Loss)			Equity
For the six months ended June 30, 2016
Balance as at January 1, 2016		31,837,144	$	3	$	448,069		$	(206,540	)	$	(1,331	)	$	240,201
Issuance of common stock under employee equity    plans, net of repurchases		540,602		-		5,682			-			-			5,682
Issuance of holdback shares in connection    with acquisitions		206,499		-		-			-			-			-
Stock-based compensation		-		-		29,635			-			-			29,635
Income tax deficiencies from employee stock option    exercises		-		-		(14	)		-			-			(14	)
Shares withheld for tax withholding on vesting of    restricted stock units		-		-		(3,954	)		-			-			(3,954	)
Components of other comprehensive income (loss),    net of tax
Change in unrealized gain (loss) on investments		-		-		-			-			206			206
Change in unrealized gain (loss) on hedging instruments		-		-		-			-			262			262
Net loss		-		-		-			(48,723	)		-			(48,723	)
Comprehensive loss															(48,255	)
Balance as at June 30, 2016		32,584,245	$	3	$	479,418		$	(255,263	)	$	(863	)	$	223,295

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

IMPERVA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six months ended June 30
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	19,593		$	(48,723	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		4,943			2,961
Stock-based compensation		25,117			32,759
Amortization of acquired intangibles		449			704
Loss on disposals		-			255
Amortization of premiums/accretion of discounts on short-term investments		(104	)		111
Excess tax deficiencies from share-based compensation		-			14
Gain on sale of business		(35,871	)		-
Other		(1,255	)		(228	)
Changes in operating assets and liabilities:
Accounts receivable, net		3,238			17,172
Inventory		192			(26	)
Prepaid expenses and other assets		(864	)		281
Accounts payable		(1,901	)		(2,570	)
Accrued compensation and benefits		3,626			(7,037	)
Accrued and other liabilities		2,990			(209	)
Severance pay (net)		246			328
Deferred revenue		5,132			8,160
Deferred tax assets		(1,593	)		(158	)
Net cash provided by operating activities		23,938			3,794
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales/maturities of short-term investments		50,923			34,331
Purchase of short-term investments		(69,451	)		(77,067	)
Proceeds from sale of business		35,015			-
Net purchases of property and equipment		(6,546	)		(8,263	)
Change in restricted cash		(154	)		12
Net cash provided by (used in) investing activities		9,787			(50,987	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Settlement of holdback liability		-			(7,157	)
Proceeds from issuance of common stock, net of repurchases		11,725			5,682
Shares withheld for tax withholding on vesting of restricted stock units		(6,621	)		(3,954	)
Offering costs relating to follow-on public offering		-			(112	)
Excess tax deficiencies from share-based compensation		-			(14	)
Net cash provided by (used in) financing activities		5,104			(5,555	)
Effect of exchange rate changes on cash and cash equivalents		1,255			228
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		40,084			(52,520	)
CASH AND CASH EQUIVALENTS - Beginning of period		107,343			168,252
CASH AND CASH EQUIVALENTS - End of period	$	147,427		$	115,732
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired but not yet paid	$	2,520		$	2,375

The accompanying notes are an integral part of the condensed consolidated financial statements.

7

IMPERVA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Business

Imperva, Inc. (together with its subsidiaries, the “Company”) was incorporated in April 2002 in Delaware. The Company is headquartered in Redwood Shores, California and has subsidiaries located throughout the world including Israel, Asia and Europe. The Company is engaged in the development, marketing, sales, service and support of cyber-security solutions that protect business-critical data and applications whether in the cloud or on premises.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with Article 10 of Regulation S-X and pursuant to the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and footnote disclosure it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its consolidated financial position, results of operations, and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 27, 2017 (the “Annual Report”).

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.

Concentration of Revenue and Accounts Receivable

Significant customers are those which represent 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date. The Company primarily sells products and services through channel partners, including distributors and resellers, which sell to end-user customers. For the six months ended June 30, 2017 and 2016, no single end-user customer represented 10% or more of the Company’s total revenue or gross accounts receivable balance.  

During those periods, the Company had one reseller that represented 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date as follows:

Revenue												Accounts Receivable
For the three months ended June 30,						For the six months ended June 30,						As of June 30,			As of December 31,
2017			2016			2017			2016			2017			2016
	12	%		12	%		12	%		13	%		21	%		18	%

Significant Accounting Policies

The Company adopted the guidance in Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting, on January 1, 2017. Under this ASU, entities are permitted to make an accounting policy election to either estimate forfeitures on share-based payment awards, as previously required, or to recognize forfeitures as they occur. The Company has elected to recognize forfeitures as they occur and the impact of that change in accounting policy has been recorded as a $2.6 million cumulative effect adjustment to increase our accumulated deficit as of January 1, 2017. Additionally, the Company has elected to use a prospective transition method for presentation of excess tax benefits on the statement of cash flows. The remaining provisions of ASU 2016-09 did not have a material impact on the accompanying condensed consolidated financial statements.

Insurance Recoveries Receivable

Insurance recoveries receivable consists of amounts receivable to the Company from insurance recoveries in connection with settlement costs and professional fees. Claims for loss recoveries are generally recognized when a loss event has occurred and recovery is considered probable.

8

There have been no other material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting”, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. The standard is effective for the Company on January 1, 2018, with early adoption permitted. The new guidance must be applied prospectively to awards modified on or after the adoption date. The future impact of ASU 2017-09 will be dependent on the nature of future stock award modifications.

In January 2017, FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which simplifies the measurement of goodwill impairment by removing the second step of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. Under this guidance, goodwill impairment is to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value with the loss recognized not to exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective beginning January 1, 2020 on a prospective basis, with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The standard is to be applied on a prospective basis. The Company does not anticipate a material impact to the consolidated financial statements once implemented.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and should be applied prospectively with early adoption permitted under certain scenarios. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard will be effective for the Company beginning January 1, 2018, with early application permitted. The standard will require adoption on a retrospective basis. The new accounting pronouncements will not have a significant impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will be effective for the Company beginning January 1, 2018, with early application permitted. The standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In June 2016, the FASB Issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The standard will be effective for the Company beginning January 1, 2020, with early application permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 regarding ASC Topic 842 “Leases.” The amendments in this guidance require balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The standard will be effective for the Company beginning January 1, 2019. The amendments require a modified retrospective approach with optional practical expedients. While the Company continues to evaluate the effect of the standard on its ongoing financial reporting, the Company anticipates that the adoption of the ASU may materially affect its Balance Sheet.

9

In May 2014, the FASB issued ASU 2014-09—Revenue (Topic 606): Revenue from Contracts with Customers. The standard will replace most existing U.S. GAAP guidance on this topic. The standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.

The standard will be effective for the Company beginning January 1, 2018 using either of two methods: (1) retrospective application of the standard to each prior reporting period presented with the option to elect certain practical expedients as defined within the standard, or (2) retrospective application of the standard with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per the standard. The Company plans to adopt the standard under the modified retrospective method effective January 1, 2018. The Company’s ability to adopt using the modified retrospective method is dependent on several factors such as the significance of the impact of the new standard on the Company’s financial results, and system readiness, including software procured from third-party providers and the completion of the Company’s analysis of information necessary to determine the cumulative effect of adoption recognized as of the date of initial application.

The Company has developed a project plan for this transition, which includes necessary changes to accounting policies, processes, internal controls, and system requirements and is progressing as planned. The Company expects to implement the plan in time to report in accordance with ASC 606 for the first quarterly filing on Form 10-Q for the period ended March 31, 2018.

As part of its preliminary evaluation, the Company has considered the impact of the standard’s requirements with respect to capitalization and amortization of incremental costs of obtaining a contract, primarily sales commissions. Under the Company’s current accounting policy, contract origination costs are expensed as incurred. The new standard requires the capitalization of all incremental costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained, provided the Company expects to recover the costs. The Company is reviewing historical costs to identify those that meet the new standard’s capitalization requirement. Under the new standard, the Company will amortize these costs over a period of benefit, as estimated by management, which may extend beyond the contract term.

The Company’s contracts with customers frequently include multiple performance obligations. For such arrangements, we will allocate revenue to each performance obligation based on its relative standalone selling price. The Company is analyzing its historical sales data and expects to determine standalone selling prices based on the prices charged to customers.

While the Company continues to assess the potential impacts of the new standard on its consolidated financial statements and related disclosures, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. The preliminary assessments are subject to change as the Company continues to assess the new standard along with industry trends and additional interpretive guidance.

2. Cash, Cash Equivalents, and Short-Term Investments

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash on hand, highly liquid investments in commercial paper, money market funds corporate debt obligations and various deposit accounts.

The Company considers all high quality investments purchased with original maturities at the date of purchase greater than three months to be short-term investments. Investments are available to be used for current operations and are, therefore, classified as current assets even though maturities may extend beyond one year. Cash equivalents and short-term investments are classified as available-for-sale and are, therefore, recorded at fair value on the condensed consolidated balance sheets, with any unrealized gains and losses reported in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity in its condensed consolidated balance sheets, until realized. The Company uses the specific-identification method to compute gains and losses on the investments. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included as a component of other income (expense), net in the condensed consolidated statements of operations.

10

Cash, cash equivalents and short-term investments consist of the following (in thousands):

	As of June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash	$	53,728	$	-	$	-	$	53,728
Commercial paper		5,490		-		1		5,489
Money market funds		84,359		-		-		84,359
Corporate debt obligations		3,852		-		1		3,851
Total	$	147,429	$	-	$	2	$	147,427
Short-term investments:
Commercial paper	$	14,228	$	-	$	11	$	14,217
Corporate debt obligations		143,078		1		266		142,813
US government agencies		14,998		-		47		14,951
Bank deposits		480		-		1		479
Total	$	172,784	$	1	$	325	$	172,460

	As of December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash	$	63,642	$	-	$	-	$	63,642
Commercial paper		6,995		-		2		6,993
Money market funds		36,708		-		-		36,708
Total	$	107,345	$	-	$	2	$	107,343
Short-term investments:
Commercial paper	$	14,245	$	-	$	8	$	14,237
Corporate debt obligations		110,062		-		347		109,715
US government agencies		18,998		2		50		18,950
Bank deposits		10,846		1		-		10,847
Total	$	154,151	$	3	$	405	$	153,749

The following table summarizes the cost and estimated fair value of short-term investments based on stated effective maturities as of June 30, 2017 (in thousands):

	As of June 30, 2017
			Estimated
	Amortized		Fair
	Cost		Value
Short-term investments:
Due within one year	$	88,396	$	88,258
Due within two years		84,388		84,202
Total	$	172,784	$	172,460

The gross unrealized loss related to these securities was due primarily to changes in interest rates. The Company reviews its short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. The Company considers factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and its intent to sell, or whether it is more likely than not the Company will be required to sell, the investment before recovery of the investment’s amortized cost basis. If the Company believes that an other-than-temporary decline exists in one of these securities, the Company writes down these investments to fair value. For debt securities, the portion of the write-down related to credit loss would be recorded to other income (expense), net, in the Company’s condensed consolidated statements of operations. Any portion not related to credit loss would be recorded to accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity in the Company’s condensed consolidated balance sheets. During the three and six months ended June 30, 2017 and 2016, the Company did not consider any of its investments to be other-than-temporarily impaired.

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The following tables show the short-term investments in an unrealized loss position and the related gross unrealized losses and fair value and length of time that the short-term investments have been in a continuous unrealized loss position (in thousands):

	As of June 30, 2017
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	14,217	$	11	$	-	$	-	$	14,217	$	11
Corporate debt obligations		89,716		186		50,082		80		139,798	$	266
US government agencies		9,458		40		5,493		7		14,951		47
Bank deposits		480		1		-		-		480	$	1
	$	113,871	$	238	$	55,575	$	87	$	169,446	$	325

	As of December 31, 2016
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	14,237	$	8	$	-	$	-	$	14,237	$	8
Corporate debt obligations		78,821		323		29,689		24		108,510	$	347
US government agencies		11,451		46		3,496		4		14,947		50
	$	104,509	$	377	$	33,185	$	28	$	137,694	$	405

3. Fair Value of Financial Instruments

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. There have been no transfers between fair value measurement levels during the three and six months ended June 30, 2017.

The Company’s cash equivalents and short-term investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include mutual funds and money market securities, and are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on quoted prices in less active markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability include U.S. agency securities, investment-grade corporate bonds, bank deposits, and commercial paper. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The Company executes its foreign currency contracts primarily in the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large multi-national and regional banks. The Company’s foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

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The following table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2017 and December 31, 2016, by level within the fair value hierarchy (in thousands):

	As of June 30, 2017
	Level I		Level II		Level III		FairValue
Financial Assets:
Cash equivalents:
Commercial paper	$	-	$	5,489	$	-	$	5,489
Money market funds		84,359		-		-		84,359
Corporate debt obligations		-		3,851		-		3,851
Short-term investments:
Commercial paper		-		14,217		-		14,217
Corporate debt obligations		-		142,813		-		142,813
US government agencies		-		14,951		-		14,951
Bank deposits		-		479		-		479
Prepaid expenses and other current assets - Forward foreign exchange    contracts		-		2,263		-		2,263
Total financial assets	$	84,359	$	184,063	$	-	$	268,422

	As of December 31, 2016
	Level I		Level II		Level III		Fair Value
Financial Assets:
Cash equivalents:
Commercial paper	$	-	$	6,993	$	-	$	6,993
Money market funds		36,708		-		-		36,708
Short-term investments:
Commercial paper		-		14,237		-		14,237
Corporate debt obligations		-		109,715		-		109,715
US government agencies		-		18,950		-		18,950
Bank deposits		-		10,847		-		10,847
Total financial assets	$	36,708	$	160,742	$	-	$	197,450
Financial Liability:
Accrued and other current liabilities - Forward foreign exchange    contracts	$	-	$	639	$	-	$	639

In addition to the amounts disclosed in the above table, the fair value of the Company’s Israeli severance pay assets, which were comprised of Level II assets, was $6.3 million and $5.1 million as of June 30, 2017 and December 31, 2016, respectively.

4. Derivative Instruments

The Company’s primary objective for holding derivative instruments is to reduce its exposure to foreign currency rate changes. The Company reduces its exposure by entering into forward foreign exchange contracts with respect to operating expenses that are forecast to be incurred in currencies other than U.S. dollars. Substantially all of the Company’s revenue and capital purchasing activities and a majority of its operating expenditures are transacted in U.S. dollars. However, certain operating expenditures are incurred in or exposed to other currencies, primarily the Israeli shekel and the Euro.

The Company has established forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. The Company’s currency risk management program includes forward foreign exchange contracts designated as cash flow hedges. These forward foreign exchange contracts generally mature within 12 months. The Company does not enter into derivative financial instruments for trading purposes.

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Derivative instruments measured at fair value and their classification on the condensed consolidated balance sheets are presented in the following tables (in thousands):

	As of June 30, 2017				As of December 31, 2016
	Notional Amount		Fair Value		Notional Amount		Fair Value
Foreign exchange forward contract derivatives in    cash flow hedging relationships -  included in    prepaid expenses and other current assets    (accrued and other current liabilities)	$	27,664	$	2,696	$	60,756	$	(639	)

Gains (losses) on derivative instruments and their classification on the condensed consolidated statement of operations are presented in the following table (in thousands):

	For the three months ended June 30						For the six months ended June 30
	2017			2016			2017			2016
Foreign Exchange Forward Contract Derivatives    in cash flow hedging relationships:
Gains recognized in OCI (a)	$	1,445		$	-		$	4,332		$	1,316
Losses recognized in OCI (a)	$	(17	)	$	(906	)	$	(17	)	$	(1,005	)
Gains recognized from accumulated OCI into    net income (b)	$	782		$	149		$	988		$	149
Losses recognized from accumulated OCI into    net income (b)	$	(5	)	$	(47	)	$	(10	)	$	(241	)

(a) Net change in the fair value of the effective portion classified in other comprehensive income (loss) (“OCI”).

(b) Effective portion of cash flow hedges reclassified from accumulated other comprehensive income (loss) into net income, of which $54 and $723 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2017; $68 and $910 were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2017. $6 and $96 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2016 and $(7) and $(85) were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2016. All amounts are reflected within the respective condensed consolidated statement of operations.

5. Goodwill and Acquired Intangible Assets

In February 2017, the Company completed the sale of its assets related to the Skyfence cloud access security broker business (“Skyfence”) to Forcepoint LLC and its Israeli subsidiary. We allocated goodwill of $1.1 million to the business being disposed of. Additionally, the acquired intangible assets with the carrying value of $4.5 million were derecognized in connection with this transaction. The Company did not have any goodwill impairments during three and six months ended June 30, 2017 and 2016.

The changes in the carrying amount of goodwill for the periods ended June 30, 2017 and December 31, 2016 were as follows (in thousands):

Balance as of December 31, 2016	$	37,448
Goodwill disposed with sale of Skyfence		(1,059	)
Balance as of June 30, 2017	$	36,389

The Company amortizes intangible assets, which consist of purchased technologies that have estimated useful lives ranging from 7 to 10 years, using the straight-line method when the consumption pattern of the asset is not apparent. The Company reviews such assets for impairment whenever an impairment indicator exists and continually monitors events and changes in circumstances that could indicate carrying amounts of the intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets exceed the estimates of future undiscounted future cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s estimated fair value. There was no impairment of intangible assets recorded for the three and six months ended June 30, 2017 and 2016. The weighted average remaining useful life of the Company’s acquired technology, customer relationships, and trade names and other intangible assets is 6.5 years, 6.5 years, and 6.5 years, respectively as of June 30, 2017.

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Acquired intangible assets subject to amortization are presented as follows (in thousands):

	As of June 30, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired technology	$	3,753	$	(1,004	)	$	2,749
Customer relationships		480		(38	)		442
Trade name and other		280		(22	)		258
Total	$	4,513	$	(1,064	)	$	3,449
	As of December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired technology	$	11,718	$	(4,085	)	$	7,633
Customer relationships		480		-			480
Trade name and other		280		-			280
Total	$	12,478	$	(4,085	)	$	8,393

Acquired intangible assets are amortized over their estimated useful lives of 7 to 10 years. As of June 30, 2017, the amortization expense in future periods is expected to be as follows (in thousands):

	Acquired
Fiscal Year	Technology
2017 (remaining 6 months)	$	265
2018		528
2019		528
2020		528
2021		528
Thereafter		1,072
Total expected amortization expense	$	3,449

6. Commitments and Contingencies

(a) Operating Leases

The Company rents its facilities under operating leases with lease periods expiring through 2022. Future minimum payments under these facility operating leases and minimum rentals to be received under non-cancellable subleases are as follows as of June 30, 2017 (in thousands):

	Operating Leases		Estimated Sublease Income
Period Ending December 31:
2017 (remaining 6 months)	$	3,601	$	356
2018		8,459		683
2019		4,741		-
2020		4,461		-
2021		301		-
Thereafter		49		-
Total	$	21,612	$	1,039

Rent expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. Rent expense for the six months ended June 30, 2017 and 2016 was $3.2 million and $3.0 million, respectively.

In connection with leases of office space, the Company may receive tenant improvement allowances from lessors for certain improvements the Company makes to the leased properties. The Company records the tenant improvement allowances as a leasehold

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improvement within property and equipment, net, and as deferred rent within other liabilities on the condensed consolidated balance sheets. The deferred rent liability is amortized to rent expense over the term of the lease on a straight-line basis. The leasehold improvements are amortized to expense over the period from when the improvements were placed into service until the end of their useful life, which is the end of the lease term. For the six months ending June 30, 2017 and 2016, the Company did not receive any tenant improvement allowances.

In addition, certain of the Company’s operating lease agreements for office space also include rent holidays and scheduled rent escalations during the initial lease term. The Company has recorded the rent holidays as a deferred rent within other liabilities on the condensed consolidated balance sheets. The Company recognizes the deferred rent liability and scheduled rent increase on a straight-line basis into rent expense over the lease term commencing on the date the Company takes possession of the lease space.

As of June 30, 2017 and December 31, 2016 the Company had $2.1 million and $1.9 million, respectively, in restricted deposits to secure bank guarantees provided to its lessors.

(b) Cancelable Lease Agreement

The Company leases motor vehicles under cancelable operating lease agreements. The Company has an option to cancel the lease agreements, which may result in penalties in a maximum amount of $0.1 million as of June 30, 2017. Motor vehicle lease expenses for the six months ended June 30, 2017 and 2016 were $1.5 million and $1.4 million, respectively.

(c) Purchase Commitments

As of June 30, 2017 and December 31, 2016, the Company had purchase commitments of $3.4 million and $3.8 million, respectively, to purchase inventory, trial units, and research and development equipment from its vendors. The purchase commitments result from the Company’s contractual obligation to order or build inventory in advance of anticipated sales. According to the Company’s agreements with its vendors, the Company committed to purchase inventory within six months from the date the inventory arrived at the vendor’s warehouse.

(d) Litigation

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business.

On April 11, 2014, a purported shareholder class action lawsuit was filed in the United States District Court for the Northern District of California against the Company and certain of its current and former officers. On August 7, 2014, the Court entered an order appointing lead plaintiff and counsel for the purported class. The lead plaintiff filed an amended complaint on October 10, 2014. The lawsuit named the Company and certain of its current and former officers and purported to bring suit on behalf of those investors who purchased the Company’s publicly traded securities between May 2, 2013 and April 9, 2014. The plaintiff alleged that defendants made false and misleading statements about the Company’s operations and business and financial results and purported to assert claims for violations of the federal securities laws. The amended complaint sought unspecified compensatory damages, interest thereon, costs incurred in the action and equitable/injunctive or other relief. On January 6, 2015, defendants filed a motion to dismiss the amended complaint. On September 17, 2015, the Court granted defendants’ motion to dismiss with leave to amend. The lead plaintiff filed an amended complaint on January 13, 2016, again naming the same current and former officers, alleging false and misleading statements about the Company’s operations and business and financial results, and seeking the same relief.  On February 10, 2016, defendants filed a motion to dismiss the amended complaint. On May 16, 2016, the Court granted the motion in part and denied the motion in part.  On September 7, 2016, defendants filed their operative answer to the amended complaint. In July 2017, with the help of a mediator, the parties reached an agreement in principle to settle the action.  The settlement, which is subject to final documentation and the approval of the Court, among other conditions, will be funded entirely by the Company’s insurance carriers, and has been accrued in current assets and current liabilities for the period ended June 30, 2017. The settlement is not deemed material to our results of operations, liquidity or capital resources as a result of the insurance receivable.

In addition, the Company receives, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend the Company, the Company’s channel partners and the Company’s customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights.

In the opinion of management, liabilities associated with these claims from third parties, while possible, are not probable at this time, and therefore the Company has not recorded any accrual for them as of June 30, 2017 and December 31, 2016. Further, any possible range of loss cannot be reasonably estimated at this time. The ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, potential negative publicity, diversion of management resources and other factors. Accordingly, there can be no assurance that existing or future legal proceedings arising in the

16

ordinary course of business or otherwise will not have a material adverse effect on the Company’s business, consolidated financial position, results of operations or cash flows.

(e) Indemnification

Under the indemnification provisions of its standard sales contracts, the Company agrees to defend its end customers and certain channel partners against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks, or trade secrets, and to pay judgments and settlements entered on such claims. The Company’s exposure under these indemnification provisions is generally limited to the total amount paid under the agreement. However, some agreements include indemnification provisions that could potentially expose the Company to losses in excess of the amount received under the agreement. To date, there have been no claims under such indemnification provisions. Accordingly, the Company has not recorded a liability on its condensed consolidated balance sheets for these indemnification provisions.

In addition to the foregoing, the Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and officers.

7. Stock Plans

(a) 2003 Stock Plan

During 2003, the Board of Directors adopted the 2003 Stock Plan (the “2003 Plan”), which allowed for the grant of both incentive stock options and non-qualified stock options and the direct award or sale of shares of the Company’s common stock (including restricted common stock) to officers, employees, directors, consultants and other key persons. In connection with the Company’s initial public offering, which was completed in November 2011, the Board of Directors determined not to grant any further awards under the 2003 Plan upon completion of the public offering.  The 2011 Stock Option and Incentive Plan (the “2011 Plan”) replaced the 2003 Plan in November 2011.  Under the 2003 Plan, incentive stock options could have been granted to employees with exercise prices of no less than the fair value of the common stock on the grant date, and non-qualified options could have been granted to employees, directors, or consultants at exercise prices of no less than 85% of the fair value of the common stock on the grant date, as determined by the Board of Directors. If, at the time the Company granted an option, the optionee directly or by attribution owned stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the option price had to have been at least 110% of the fair value. Options granted under the 2003 Plan generally expire no later than ten years from the date of grant and, in general, vest four years from the date of grant.

(b) 2011 Stock Option and Incentive Plan

In September 2011, the Board of Directors adopted the 2011 Plan which was subsequently approved by the Company’s stockholders. The 2011 Plan replaced the 2003 Plan and the Company no longer grants awards under the 2003 Plan. The Company initially reserved a total of 1,000,000 shares of common stock for issuance under the 2011 Plan. In addition, 955,568 reserved but unissued shares under the 2003 Stock Plan were added to the number of shares reserved for issuance under the 2011 Plan. The 2011 Plan also provided that the number of shares reserved and available for issuance under the plan would automatically increase each January 1, beginning in 2012 and ending in 2015, by 4% of the outstanding number of shares of common stock on the immediately preceding December 31. The last automatic increase occurred on January 1, 2015.  In April 2017 and May 2016, the Company’s stockholders approved an increase to the share reserve under the 2011 Plan by 850,000 shares and 1,300,000 shares respectively.

The 2011 Plan permits the granting of incentive stock options, non-qualified stock options, restricted stock units (“RSUs”), stock appreciation rights, restricted shares of common stock and performance share awards. The exercise price of stock options may not be less than 100% of the fair market value of the common stock on the date of grant. Options granted pursuant to the 2011 Plan generally expire no later than ten years from the date of grant. The Company also grants RSUs.  RSUs granted to new hires and merit grants to existing employees generally vest over a four-year period with 25% vesting at the end of one year and the remainder vesting quarterly thereafter. Additionally, from time to time, the Company grants performance-based RSUs (“PRSUs”).  During the quarter ended March 31, 2017, the Company granted PRSUs to its executives to align with the Company’s pay-for-performance philosophy. During the quarter ended June 30, 2017, the Company granted supplemental merit-based PRSUs to two executives on substantially the same terms as those granted during the prior quarter. The PRSUs provide for a target number of shares that generally vest over three years including a one year performance period and two years of service-based vesting.  The PRSUs vest contingent upon the Company’s achievement of an annual contract value of subscription bookings target for fiscal 2017 and total operating expenses for 2017 that are at 110% or less of the internal operating plan.  The amount of PRSUs earned may vary from zero to 200% of the target award amount depending on level of achievement, and provided the award recipient remains employed through each applicable vesting date. In addition, from the PRSUs awarded to executives during the quarter ended March 31, 2016, an aggregate of 46,619 PRSUs were issued during the quarter ended March 31, 2017, based on the Company’s achievement against its annual contract value

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of subscription bookings target for fiscal 2016 and achieving total operating expenses for 2016 that were 110% or less of the internal operating plan. The PRSUs are subject to vest over a two-year period and vest quarterly through February 15, 2019.

(c) 2011 Employee Stock Purchase Plan

In September 2011, the Board of Directors adopted the 2011 Employee Stock Purchase Plan (the “ESPP”) which was subsequently approved by the Company’s stockholders. The ESPP took effect on November 8, 2011, the effective date of the registration statement for the Company’s initial public offering. The ESPP permits eligible employees to acquire shares of the Company’s common stock by accumulating funds through periodic payroll deductions of up to 15% of base salary. Each offering period may run for no more than 24 months and consist of no more than five purchase periods. The purchase price for shares of the Company’s common stock purchased under the ESPP will be 85% of the lesser of the fair market value of the Company’s common stock on the first day of the offering period or the last trading day of the applicable purchase period within that offering period.

The Company initially reserved a total of 500,000 shares of common stock for future issuance under the ESPP. The number of shares reserved for issuance under the ESPP increases automatically on January 1 of each of the first eight years commencing in 2012 by the number of shares equal to 1% of the Company’s total outstanding shares as of the immediately preceding December 31. The Board of Directors or compensation committee may reduce the amount of the increase in any particular year. No more than 20,000,000 shares of common stock may be issued under the ESPP and no other shares may be added to the ESPP without the approval of the Company’s stockholders. On January 1, 2017, the share reserve under the 2011 Employee Stock Purchase Plan was automatically increased by 330,889 shares.

(d) Inducement Stock Option Plan and Agreement and Inducement Restricted Stock Unit Plan and Agreement

In August 2014 and August 2015, the Compensation Committee of the Board of Directors adopted Inducement Stock Option Plans and Agreements (the “Inducement Option Plans”) and Inducement Restricted Stock Unit Plans and Agreements (the “Inducement RSU Plans”), in each case created as employment inducement awards. In accordance with the terms of the Inducement Option Plans, the Company issued options to purchase an aggregate of 290,000 shares of the Company’s common stock at an exercise price equal to the fair market value of a share of the Company’s common stock on the dates of grant of the options. The options, which have a ten-year term, vest at the rate of 25% of the shares on each of the first anniversary of the vesting commencement date with an additional 6.25% of the shares subject to the option vesting each quarter thereafter so long as the participant has not been terminated. In accordance with the terms of the Inducement RSU Plans, the Company issued RSUs representing an aggregate of 290,000 shares of the Company’s common stock. The RSUs, which expire following settlement, vest at the rate of 25% of the shares on each of the first anniversary of the vesting commencement date with an additional 6.25% of the shares subject to the RSU vesting each quarter thereafter so long as the participant has not been terminated.

(e) 2015 Equity Inducement Plan

In October 2015, the Board of Directors adopted the 2015 Equity Inducement Plan, a non-stockholder approved plan that provides for the granting of stock options and RSUs as employment inducement awards and in connection with acquisitions, subject to compliance with applicable securities laws and stock exchange requirements for such plans.  The Company has reserved 100,000 shares of common stock for issuance under the 2015 Equity Inducement Plan.  No awards have been made under the 2015 Equity Inducement Plan and the entire reserve remains available for grant.  Under the terms of the 2015 Equity Inducement Plan, the exercise price of stock options may not be less than 100% of the fair market value of common stock on the date of grant and generally expire no later than ten years from the date of grant.

(f) Incapsula 2010 Share Incentive Plan

In March 2010, Incapsula’s board of directors adopted the Incapsula 2010 Share Incentive Plan (the “Incapsula Plan”), pursuant to which Incapsula was able to grant to its employees and service providers options to purchase shares of its common stock, restricted shares, or RSUs. As of November 2013, the total number of shares of common stock that could have been granted under the Incapsula Plan was not to exceed 10,263,211 shares in the aggregate, subject to certain adjustments.

In November 2013, the board of directors of Incapsula approved the grant of RSUs for 7,095,461 shares of Incapsula’s common stock (“Incapsula RSUs”). As part of the Incapsula acquisition, the Incapsula RSUs were assumed and replaced by performance-based RSUs for Company Common Stock to be issued to continuing employees of Incapsula. The Incapsula RSUs were earned upon Incapsula’s achievement of revenue targets for Incapsula and Incapsula-related products and services for fiscal year 2014 and were converted into approximately 198,825 shares of Company Common Stock at the same exchange ratio applicable to the shares of Incapsula common stock acquired in the acquisition. In addition to performance conditions, the awards were dependent on the market price of Imperva’s common stock during February 2014, which was deemed a market condition under ASC 718.

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The outstanding options and RSUs under the Incapsula 2010 Stock Incentive Plan were assumed as part of the Incapsula acquisition and at the time they were assumed were equivalent to 247,184 shares of Company common stock on an as-converted basis.  As of June 30, 2017, there were 4,348 assumed Incapsula options and 118 assumed Incapsula RSUs outstanding.  The Company does not intend to grant any additional shares under the Incapsula 2010 Stock Incentive Plan.

Option Activity

The following table summarizes option activity under the Plans and related information:

	Options Outstanding					Weighted- Average Remaining
	Number of Shares			Weighted Average Exercise Price		Contractual Term (in years)		Aggregate Intrinsic Value (in thousands) (1)
Balances - January 1, 2017		1,570,765		$	39.64		6.90	$	9,226
Granted		-
Exercised		(272,676	)	$	30.63
Cancelled or forfeited		(119,002	)	$	49.77
Balances - June 30, 2017		1,179,087		$	40.70		6.51	$	12,754
Vested and expected to vest - June 30, 2017		1,179,087		$	40.70		6.51	$	12,754
Exercisable - June 30, 2017		815,232		$	38.95		6.10	$	9,919

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $47.85 of the Company’s common stock on June 30, 2017.

RSU Activity

The following table summarizes RSU activity under the Plans and related information:

	Number of Restricted Stock Units Outstanding			Weighted- Average Grant Date Fair Value
Unvested - January 1, 2017		1,994,790		$	51.42
Granted		1,052,009		$	42.67
Granted, performance RSUs		301,900		$	41.96
Released		(495,356	)	$	47.30
Cancelled or forfeited		(435,994	)	$	50.34
Unvested - June 30, 2017		2,417,349		$	47.47

The aggregate intrinsic value of options exercised under the Plans was $4.2 million for the six months ended June 30, 2017. The aggregate intrinsic value is calculated as the difference between the fair market value of the Company’s common stock on the date of the exercise and the exercise price of each option multiplied by the number of options exercised. As of June 30, 2017, total compensation cost related to unvested stock-based awards granted to employees under the Plans, but not yet recognized, was $97.2 million. As of June 30, 2017, this cost will be amortized to expense over a weighted-average remaining period of 2.7 years. Future stock-based award grants will increase the amount of compensation expense to be recorded in these periods.

There was no capitalized stock-based compensation expense during the three and six months ended June 30, 2017 and 2016.

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(g) Stock Compensation Expense

The Company recognized stock-based compensation expense under the 2011 Stock Option and Incentive Plan, 2003 Stock Plan, Inducement Plans, 2011 Employee Stock Purchase Plan, and the Incapsula 2010 Share Incentive Plan in the condensed consolidated statements of operations as follows (in thousands):

	For the three months ended June 30				For the six months ended June 30
	2017		2016		2017		2016
Cost of revenue	$	1,403	$	1,132	$	2,672	$	2,525
Research and development		2,560		3,802		7,328		8,051
Sales and marketing		3,700		7,683		7,166		12,777
General and administrative		3,844		4,487		7,276		9,406
Restructuring charges		0		-		675		-
Total stock-based compensation expense	$	11,507	$	17,104	$	25,117	$	32,759

The Company did not issue stock option grants for the three months ended June 30, 2017 and 2016 and six months ended June 30, 2017. The fair value of stock option grants for the six months ended June 30, 2016 and ESPP grants for the three and six months ended June 30, 2017 and 2016 was estimated using the following weighted average assumptions:

	For the three months ended June 30						For the six months ended June 30
	2017			2016			2017			2016
Stock option grants:
Dividend rate		-			-			-			0	%
Risk-free interest rate		-			-			-			1.5	%
Expected term (in years)		-			-			-			6.1
Expected volatility		-			-			-			58	%
ESPP grants:
Dividend rate		0	%		0	%		0	%		0	%
Risk-free interest rate		1.1	%		0.4	%		1.1	%		0.4	%
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		52	%		58	%		52	%		58	%

The fair value of the RSUs is determined using the closing price of the Company’s common stock on the date of the grant. Compensation is recognized on a straight-line basis over the requisite service period of each grant.

8. Accumulated Other Comprehensive Income (Loss)

The changes in the balances of accumulated other comprehensive income (loss) by component are as follows (in thousands):

	For the three months ended June 30, 2017									For the three months ended June 30, 2016
	Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total			Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total
Balance at April 1	$	664		$	(385	)	$	279		$	(105	)	$	(141	)	$	(246	)
Other comprehensive income    (loss) before reclassifications		1,196			22			1,218			(552	)		37			(515	)
Amounts reclassified to net    income (loss)		(777	)		-			(777	)		(102	)		-			(102	)
Change in other comprehensive    income (loss)		419			22			441			(654	)		37			(617	)
Balance at June 30	$	1,083		$	(363	)	$	720		$	(759	)	$	(104	)	$	(863	)

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	For the six months ended June 30, 2017									For the six months ended June 30, 2016
	Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total			Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total
Balance at January 1	$	(1,065	)	$	(413	)	$	(1,478	)	$	(1,021	)	$	(310	)	$	(1,331	)
Other comprehensive income    (loss) before reclassifications		3,126			50			3,176			170			206			376
Amounts reclassified to net loss		(978	)		-			(978	)		92			-			92
Change in other comprehensive    income (loss)		2,148			50			2,198			262			206			468
Balance at June 30	$	1,083		$	(363	)	$	720		$	(759	)	$	(104	)	$	(863	)

The following is a summary of reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 (in thousands):

	For the three months ended June 30, 2017									For the three months ended June 30, 2016
	Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount			Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount
Unrealized gains (losses) on    cash flow hedges:
Current period unrealized gain    (loss)	$	1,428			(232	)	$	1,196		$	(906	)		354		$	(552	)
Reclassification adjustments 1		(777	)		-			(777	)		(102	)		-			(102	)
Unrealized gains (losses) on    cash flow hedges, net		651			(232	)		419			(1,008	)		354			(654	)
Unrealized gains (losses) on    investments:
Current period unrealized gain    (loss)	$	34			(12	)		22		$	57			(20	)		37
Unrealized gains (losses) on    investments:		34			(12	)		22			57			(20	)		37
Other comprehensive income (loss)	$	685		$	(244	)	$	441		$	(951	)	$	334		$	(617	)

	For the six months ended June 30, 2017									For the six months ended June 30, 2016
	Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount			Pre-Tax Amount		Tax Expense (Benefit)			After-Tax Amount
Unrealized gains (losses) on    cash flow hedges:
Current period unrealized gain    (loss)	$	4,315			(1,189	)	$	3,126		$	311		(141	)	$	170
Reclassification adjustments 1		(978	)		-			(978	)		92					92
Unrealized gains (losses) on    cash flow hedges, net		3,337			(1,189	)		2,148			403		(141	)		262
Unrealized gains (losses) on    investments:
Current period unrealized gain    (loss)	$	78			(28	)		50		$	317		(111	)		206
Unrealized gains (losses) on    investments:		78			(28	)		50			317		(111	)		206
Other comprehensive income    (loss)	$	3,415		$	(1,217	)	$	2,198		$	720	$	(252	)	$	468

¹ Refer to note 4 for the affected line items in the condensed consolidated statement of operations.

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9. Income Taxes

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely. For the three months ended June 30, 2017 and 2016, the Company recorded an income tax benefit of $0.9 million and income tax expense of $0.7 million respectively. The income tax benefit for the three months ended June 30, 2017, was primarily attributable to tax benefits related to employee gains from their sale of Company stock and intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income, offset in part by foreign and state income taxes. The income tax expense for the three months ended June 30, 2016 was primarily attributable to foreign and state income taxes. For the six months ended June 30, 2017 and 2016, the Company recorded income tax expense of less than $0.1 million and $0.6 million, respectively. The income tax expense for the six months ended June 30, 2017, was primarily attributable to foreign and state income taxes including tax effects of the gain related to the sale of the Skyfence business, offset in part by tax benefits related to employee gains from their sale of Company stock and an intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income. Additionally, the amount of unrecognized tax benefits increased during the six months ended June 30, 2017, which also contributed to the change in income tax expense for the period. The income tax expense for the six months ended June 30, 2016 was primarily attributable to foreign and state income taxes, offset in part by an intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income.  

Factors that impact the income tax provision include, but are not limited to, stock-based compensation expense, permanent tax adjustments, foreign operations and a valuation allowance against the Company’s domestic deferred tax assets.

10. Segment Information

The Company operates its business in one operating segment, which is the development, marketing, sales, service and support of cyber-security solutions that protect business-critical data and applications whether in cloud or on premises. Operating segments are defined as components of an enterprise that engage in business activities for which separate financial information is available and evaluated by the chief operating decision maker in deciding how to allocate resources and assessing performance. The chief operating decision maker is the Company’s Chief Executive Officer.

The Company’s net revenue by geographic region, based on the customer’s location, is summarized as follows (in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
United States	$	36,701	$	30,208	$	74,346	$	63,879
EMEA		14,842		11,891		28,622		23,175
APAC		14,596		10,640		28,302		21,977
Other		8,296		5,134		15,473		8,615
Total net revenue	$	74,435	$	57,873	$	146,743	$	117,646

The following table presents long-lived assets by location (in thousands):

	As of June 30,		As of December 31,
	2017		2016
United States	$	23,461	$	20,525
Israel		4,540		9,344
Other		236		20
Total long-lived assets	$	28,237	$	29,889

11. Restructuring Charges

In November 2016, we implemented a restructuring plan and cost reduction initiatives to reduce expenses, streamline the organization, and reallocate resources to align more closely with future business needs. We incurred no restructuring charges during the three months ended June 30, 2017. The restructuring charge during the six months ended June 30, 2017 was $0.7 million, related to stock-based compensation. During the six months ended June 30, 2017 we also paid $1.1 million, of restructuring charges, which were recorded as a current liability within accrued compensation and benefits on the consolidated balance sheet as of December 31, 2016. There was no payment of restructuring charges during the three months ended June 30, 2017. The restructuring activity was completed by the end of the first quarter of 2017.

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12. Net Income (Loss) per Share

Basic and diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. The computation of net income (loss) per share for each period, including the number of weighted-average shares outstanding, is shown on the face of the condensed consolidated statements of operations. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we recognize a net loss, we exclude the impact of outstanding stock awards from the diluted loss per share calculation as their inclusion would have an antidilutive effect.

The table below shows the reconciliation of the basic and diluted shares for the three and six months ended June 30, 2017, in thousands:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Weighted average number of shares    outstanding:
Basic		33,640		32,163		33,425		31,984
Dilutive effects of:
Employee stock options, RSU’s and share    based payment awards issued to employees		-		-		559		-
Diluted		33,640		32,163		33,984		31,984

The following outstanding shares of common stock and potential common shares were excluded from the computation of diluted net income (loss) per share of common stock for the three months ended June 30, 2017 and 2016 because including them would have been antidilutive:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Stock options to purchase common stock		1,179,087		1,812,415		670,872		1,812,415
Restricted stock units for common stock		2,417,349		2,454,882		550,544		2,454,882
Restricted stock issued in connection with    Skyfence acquisition		-		257,847		-		257,847

13. Disposition of Business

On February 23, 2017, the Company completed the sale of the assets of its Skyfence cloud access security broker business (“Skyfence”) to Forcepoint LLC and its Israeli subsidiary for consideration of approximately $40 million in cash. Of the total consideration, approximately $5.0 million was remitted directly to escrow to secure the Company’s indemnification obligations. This escrowed amount is recorded in other assets on our condensed consolidated balance sheet as of June 30, 2017, and represents a noncash item in our condensed consolidated statement of cash flows. As a result of the sale, we recognized a gain of $35.9 million during the first quarter of 2017 included in gain on sale of Skyfence in our condensed consolidated statement of operations.

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The following table presents the carrying amounts of Skyfence immediately preceding the disposition on February 23, 2017:

	(dollarsin thousands)
Assets
Prepaid and other current assets	$	46
Property and equipment, net		219
Goodwill		1,058
Acquired intangible assets, net		4,496
Total assets	$	5,819
Liabilities
Accounts payable	$	104
Accrued and other current liabilities		117
Deferred revenue		1,454
Total liabilities	$	1,675

We evaluated the disposition of Skyfence and determined it did not meet the criteria for classification as a discontinued operation and determined that the disposition is not expected to have a material impact to our quarterly consolidated operating loss and net income. However, we determined that the disposition does represent an individually significant component of our business. The following table presents certain amounts related to Skyfence in our consolidated results of operations through its disposal on February 23, 2017:

	Forthe three months ended June 30,				For the six months ended June 30,
	2017	2016			2017			2016
	(dollars in thousands)				(dollars in thousands)
Operating loss	-	$	(3,735	)	$	(3,567	)	$	(8,998	)
Loss before taxes	-		(3,735	)		(3,648	)	$	(8,998	)
Net loss	-		(3,821	)		(3,659	)		(9,129	)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2016 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 27, 2017. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Form 10-Q and in our other SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2016. You should review the risk factors for a more complete understanding of the risks associated with an investment in our securities. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a leader in cyber-security solutions that protect business-critical data and applications whether in the cloud or on premises. As organizations worldwide undergo digital transformation, their day-to-day operations are increasingly dependent upon their application and data portfolios. Extortion and theft by cybercriminals, using an evolving array of sophisticated attacks, continuously threaten these applications and data. Organizations are facing numerous challenges in providing the visibility and control required to protect business-critical applications and data from these attacks. Adoption of new technologies and architectures, such as mobile applications, web applications and big data, increases the complexity of, opens access to, and increases the vulnerability of business-critical data and applications. The increasing use of virtualization technologies and cloud delivery models, including unsanctioned, employee-adopted applications, known as “shadow IT,” is forcing organizations to operate outside of the traditional security model. Additionally, organizations must comply with complex regulatory standards enacted to protect their systems and data. We believe that these challenges are driving the need for cyber-security solutions that protect applications and data, whether in the cloud or on premises.

Our cyber-security solutions directly protect the business-critical data and applications that are being attacked, and are designed to fill the gaps left by existing endpoint and network or perimeter security solutions. Our Imperva SecureSphere platform provides database, file and web application security across various physical and virtual systems in data centers, including those in traditional on-premise data centers as well as in private, public and hybrid cloud computing environments. Our Imperva Incapsula product line provides cloud-based website security, denial of service protection and performance solutions that do not require software or hardware changes. Our Imperva CounterBreach product line uses machine learning to analyze how users access data and to spotlight data breach activity. In addition, our cloud offerings are designed to protect against the unique threats created as enterprises increasingly shift to deploying their applications and storing their data in the cloud to take advantage of the flexibility and cost-efficiency offered by cloud-based solutions. During the second quarter of 2017, we released CounterBreach version 2.0 and announced enhancements to the Incapsula Content Delivery Network.

We were incorporated as a Delaware corporation in 2002 with the vision of protecting high-value applications and data assets within the enterprise. Since that time we have been investing in our cyber-security solutions to meet the rapidly evolving demands of customers. We shipped our initial web application security and data security products in 2002; in 2006, we expanded our database security product to include compliance features. In 2010, we launched our file security offering. In addition, in 2010, we launched our cloud-based initiatives with ThreatRadar and, in 2011, we introduced our cloud-based offering for mid-market enterprises and small and medium-sized businesses (“SMB”) that we provide through Incapsula, Inc., which was majority owned by us until March 2014 when we acquired the remaining portion of Incapsula that we did not already own in order to more fully integrate their operations with ours. In January 2014, we acquired certain assets and liabilities of Tomium Software, LLC to accelerate our mainframe data security solutions. In February 2014, we acquired Skyfence Networks Ltd. to further our Software as a Service (“SaaS”) delivery models for internally facing corporate applications. In December 2016, we acquired certain assets and liabilities of Camouflage Software, Inc., to further our data masking, security and compliance solutions in the cloud and on-premises. In February 2017, we sold the assets of the Skyfence business to Forcepoint LLC.

Our research and development efforts are focused primarily on improving and enhancing our existing cyber-security solutions and services, as well as developing new products and services (including cloud-based services) and conducting advanced security research. We conduct most of our research and development activities in Israel, and we believe this provides us with access to some of

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the best engineering talent in the security industry. As of June 30, 2017, we had 297 employees dedicated to research and development, including our advanced security research group, the Imperva Defense Center (“IDC”). Our research and development expense was $32.0 million for the six months ended June 30, 2017 as compared to $31.6 million for the same period in 2016.

We derive our revenue from sales and licenses of our products and sales of our services. Products and license revenue is generated primarily from sales of perpetual software licenses installed on hardware appliances or virtual appliances for our SecureSphere product line. Services revenue consists of maintenance and support, professional services and training and subscriptions services. A majority of our revenue is derived from customers in the Americas region. In the six months ended June 30, 2017, 51% of our total revenue was generated United States, 20% from Europe, Middle East and Africa (“EMEA”), 19% from Asia Pacific (“APAC”) and 10% from other regions.

We market and sell our products through a hybrid sales model, which combines a direct touch sales organization and an overlay channel sales team that actively assist our extensive network of channel partners throughout the sales process. We also provide our channel partners with marketing assistance, technical training and support. We primarily sell our products and services through our channel partners, including distributors and resellers, which sell to end-user customers, who we refer to in this Quarterly Report on Form 10-Q as our customers. In 2016, over 500 channel partners worldwide sold our products, which included approximately 200 direct resellers and distributors and over 300 indirect resellers. In 2016, our channel partners originated over 50% of our sales and fulfilled almost 86% of our sales. We work with many of the world’s leading security value-added resellers, and our partners include some of the largest hosting companies for cloud-based deployments.

As of June 30, 2017, we had over 5,500 customers in more than 100 countries. In addition, our solutions are used to protect thousands of organizations through cloud-based deployments with our Software-as-a-Service (“SaaS”) customers and our managed security service provider (“MSSP”) and hosting partners.

Our net revenue has increased in each of the last three years, growing from $137.8 million in 2013 to $264.4 million in 2016. We earned net income of $19.6 million in the six months ended June 30, 2017 and incurred net losses of $70.3 million in the year ended December 31, 2016. As of June 30, 2017, we had an accumulated deficit of $259.8 million.

Opportunities, Challenges and Risks

We believe that the growth of our business and our future success are dependent upon many factors, including our ability to maintain our technology leadership, improve our sales and marketing, address the needs of smaller enterprises and compete effectively in the marketplace for cyber-security solutions. While each of these areas presents significant opportunities for us, they also pose important challenges and risks that we must successfully address in order to sustain the growth of our business and improve our results of operations.

Maintain Technology Leadership. As a result of the rise in sophisticated attacks by hackers and malicious insiders, the difficulty in complying with regulations governing business data and the growing complexity of, and open access to, data centers, we believe that enterprises are struggling to provide visibility and control over high-value business applications and data assets that they need to protect. In addition, organizations are increasingly taking advantage of cloud-based services and virtualization technologies, and these new technologies and architectures are increasing the complexity of, and accessibility to, the data center. We believe these challenges are driving the need for a new protection layer positioned closely around the applications and data assets in the data center. We expect that as enterprises recognize the growing risk to high-value business data and the need to comply with increasing regulatory compliance mandates, their spending will increase on solutions designed to control and protect such data. We believe that traditional security and compliance products do not address the evolving needs of enterprises or do not do so adequately, and that this presents us with a large market opportunity. To capitalize on this opportunity, we have introduced and expect that in the future we will need to continue to introduce innovations to our broad business security solutions, including solutions to address cyber-security opportunities that arise as enterprises pursue cloud computing initiatives. We cannot assure you that our products will achieve widespread market acceptance or that we will properly anticipate future customer needs. Moreover, if our products do not satisfy evolving customer requirements, we will not capture the increase in spending that we expect will result from enterprises seeking to secure data across various systems in the data center.

Invest in Sales and Marketing. In order to capitalize on the anticipated increase in spending in the cyber-security market, we will need to continue to invest significant resources to further strengthen our existing relationships with channel partners, extend our global network by adding new channel partners and grow our sales and marketing team. Any investments that we make in our sales and marketing will occur in advance of our experiencing any benefits from such investments, and so it may be difficult for us to determine if we are efficiently allocating our resources in this area. We cannot assure you that the investments that we intend to make to strengthen our sales and marketing efforts will enable us to capitalize on the expected increase in spending in the cyber-security market or result in an increase in revenue or an improvement in our results of operations.

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Address Needs of Smaller Enterprises. As market awareness of the benefits of a comprehensive cyber-security solution increases, we believe there is a significant opportunity to provide cyber-security solutions to smaller enterprises as they confront increasing security threats and compliance mandates. To capitalize on this opportunity, we intend to increase our business with mid-market enterprises and SMBs by expanding our cloud-based service offerings and our distribution channel. We have made, and may in the future continue to make, significant investments in our cloud-based security products to address the business security needs of mid-market enterprises and SMBs. If our cloud-based security products, which are relatively new, fail to gain broad acceptance with mid-market enterprises and SMBs, our revenue growth, results of operations and competitive position in our industry could suffer.

Compete Effectively. We operate in an intensely competitive market that has witnessed significant consolidation in recent years with large companies acquiring many of our competitors. We track our success rate in competitive sales opportunities against certain competitors, some of which generate higher revenues and have greater market capitalizations than we do, and many of which are more established or have greater name recognition within our industry. Based upon our internal tracking of the results of such competitive sales opportunities, we believe that we have historically competed favorably against our larger competitors, and that we have a proven track record of successfully competing against such larger competitors. Nonetheless, some of our larger competitors have numerous advantages, including, but not limited to, greater financial resources, broader product offerings and more established relationships with channel partners and customers. If we are unable to compete effectively for a share of the business security market, our business, results of operations and financial condition could be materially and adversely affected.

To date, we have incurred, and continue to incur, losses from operations. However, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Further, we expect that, if we successfully execute our business plan and strategy, our loss from operations will decline, and that we will reach profitability. Should we need additional cash in the future, we may enter into lines of credit or raise funds through the sale of equity securities.

Key Metrics of Our Business

We monitor the key financial metrics discussed below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies.

Net Revenue. We measure our net revenue to assess the acceptance of our products from our customers, our growth in the markets we serve and to help us establish our strategic and operating plans for future periods. We discuss the components of our net revenue in “—Financial Overview—Net Revenue” below.

Gross Margin. We monitor our gross margin to assess the impact on our current and forecasted financial results from any changes to the pricing and mix of products we are selling to our customers.

Loss from Operations. We track our loss from operations to assess how effectively we are planning and monitoring our operations as well as controlling our operational costs, which are primarily driven by headcount.

Cash, Cash Equivalents and Short-term Investments. We evaluate the level of our cash, cash equivalents and short-term investments to ensure we have sufficient liquidity to fund our operations, including the development of future products and product enhancements and the expansion into new sales channels and territories.

Number of Customers. We believe our customer count is a key indicator of our market penetration, the productivity of our sales organization and the value that our products bring to our customer base. We also believe our existing customers represent significant future revenue opportunities for us.

We discuss for the periods presented revenue, gross margin, the components of loss from operations and number of customers further below under “—Results of Operations”, as applicable, and we discuss our cash and cash equivalents under “—Liquidity and Capital Resources.”

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We also believe that deferred revenue and net cash flow provided by operations are key financial metrics for our business. The components of deferred revenue and net cash flow provided by operations, as well as our rationale for monitoring these metrics, are discussed immediately below this table:

	Three months ended or As of June 30,						Six months ended or As of June 30,
	2017			2016			2017			2016
	(in thousands, except number of customers and percentages)
Net revenue	$	74,435		$	57,873		$	146,743		$	117,646
Gross margin		79.1	%		78.4	%		79.2	%		78.3	%
Loss from operations	$	(4,562	)	$	(23,794	)	$	(16,300	)	$	(47,986	)
Total deferred revenue	$	134,150		$	114,817		$	134,150		$	114,817
Cash, cash equivalents and    short-term investments	$	319,887		$	255,230		$	319,887		$	255,230
Net cash provided by (used in)    operations	$	5,442		$	(2,188	)	$	23,938		$	3,794
Number of customers		5,591			4,864			5,591			4,864

Deferred Revenue

Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue. The majority of our deferred revenue balance consists of the unamortized portion of services revenue from maintenance and support, and subscription contracts. We monitor our deferred revenue balance because it represents a significant portion of revenue to be recognized in future periods. We also assess the increase in our deferred revenue balance plus revenue we recognized in a particular period as a measure of our sales activity for that period. While the change in our deferred revenue and revenue recognized in a given period comprise the majority of our sales activity during that period, they do not constitute the entire sales activity during the period. Our total sales activity also includes sales of products and services for which we have not yet met the criteria to recognize revenue or add such amounts to our deferred revenue balance. Revenue and deferred revenue from these transactions is recognized or recorded in future periods when we have met the required criteria. We discuss for the periods presented deferred revenue further below under “—Results of Operations.”

Net Cash Flow Provided By Operations

We monitor cash flow from operations as a measure of our overall business performance. Our cash flow from operations is driven primarily by sales of our products and licenses, subscription services and from up-front payments from customers under maintenance and support contracts. Our primary uses of cash in operating activities are for personnel-related expenditures, costs of acquiring the hardware used for our appliances, marketing and promotional expenses and costs related to our facilities. Monitoring cash flow from operations enables us to analyze our financial performance without the non-cash effects of certain items such as depreciation and amortization and stock-based compensation expenses, thereby allowing us to better understand and manage the cash needs of our business.

Financial Overview

Net Revenue

We derive our revenue from sales and licenses of our products and sales of our services.

Our net revenue is comprised of the following:

• Products and License Revenue—Products and license revenue is generated primarily from sales of perpetual software licenses installed on hardware appliances or virtual appliances for our SecureSphere product line. Our SecureSphere product line consists of database security, file security and web application security. Our other product lines include CounterBreach, ThreatRadar and Camouflage. We offer multiple hardware appliance versions that accompany our SecureSphere software, each with different throughput capacities. Perpetual software license revenue is generated from sales of our appliances, licenses for additional users and add-on software modules. We also generate a small amount of hardware revenue from sales of spares or replacement appliances, demonstration units and accessories.

• Services Revenue—Services revenue consists of maintenance and support, subscription and professional services and training. Maintenance and support revenue is generated from support services that are bundled with appliances and add-on software modules. There are three levels of maintenance and support—Standard, Enhanced and Premium—and these are usually offered through agreements for one to three-year terms. Maintenance and support includes major and minor when-

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and-if available software updates; customer care, which includes our designated support engineer and Imperva resident engineer programs; content updates from our advanced security research group, the IDC, and hardware replacement. Subscription revenue is generated from sales of our cloud-based services. Professional services revenue consists of fees we earn related to implementation and consulting services we provide our customers. Training revenue consists of fees we earn related to training customers and partners on the use of our products. We expect that the services revenue from maintenance and support contracts will continue to grow along with the increase in the size of our installed base. We also expect subscription revenue will increase as sales of our cloud-based services continue to increase.

A majority of our products and services are sold to customers in the Americas, primarily in the United States, however, a significant portion of our revenue is generated from international sales. See Note 10 of “Notes to Condensed Consolidated Financial Statements” for a discussion of our financial information by geographic region. Our revenue by geographic region is as follows (in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
United States	$	36,701	$	30,208	$	74,346	$	63,879
EMEA		14,842		11,891		28,622		23,175
APAC		14,596		10,640		28,302		21,977
Other		8,296		5,134		15,473		8,615
Total net revenue	$	74,435	$	57,873	$	146,743	$	117,646

Cost of Revenue

Our total cost of revenue is comprised of the following:

• Cost of Products and License Revenue—Cost of products and license revenue is comprised primarily of third-party hardware costs and royalty fees. Our cost of products and license revenue also includes personnel costs related to our operations team, shipping costs and write-offs for excess and obsolete inventory.

• Cost of Services Revenue—Cost of services revenue is primarily comprised of personnel costs of our technical support team, our professional consulting services and training teams and our Security Operations Center (“SOC”) team. Cost of services revenue also includes facilities costs, subscription fees and depreciation. We expect that our cost of services revenue will increase in absolute dollars as we increase our headcount.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, general and administrative expenses, restructuring charges and amortization of acquired intangible assets. Personnel costs are the most significant component of our operating expenses and consist of wages, benefits and bonuses and, with regard to the sales and marketing expense, sales commissions. Personnel costs also include stock-based compensation. We expect personnel costs to continue to increase in absolute dollars as we hire additional employees to continue to grow our business.

Research and Development

Our research and development is focused on maintaining and improving our existing products and on new product development. A majority of our research and development expenses are comprised of personnel costs and, to a lesser extent, facility costs, hardware prototype costs, laboratory expenses and depreciation. We expense research and development costs as incurred. We expect our research and development expenses to increase in absolute dollars as we continue to enhance our existing products and develop new products and services that address the emerging market for business security and regulatory compliance.

Sales and Marketing

Sales and marketing expense is the largest component of our operating expenses and consists primarily of personnel costs, including commissions and travel expenses. Sales and marketing expenses also include costs related to marketing and promotional activities, third-party referral fees, facilities costs and depreciation. We expect our sales and marketing expenses to increase in absolute dollars as we expand our sales and marketing efforts worldwide.

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General and Administrative

General and administrative expense consists primarily of personnel costs, including stock-based compensation, as well as professional fees, facilities costs and depreciation. General and administrative personnel costs include our executive, finance, purchasing, order entry, human resources, information technology and legal functions. Our professional fees consist primarily of accounting, external legal, information technology and other consulting costs.

Restructuring Charges

In November 2016, we implemented a business restructuring plan to reduce sales, marketing and general and administrative expenses through reductions in headcount and spending generally. The restructuring activity was completed by the end of the first quarter of 2017. The expenses incurred primarily consisted of employee severance charges and other termination-related costs. We did not incur any restructuring charges in the three months ended June 30, 2017 and do not expect to incur significant additional restructuring costs associated with this plan in future periods

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets consists of amortization of intangible assets from the acquisitions of Skyfence and Tomium that occurred in the first quarter of 2014 and Camouflage in the fourth quarter of 2016. On February 23, 2017, we completed the sale of Skyfence.

Gain on Sale of Business

On February 23, 2017, we completed the sale of the assets of our Skyfence cloud access security broker business (“Skyfence”) to Forcepoint LLC and its Israeli subsidiary for consideration of approximately $40 million in cash. Of the total consideration, approximately $5.0 million was remitted directly to escrow to secure the indemnification obligations and for the mutual protection of the Company. As a result of the sale, we recognized a gain during the first quarter of 2017.

Other Income (Expense), net

Other income (expense), net is comprised of the following items:

• Interest Income—Interest income consists of interest earned on our cash, cash equivalents and short-term investments. We expect interest income will vary each reporting period depending on our average investment balances during the period and market interest rates.

• Interest Expense—Interest expense consists of interest accrued or paid on debt obligations.

• Foreign Currency Forward Contract Gains (Losses)—Foreign currency forward contract gains and losses pertain to the ineffective portion of derivative instruments designated as hedges that we have entered into primarily to manage our exposure to the variability in expected future expenses resulting from changes in foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.

• Foreign Currency Exchange Gains (Losses)—Foreign currency exchange gains and losses relate to transactions denominated in currencies other than the U.S. Dollar.

Provision for Income Taxes

We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business including the United States and Israel. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to U.S. income tax if such earnings are distributed to the U.S. We have incurred net losses in each fiscal year since our inception. For the six months ended June 30, 2017, we generated net income. We have recorded insignificant U.S. federal income tax expense. Our tax expense to date relates primarily to foreign income taxes, mainly from our Israeli and United Kingdom activities, and to a lesser extent, state income taxes.

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Results of Operations

The following table is a summary of our condensed consolidated statements of operations in dollars and as a percentage of our total revenue. We have derived the data for the three and six months ended June 30, 2017 and 2016 from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

	For the three months ended June 30,												For the six months ended June 30,
	2017						2016						2017						2016
	Amount			% of Net Revenue			Amount			% of Net Revenue			Amount			% of Net Revenue			Amount			% of Net Revenue
	(dollars in thousands)												(dollars in thousands)
Statement of Operations Data:
Net revenue:
Products and license	$	20,012			26.9		$	14,830			25.7		$	39,590			26.9		$	35,671			30.3
Services:
Maintenance and support		22,596			30.4			19,802			34.2			44,576			30.4			38,663			32.9
Professional services and    training		3,730			5.0			3,656			6.3			7,228			4.9			7,091			6.0
Subscriptions		28,097			37.7			19,585			33.8			55,349			37.8			36,221			30.8
Total services		54,423			73.1			43,043			74.3			107,153			73.1			81,975			69.7
Total net revenue		74,435			100.0			57,873			100.0			146,743			100.0			117,646			100.0
Cost of revenue:
Products and license		1,823			2.4			1,814			3.1			3,755			2.6			3,998			3.4
Services		13,751			18.5			10,703			18.5			26,771			18.2			21,487			18.3
Total cost of revenue		15,574			20.9			12,517			21.6			30,526			20.8			25,485			21.7
Gross profit		58,861			79.1			45,356			78.4			116,217			79.2			92,161			78.3
Operating expenses:
Research and development		14,528			19.5			15,576			26.9			31,978			21.8			31,595			26.9
Sales and marketing		36,388			48.9			40,977			70.8			73,512			50.1			81,717			69.5
General and administrative		12,375			16.6			12,245			21.2			25,911			17.7			26,131			22.2
Restructuring charges		-			0.0			-			-			667			0.5			-			-
Amortization of purchased    intangibles		132			0.2			352			0.6			449			0.3			704			0.6
Total operating expenses		63,423			85.2			69,150			119.5			132,517			90.4			140,147			119.2
Loss from operations		(4,562	)		(6.1	)		(23,794	)		(41.1	)		(16,300	)		(11.2	)		(47,986	)		(40.9	)
Gain on sale of business		-			0.0			-			-			35,871			24.4			-			-
Other income (expense), net		158			0.2			(241	)		(0.4	)		66			-			(158	)		(0.1	)
Income (loss) before provision for    income taxes		(4,404	)		(5.9	)		(24,035	)		(41.5	)		19,637			13.2			(48,144	)		(41.0	)
(Benefit) provision for income    taxes		(914	)		(1.2	)		681			1.2			44			-			579			0.5
Net income (loss)	$	(3,490	)		(4.7	)	$	(24,716	)		(42.7	)	$	19,593			13.2		$	(48,723	)		(41.5	)

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Comparison of the Three and Six Months Ended June 30, 2017 and 2016

	Forthe three months ended June 30,											Forthe six months ended June 30,
	2017			2016			Change					2017			2016			Change
	Amount			Amount			Amount		%			Amount			Amount			Amount		%
	(dollars in thousands)											(dollars in thousands)
Net revenue:
Products and license	$	20,012		$	14,830		$	5,182		34.9	%	$	39,590		$	35,671		$	3,919		11.0	%
Percentage of net revenue		26.9	%		25.7	%							26.9	%		30.3	%
Services:
Maintenance and Support		22,596			19,802			2,794		14.1	%		44,576			38,663			5,913		15.3	%
Percentage of net revenue		30.4	%		34.2	%							30.4	%		32.9	%
Professional Services and    Training		3,730			3,656			74		2.0	%		7,228			7,091			137		1.9	%
Percentage of net revenue		5.0	%		6.3	%							4.9	%		6.0	%
Subscriptions		28,097			19,585			8,512		43.5	%		55,349			36,221			19,128		52.8	%
Percentage of net revenue		37.7	%		33.8	%							37.8	%		30.8	%
Total Services		54,423			43,043			11,380		26.4	%		107,153			81,975			25,178		30.7	%
Percentage of net revenue		73.1	%		74.3	%							73.1	%		69.7	%
Total net revenue	$	74,435		$	57,873		$	16,562		28.6	%	$	146,743		$	117,646		$	29,097		24.7	%
United States	$	36,701		$	30,208		$	6,493		21.5	%	$	74,346		$	63,879		$	10,467		16.4	%
Percentage of net revenue		49.3	%		52.2	%							50.7	%		54.3	%
EMEA		14,842			11,891			2,951		24.8	%		28,622			23,175			5,447		23.5	%
Percentage of net revenue		19.9	%		20.5	%							19.5	%		19.7	%
APAC		14,596			10,640			3,956		37.2	%		28,302			21,977			6,325		28.8	%
Percentage of net revenue		19.6	%		18.4	%							19.3	%		18.7	%
Other		8,296			5,134			3,162		61.6	%		15,473			8,615			6,858		79.6	%
Percentage of net revenue		11.1	%		8.9	%							10.5	%		7.3	%
Total net revenue	$	74,435		$	57,873		$	16,562		28.6	%	$	146,743		$	117,646		$	29,097		24.7	%

Three Months Ended June 30, 2017 Compared with Three Months Ended June 30, 2016

Our net revenue increased by $16.5 million, or 28.6%, to $74.4 million during the three months ended June 30, 2017 from $57.9 million during the three months ended June 30, 2016. This revenue growth reflects the increasing demand for our subscription service offerings reflected in the addition of 727 customers since June 30, 2016 as well as a broader installed base of product and licenses which generate higher maintenance and support revenues. We had 154 orders exceeding $100,000 during the three months ended June 30, 2017, compared to 115 orders during the three months ended June 30, 2016.

All regions contributed to this growth with a $6.5 million, $2.9 million, $3.9 million and $3.2 million increase in United States, EMEA, APAC and Other respectively, over the same period in 2016. The revenue growth in the three months ended June 30, 2017 as compared to the three months ended June 30, 2016 in all regions was principally due to increasing demand for our subscription service offerings, increased sales volume of our products, an increase in our international sales personnel and improved sales execution.

Products and license revenue increased by $5.2 million, to $20.0 million during the three months ended June 30, 2017 from $14.8 million during the three months ended June 30, 2016. The increase in products and license revenue was primarily due to increased sales volume of our products and improved sales execution.

Services revenue increased by $11.4 million, to $54.4 million during the three months ended June 30, 2017 from $43.0 million during the three months ended June 30, 2016. During the three months ended June 30, 2017, our services revenue was comprised of $22.6 million in maintenance and support, $3.7 million in professional services and training and $28.1 million in subscriptions. The change in services revenue in the three months ended June 30, 2017 from the three months ended June 30, 2016 was primarily due to an increase of $8.5 million in subscription revenue resulting from our cloud-based security services, in addition to an increase of $2.8 million in maintenance and support revenue from our larger installed base in all regions. Our professional services and training revenue increased by $0.1 million, primarily due to timing of projects.

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Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Our net revenue increased by $29.1 million, or 24.7%, to $146.7 million during the six months ended June 30, 2017 from $117.6 million during the six months ended June 30, 2016. This revenue growth reflects the increasing demand primarily for our service offerings, especially in the subscription service line mostly due to strong cloud-based security services. We had 296 orders exceeding $100,000 during the six months ended June 30, 2017, from 233 orders during the six months ended June 30, 2016.

All regions contributed to this growth with a $10.5 million, $5.4 million, $6.3 million and $6.9 million increase in United States, EMEA, APAC and Other respectively, over the same period in 2016. The increase in all regions was principally due to increasing demand for our service offerings, an increase in our international sales personnel and improved sales execution.

Products and license revenue increased by $3.9 million, to $39.6 million during the six months ended June 30, 2017 from $35.7 million during the six months ended June 30, 2016. The increase in product and license revenue was primarily due to increased sales volume of our products and improved sales execution.

Services revenue increased by $25.2 million, to $107.2 million during the six months ended June 30, 2017 from $82.0 million during the six months ended June 30, 2016. During the six months ended June 30, 2017, our services revenue was comprised of $44.6 million in maintenance and support, $55.3 million in subscriptions and $7.2 million in professional services and training. The change in services revenue in the six months ended June 30, 2017 from the six months ended June 30, 2016 was primarily due to an increase of $19.1 million in subscriptions revenue resulting from our cloud-based security services, in addition to an increase of $5.9 million in maintenance and support revenue from our larger installed base in all regions. Our professional services and training revenue increased by $0.1 million, primarily due to timing of projects.

Gross Profit

	Forthe three months ended June 30,									Forthe six months ended June 30,
	2017			2016						2017			2016
	Amount			Amount			% Change			Amount			Amount			% Change
	(dollars in thousands)									(dollars in thousands)
Products and license gross profit	$	18,189		$	13,016					$	35,835		$	31,673
Gross Margin %		90.9	%		87.8	%		3.1			90.5	%		88.8	%		1.7
Services gross profit		40,672			32,340						80,382			60,488
Gross Margin %		74.7	%		75.1	%		(0.4	)		75.0	%		73.8	%		1.2
Total gross profit	$	58,861		$	45,356					$	116,217		$	92,161
		79.1	%		78.4	%		0.6			79.2	%		78.3	%		0.9

Three Months Ended June 30, 2017 Compared with Three Months Ended June 30, 2016

Total gross margin increased 0.6% to 79.1% during the three months ended June 30, 2017 from 78.4% during the three months ended June 30, 2016. The products and license gross margin increased by 3.1% to 90.9% for the three months ended June 30, 2017 from 87.8% for the three months ended June 30, 2016. The products and license gross margin increase was primarily attributable to increased sales of higher throughput appliances, which generally have higher gross margins.

The services gross margin decreased by 0.4% to 74.7% for the three months ended June 30, 2017 from 75.1% for the three months ended June 30, 2016. The services gross margin decrease during the three months ended June 30, 2017 as compared to the 2016 period was primarily attributable to higher costs associated with expanding our infrastructure for our cloud-based services to support an increasing number of customers.

Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Total gross margin increased 0.9% to 79.2% during the six months ended June 30, 2017 from 78.3% during the six months ended June 30, 2016 primarily due to an increase in both products and license and services gross margin. Products and license gross margin increased 1.7% to 90.5% during the six months ended June 30, 2017 from 88.8% during the six months ended June 30, 2016. The products and license gross margin increase was primarily attributable to increased sales of higher throughput appliances, which generally have higher gross margins.

Services gross margin increased 1.2% to 75.0% for the six months ended June 30, 2017 from 73.8% for the six months ended June 30, 2016. The services gross margin increase was primarily attributable to higher subscription, maintenance and support revenues which better leveraged our internal cost structure to support these services offset higher costs associated with expanding our

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infrastructure for our cloud-based services to support an increasing number of customers by during the six months ended June 30, 2017 as compared to the six months ended June 30, 2016.

Operating Expenses

	Forthe three months ended June 30,												Forthe six months ended June 30,
	2017			2016			Change						2017			2016			Change
	Amount			Amount			Amount			%			Amount			Amount			Amount			%
	(dollars in thousands)												(dollars in thousands)
Operating expenses:
Research and development	$	14,528		$	15,576		$	(1,048	)		-6.7	%	$	31,978		$	31,595		$	383			1.2	%
Percentage of net revenue		19.5	%		26.9	%								21.8	%		26.9	%
Sales and marketing		36,388			40,977			(4,589	)		-11.2	%		73,512			81,717			(8,205	)		-10.0	%
Percentage of net revenue		48.9	%		70.8	%								50.1	%		69.5	%
General and administrative		12,375			12,245			130			1.1	%		25,911			26,131			(220	)		-0.8	%
Percentage of net revenue		16.6	%		21.2	%								17.7	%		22.2	%
Restructuring charges		-			-			-			100.0	%		667			-			667			100.0	%
Percentage of net revenue		0.0	%		0.0	%								0.5	%		0.0	%
Amortization of acquired    intangible assets		132			352			(220	)		-62.5	%		449			704			(255	)		-36.2	%
Percentage of net revenue		0.2	%		0.6	%								0.3	%		0.6	%
Total operating expenses	$	63,423		$	69,150		$	(5,727	)		-8.3	%	$	132,517		$	140,147		$	(7,630	)		-5.4	%

Results above include stock-based compensation expense of:

	For the three months ended June 30,							For the six months ended June 30,
	2017		2016		Change			2017		2016		Change
	(dollars in thousands)							(dollars in thousands)
Research and development	$	2,560	$	3,802	$	(1,242	)	$	7,328	$	8,051	$	(723	)
Sales and marketing		3,700		7,683		(3,983	)		7,166		12,777		(5,611	)
General and administrative		3,844		4,487		(643	)		7,276		9,406		(2,130	)
Restructuring charges		-		-		-			675		-		675

Three Months Ended June 30, 2017 Compared with Three Months Ended June 30, 2016

Research and development expenses decreased by $1.1 million, or 6.7%, to $14.5 million during the three months ended June 30, 2017 from $15.6 million during the three months ended June 30, 2016. The decrease is primarily due to a decrease in personnel costs due to decreased headcount following the sale of the assets of the Skyfence business in the first quarter of 2017.

Sales and marketing expenses decreased by $4.6 million, or 11.2%, to $36.4 million during the three months ended June 30, 2017 from $41.0 million during the three months ended June 30, 2016. The change was principally due to a decrease of $4.0 million in personnel costs, including stock-based compensation and contractor costs due to decreased headcount upon implementing our 2016 restructuring plan and cost reduction initiatives. We also incurred decreases in direct sales expenses and travel costs totaling $1.5 million relating to the decreased headcount. This is partially offset by an increase of $1.0 million in sales commissions with increased revenue.

General and administrative expenses increased by $0.2 million, or 1.1%, to $12.4 million during the three months ended June 30, 2017 from $12.2 million during the three months ended June 30, 2016. The change was primarily due to the acquisition of Camouflage Software, Inc., in December 2016.

Amortization of purchased intangibles decreased by $0.2 million, or 62.5% during the three months ended June 30, 2017 compared to the same period in 2016. The decrease is due to the sale of the acquired intangible assets of the Skyfence business in the first quarter of 2017.

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Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Research and development expenses increased by $0.4 million, or 1.2%, to $32.0 million during the six months ended June 30, 2017 from $31.6 million during the six months ended June 30, 2016. The change was primarily due to the charge recorded in the first quarter 2017 for modification of stock options of $2.3 million partially offset by a decrease of $2.0 million in personnel costs due to decreased headcount following the sale of the assets of the Skyfence business in the first quarter of 2017.

Sales and marketing expenses decreased by $8.2 million, or 10.0%, to $73.5 million during the six months ended June 30, 2017 from $81.7 million during the six months ended June 30, 2016. The change was principally related to a decrease of $6.2 million in personnel costs, including stock-based compensation and contractor costs due to decreased headcount upon implementing our 2016 restructuring plan and cost reduction initiatives. We also incurred decreases in direct sales expenses and travel costs totaling $3.2 million relating to the decreased headcount. This was partially offset by an increase of $1.0 million in sales commissions resulting from increased revenue.

General and administrative expenses decreased by $0.2 million, or 0.8%, to $25.9 million during the six months ended June 30, 2017 from $26.1 million during the six months ended June 30, 2016. The change was primarily due to decreased headcount upon implementing our 2016 restructuring plan and cost reduction initiatives.

We incurred restructuring charges of $0.7 million during the six months ended June 30, 2017 in connection with the plan implemented in November 2016. We incurred no restructuring charges during the six months ended June 30, 2016. The restructuring charges are termination-related costs, which consist of stock-based compensation expense. The restructuring plan was initiated to reduce sales, marketing and general and administrative expenses through reductions in headcount and spending generally and to align personnel resources in our growth areas.

Amortization of purchased intangibles decreased by $0.3 million, or 36.2% during the three months ended June 30, 2017 compared to the same period in 2016. The decrease is due to the sale of the acquired intangible assets of the Skyfence business in the first quarter of 2017.

Loss from Operations

For the three months ended June 30,						Change					For the six months ended June 30,						Change
2017			2016			Amount		%			2017			2016			Amount		%
(dollars in thousands)											(dollars in thousands)
$	(4,562	)	$	(23,794	)	$	19,232		80.8	%	$	(16,300	)	$	(47,986	)	$	31,686		66.0	%

Three Months Ended June 30, 2017 Compared with Three Months Ended June 30, 2016

Our loss from operations decreased by $19.2 million, or 80.8%, to $4.6 million for the three months ended June 30, 2017 from $23.8 million for the three months ended June 30, 2016. Our gross profit increased by $13.5 million during the three months ended June 30, 2017 due to higher product and license revenues. Our total operating expenses decreased by $5.7 million during the three months ended June 30, 2017 when compared to the prior year period principally due to reductions in headcount as a result of the sale of the assets of the Skyfence business in the first quarter of 2017 and other senior personnel changes.

Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

Our loss from operations decreased by $31.7 million, or 66.0%, to $16.3 million for the six months ended June 30, 2017 from $48.0 million for the six months ended June 30, 2016. Our gross profit increased by $24.1 million during the six months ended June 30, 2017 due to higher total revenues. Our total operating expenses decreased by $7.6 million during the six months ended June 30, 2017 when compared to the prior year period principally due to reductions in headcount as a result of the fourth quarter of 2016 restructuring plan and the sale of the assets of the Skyfence business in the first quarter of 2017 and other senior personnel changes.

Gain on Sale of Business

For the three months ended June 30,				Change					For the six months ended June 30,				Change
2017		2016		Amount		%			2017		2016		Amount		%
(dollars in thousands)									(dollars in thousands)
$	-	$	-	$	-		100.0	%	$	35,871	$	-	$	35,871		100.0	%

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On February 23, 2017, we completed the sale of the assets of Skyfence to Forcepoint LLC and its Israeli subsidiary for consideration of approximately $40 million in cash. As a result of the sale, we recognized a gain of $35.9 million during the first quarter of 2017.

Other Income (Expense), Net

For the three months ended June 30,					Change					For the six months ended June 30,					Change
2017		2016			Amount		%			2017		2016			Amount		%
(dollars in thousands)										(dollars in thousands)
$	158	$	(241	)	$	399		165.6	%	$	66	$	(158	)	$	224		141.8	%

Other income (expense), net increased by $0.4 million during the three months ended June 30, 2017 when compared to the three months ended June 30, 2016 primarily due to changes in foreign exchange rates and an increase in interest income from short-term investments.

Other income (expense), net increased by $0.2 million during the six months ended June 30, 2017 when compared to the six months ended June 30, 2016. The change was primarily due to changes in foreign exchange rates and an increase in interest income from short-term investments.

(Benefit) Provision for Income Taxes

	Forthe three months ended June 30,						Change						Forthe six months ended June 30,						Change
	2017			2016			Amount			%			2017			2016			Amount			%
													(dollars in thousands)
(Benefit) provision for    income taxes	$	(914	)	$	681		$	(1,595	)		-234.2	%	$	44		$	579		$	(535	)		-92.4	%
Effective tax rate		(20.8	)%		3	%								(0.22	)%		1	%

For the three months ended June 30, 2017, we recorded an income tax benefit of $0.9 million compared to income tax expense of $0.7 million for the three months ended June 30, 2016. The income tax benefit for the three months ended June 30, 2017, was primarily attributable to tax benefits related to employee gains from their sale of our common stock and intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income, offset in part by foreign and state income taxes. The income tax expense for the three months ended June 30, 2016 was primarily attributable to foreign and state income taxes.

For the six months ended June 30, 2017, we recorded an income tax expense of less than $0.1 million compared to income tax expense of $0.6 million for the six months ended June 30, 2016. The income tax expense for the six months ended June 30, 2017 was primarily attributable to foreign and state income taxes including tax effects of the gain related to the sale of the Skyfence business, offset in part by tax benefits related to employee gains from their sale of our common stock and an intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income. Additionally, the amount of unrecognized tax benefits increased, which also contributed to the income tax expense for the period. The income tax expense for the six months ended June 30, 2016 was primarily attributable to foreign and state income taxes, offset in part by an intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income.

Deferred Revenue

	As of June 30,				Change
	2017		2016		Amount		%
	(dollars in thousands)
Total deferred revenue	$	134,150	$	114,817	$	19,333		16.8	%

Deferred revenue increased by $19.3 million, or 16.8%, to $134.1 million as of June 30, 2017 from $114.8 million as of June 30, 2016. The growth in our deferred revenue was primarily attributable to an increase in our installed base of products and licenses worldwide and resulting renewals of maintenance and support agreements, as well as new sales of maintenance and support, and subscription revenue.

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Number of Customers

	As of June 30,				Change
	2017		2016		Amount		%
Number of customers		5,591		4,864		727		14.9	%

Our number of customers increased by 727, or 14.9%, to 5,591 as of June 30, 2017 from 4,864 as of June 30, 2016. Our growth in customer count was driven by increasing market acceptance of our products.

Liquidity and Capital Resources

To date, we have satisfied our capital and liquidity needs through sales of our products and services, our initial and follow-on public offerings of common stock, and private placements of convertible preferred stock. We have incurred significant losses as we continue to expand our business. Our cash flows from operating activities will continue to be affected principally by the extent to which our revenue exceeds or does not exceed any increase in spending on personnel to support the growth of our business. Our largest source of operating cash flow is cash collections from our customers.

Capital Resources

As of June 30, 2017, we had $319.9 million of cash, cash equivalents and short-term investments, $18.0 million of which is currently held outside of the United States and not presently available to fund domestic operations and obligations. If we were to repatriate cash held outside of the United States, it could be subject to U.S. income taxes on such amounts, less any previously paid foreign income taxes. Our cash, cash equivalents and short-term investments have increased from $17.7 million as of December 31, 2010 to $319.9 million as of June 30, 2017. The largest increases were upon our initial public offering of common stock in November 2011 in which we raised $86.2 million, after deducting underwriters’ discounts and offering expenses, our follow-on public offering of common stock in March 2015 in which we raised $127.9 million, after deducting underwriters’ discounts and offering costs and proceeds of $35.0 million from the sale of our Skyfence business in February 2017. This amount was partially offset by our losses from operations as we continued to fund our investments in growth, including the development of future products and product enhancements, and expanded into new sales channels and geographies. In addition, we increased our use of cash through the acquisitions of certain assets of Tomium in January 2014 and Camouflage in December 2016, and our acquisitions of Skyfence and Incapsula in February 2014, which included cash consideration totaling approximately $29.4 million. We believe our existing cash, cash equivalents and short-term investments will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including, among other things, market acceptance of our products, the cost of our research and development activities, the acquisition of other businesses and overall economic conditions.

Cash Flows

The following summary of our cash flows for the periods indicated has been derived from our consolidated financial statements which are included elsewhere in this Quarterly Report on Form 10-Q:

	Forthe six months ended June 30,
	2017		2016
	(dollars in thousands)
Net cash provided by operating activities	$	23,938	$	3,794
Net cash provided by (used in) investing activities	$	9,787	$	(50,987	)
Net cash provided by (used in) financing activities	$	5,104	$	(5,555	)

Cash Flows from Operating Activities

Our largest uses of cash from operating activities are for employee related expenditures. Our primary source of cash flow from operating activities is cash receipts from customers. Our cash flow from operations will continue to be affected principally by the extent to which we grow our revenues and increase our headcount, primarily in our sales and marketing and research and development functions, in order to grow our business.

Net cash provided by operating activities of $23.9 million for the six months ended June 30, 2017 reflected a net income of $19.6 million, adjusted for non-cash charges of $6.7 million primarily due to gain on sale of business of $35.9 million partially offset by stock-based compensation expense of $25.1 million and a depreciation and amortization charge of $5.4 million, as well as a net change of $11.7 million in our net operating assets and liabilities. The net change in our operating assets and liabilities was primarily the result of an increase in our deferred revenue of $5.1 million, a decrease in accounts receivable of $3.2 million, an increase in both accrued

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compensation and benefits of $3.6 million and accrued and other liabilities of $3.0 million offset by a decrease in accounts payable of $1.9 million, increase in deferred tax assets of $1.6 million and increase in prepaid expenses and other assets of $0.9 million.

Net cash provided by operating activities of $3.8 million for the six months ended June 30, 2016 reflected a net loss of $48.7 million, adjusted for non-cash charges of $36.7 million primarily due to stock-based compensation expense, as well as a net change of $15.8 million in our net operating assets and liabilities. The net change in our operating assets and liabilities was primarily the result of a decrease in our accounts receivable of $17.0 million.

Cash Flows from Investing Activities

Our investing activities consist primarily of purchases and sales of short-term investments and expenditures to purchase property and equipment.

Cash provided by investing activities during the six months ended June 30, 2017 was $9.8 million, primarily resulting from proceeds from disposition of the Skyfence business of $35.0 million, proceeds from the maturities of short-term investments of $50.9 million offset by purchases of short-term investments of $69.5 million and capital expenditures of $6.5 million.

Cash used in investing activities during the six months ended June 30, 2016 was $51.0 million, primarily resulting from purchases of short-term investments of $77.0 million and capital expenditures of $8.3 million offset by net proceeds from the maturities of short-term investments of $34.3 million.

Cash Flows from Financing Activities

Net cash provided by financing activities was $5.1 million for the six months ended June 30, 2017 primarily as a result of net proceeds from issuance of common stock of $11.7 million offset by shares withheld for tax withholding of $6.6 million.

Net cash used in financing activities was $5.5 million for the six months ended June 30, 2016 primarily as a result of settlement of holdback liability as part of the consideration in connection with the acquisition of SkyFence Networks Ltd of $7.1 million offset by proceeds from issuance of common stock of $1.7 million.

Contractual Obligations

The following summarizes our contractual obligations as of June 30, 2017:

	Payments Due by Period
Contractual Obligations:	2017		2018		2019		2020		2021		Thereafter		Total
	(in thousands)
Operating lease obligations(1)	$	3,601	$	8,459	$	4,741	$	4,461	$	301	$	49	$	21,612
Severance Pay Fund(2)		-		-		-		-		-		-		7,152
Purchase commitments(3)		3,391		-		-		-		-		-	$	3,391
Total	$	6,992	$	8,459	$	4,741	$	4,461	$	301	$	49	$	32,155

1 Operating lease agreements represent our obligations to make payments under our non-cancelable lease agreements for our facilities. During the six months ended June 30, 2017, we made regular lease payments of $3.3 million under the operating lease agreements.

2 Our condensed consolidated balance sheet as of June 30, 2017 includes $7.2 million of non-current liabilities for our Israeli severance pay fund. The specific timing of any cash payments relating to this obligation cannot be projected with reasonable certainty and, therefore, no amounts for this obligation are included in the annual columns of the table set forth above.

3 Purchase commitments are contractual obligations to purchase hardware appliances and related component parts from our vendors in advance of anticipated sales, generally within six months from the date the inventory arrived at the vendor’s warehouse.

Off-Balance Sheet Arrangements

Through June 30, 2017, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include our accounts and the accounts of our wholly-owned subsidiaries. The preparation of our consolidated financial statements requires our management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the applicable periods. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that they believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported. Our management evaluates its estimates, assumptions and judgments on an ongoing basis.

We believe that the estimates, assumptions and judgments involved in revenue recognition, stock-based compensation, long-lived assets, and accounting for income taxes have the greatest potential impact on our Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. The critical accounting estimates associated with these policies are described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2016 Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Except for the adoption of ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting and Insurance Recoveries Receivable policy, there have been no other material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

See Note 1 – Basis of Presentation and Summary of Significant Accounting Policies – Recent Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements for further discussion.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no significant changes in our market risk exposures during the six months ended June 30, 2017 as compared to the market risk exposures disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7A, of our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, or the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on the aforementioned evaluation, our chief executive officer and chief financial officer have concluded that as of June 30, 2017, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure and that such controls and procedures provide reasonable assurance that the financial reporting and the preparation of financial statements for external purposes are reliably prepared and reported in accordance with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

Regulations under the Exchange Act require public companies, including our company, to evaluate any change in our “internal control over financial reporting” as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. In connection with their evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our chief executive officer and chief financial officer did not identify any changes in our internal control over financial reporting during the three months covered by this Quarterly Report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.

On April 11, 2014, a purported shareholder class action lawsuit was filed in the United States District Court for the Northern District of California against us and certain of our current and former officers. On August 7, 2014, the Court entered an order appointing lead plaintiff and counsel for the purported class. The lead plaintiff filed an amended complaint on October 10, 2014. The lawsuit named us and certain of our current and former officers and purported to bring suit on behalf of those investors who purchased our publicly traded securities between May 2, 2013 and April 9, 2014. The plaintiff alleged that defendants made false and misleading statements about our operations and business and financial results and purported to assert claims for violations of the federal securities laws. The amended complaint sought unspecified compensatory damages, interest thereon, costs incurred in the action and equitable/injunctive or other relief. On January 6, 2015, defendants filed a motion to dismiss the amended complaint. On September 17, 2015, the Court granted defendants’ motion to dismiss with leave to amend. The lead plaintiff filed an amended complaint on January 13, 2016, again naming the same current and former officers, alleging false and misleading statements about our operations and business and financial results, and seeking the same relief.  On February 10, 2016, defendants filed a motion to dismiss the amended complaint. On May 16, 2016, the Court granted the motion in part and denied the motion in part.  On September 7, 2016, defendants filed their operative answer to the amended complaint. In July 2017, with the help of a mediator, the parties reached an agreement in principleto settle the action.  The settlement, which is subject to final documentation and the approval of the Court, among other conditions, will be funded entirely by the Company’s insurance carriers.

In addition, we have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our channel partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights.

Further, the ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, potential negative publicity, diversion of management resources and other factors. Accordingly, there can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

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Item 1A. Risk Factors

Risks Related to Our Business

We have a history of losses, we may not become profitable and our revenue growth may not continue.

We have incurred net losses in each fiscal year since our inception, including net losses of $(48.9) million in 2015 and $(70.3) million in 2016.  While we generated net income of $19.6 million for the six months ended June 30, 2017, we had an accumulated deficit of $259.8 million at June 30, 2017. We may not remain profitable in the future if we fail to increase revenue and manage our expenses, or if we incur unanticipated liabilities. Revenue growth may slow or revenue may decline for a number of possible reasons, including slowing demand for our products or services, increasing competition, a decrease in the growth of, or decline in, our overall market, or our failure to capitalize on growth opportunities or introduce new products and services. In addition, we have incurred, and anticipate that we will continue to incur, significant legal, accounting and other expenses relating to being a public company. If our revenue does not increase at a rate to proportionally offset these expected increases in operating expense, our operating margins will suffer. Further, in future periods, our revenue could decline and, accordingly, we may not be able to achieve profitability and our losses may increase. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a consistent basis. Any failure by us to achieve, maintain or increase profitability and continue our revenue growth could cause the price of our common stock to materially decline.

Our quarterly operating results have and are likely to continue to vary significantly and to be unpredictable, which could cause the trading price of our stock to decline.

Our revenue and operating results have and could continue to vary significantly from period to period as a result of a variety of factors, many of which are outside of our control. As a result, comparing our revenue and operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. We may not be able to accurately predict our future revenue or results of operations. We base our current and future expense levels on our operating plans and sales forecasts, and our operating costs are relatively fixed in the short-term. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenue, and even a small shortfall in revenue could disproportionately and adversely affect financial results for that quarter. If our revenue or operating results fall below the expectations of investors or any securities analysts that cover our stock, the price of our common stock could decline substantially.

In addition to other risk factors listed in this section, factors that may individually or cumulatively affect our operating results from period to period include:

• the level of demand for our products and services, and the timing of orders from our channel partners and customers;

• the timing of sales and shipments of products during a quarter, which may depend on many factors such as inventory and logistics and our ability to ship new products on schedule and accurately forecast inventory requirements;

• the mix of products sold, the mix of revenue between products and services, including subscription services, and the degree to which products and services are bundled and sold together for a package price;

• the budgeting, procurement and work cycles of our customers, which may result in seasonal variation as our business and the market for solutions such as ours mature;

• changes in customer renewal rates for our services;

• general economic conditions, both domestically and in our foreign markets, and economic conditions specifically affecting industries in which our customers participate;

• the timing of satisfying revenue recognition criteria for our sales, including shipping and delivery terms, particularly where we accrue the associated commission expense in a different period, which may be affected by the extent to which we bring on new resellers and distributors, and our ability to establish vendor-specific objective evidence of fair value, or VSOE, for new products and maintain VSOE for maintenance and services;

• future accounting pronouncements or changes in our accounting policies; and

• increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates, since a significant portion of our expenses are incurred and paid in the Israeli shekel and other currencies besides the U.S. dollar.

Reliance on a concentration of shipments at the end of the quarter could cause our revenue to fall below expected levels, resulting in a decline in our stock price.

Historically, we have received a significant majority of a quarter’s sales orders and generated a significant majority of a quarter’s revenue during the last two weeks of the quarter. The fact that so many orders arrive at the end of a quarter means that our

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revenue may shift from one quarter to the next if we cannot fulfill all of the orders and satisfy all of the revenue recognition criteria under our accounting policies before the quarter ends.

This pattern is a result of customer buying habits and the efforts of our sales force and channel partners to meet or exceed quarterly quotas. If expected revenue at the end of any quarter is delayed because anticipated purchase orders fail to materialize, our logistics partners fail to ship or deliver products on time, we fail to manage our inventory properly, we fail to release new products on schedule, or for any other reason, then our revenue for that quarter could fall below our expectations or those of securities analysts and investors, resulting in a decline in our stock price.

We rely on third party channel partners to generate a significant portion of, and to fulfill a substantial majority of, our sales. If we fail to expand and manage our distribution channels, our revenue could decline and our growth prospects could suffer.

In 2016, our channel partners originated over 50%, and fulfilled almost 86%, of our sales, and we expect that channel sales will represent a substantial portion of our revenue for the foreseeable future. Our ability to expand our distribution channels depends in part on our ability to educate our channel partners about our products and services, which are often complex. Our agreements with our channel partners are generally non-exclusive and many of our channel partners have more established relationships with our competitors. If our channel partners choose to place greater emphasis on products and services of their own or those offered by our competitors, our ability to grow our business and sell our products may be adversely affected. If our channel partners do not effectively market and sell our products and services, or if they fail to meet the needs of our customers, then our ability to grow our business and sell our products may be adversely affected. The loss of one or more of our larger channel partners, who may cease marketing our products with limited or no notice, and our possible inability to replace them could adversely affect our sales. Our failure to recruit additional channel partners, or any reduction or delay in their sales of our products and services or conflicts between channel sales and our direct sales and marketing activities could materially and adversely affect our revenue.

We face intense competition, especially from larger, better-known companies and we may lack sufficient financial or other resources to maintain or improve our competitive position.

The market for cyber-security products is intensely competitive and we expect competition to intensify in the future. Our competitors include companies such as Akamai Technologies, Inc., F5 Networks, Inc., International Business Machines Corporation (“IBM”), McAfee, LLC (“McAfee”), Oracle Corporation (“Oracle”), Symantec Corporation and other point solution security vendors.

Many of our existing and potential competitors may have substantial competitive advantages such as:

• greater name recognition and longer operating histories;

• larger sales and marketing budgets and resources and the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products;

• broader, deeper or otherwise more well-established relationships with customers, potential customers and channel partners;

• broader distribution networks and more established relationships with distributors;

• wider geographic presence;

• access to larger customer bases;

• greater customer support resources;

• greater resources to make acquisitions;

• greater resources to develop and introduce products that compete with our products;

• lower labor and development costs; and

• substantially greater financial, technical and other resources.

As a result, they may be able to adapt more quickly and effectively to new or emerging technologies and changing opportunities, standards or customer requirements. In addition, these companies could reduce the price of their competing products, resulting in intensified pricing pressures within the markets in which we compete. Further, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products or incorporate functionality into existing products in a manner that discourages customers from purchasing our products.

Our competitors may offer a bundled product offering, and our customers may elect to accept this offering from our competitors, even if it has more limited functionality than our product offering, instead of adding the additional appliances required to

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implement our offering. The consolidation in our industry, such as IBM’s acquisition of Guardium, Inc., Oracle’s acquisition of Secerno, Ltd. and McAfee’s acquisition of Sentrigo, increases the likelihood of competition based on integration or bundling, particularly where our competitors’ products and offerings are effectively integrated, and we believe that consolidation in our industry may increase the competitive pressures we face on all our products and services. If we are unable to sufficiently differentiate our products and services from the integrated or bundled products of our competitors, such as by offering enhanced functionality, performance or value, we may see a decrease in demand for those products or services, which would adversely affect our business, operating results and financial condition. Further, it is possible that continued industry consolidation may impact customers’ perceptions of the viability of smaller or even medium-sized software firms and consequently customers’ willingness to purchase from firms of our size. Similarly, if customers seek to concentrate their software purchases in the product portfolios of a few large providers or have already deployed products that are similar to ours, we may be at a competitive disadvantage notwithstanding the superior performance that we believe our products and services can deliver. Larger competitors are also often in a better position to withstand any significant reduction in capital spending by customers, and will therefore not be as susceptible to economic downturns.

Many of our smaller competitors that specialize in providing protection from a single type of cyber-security threat may deliver these specialized cyber-security products to the market more quickly than we can or may introduce innovative new products or enhancements before we do. Conditions in our markets could change rapidly and significantly as a result of technological advancements.

We may not compete successfully against our current or potential competitors. Companies competing with us may introduce products that have greater performance or functionality, are easier to implement or use, or incorporate technological advances that we have not yet developed or implemented. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. In addition, companies competing with us may price their products more competitively than ours, or have an entirely different pricing or distribution model. Increased competition could result in fewer customer orders, price reductions, reduced operating margins and loss of market share. Further, we may be required to make substantial additional investments in research and development and marketing and sales in order to respond to such competitive threats, and we cannot assure you that we will be able to compete successfully in the future.

We operate in an evolving market that has not yet reached widespread adoption.  New or existing technologies that may be perceived to address cyber-security risks in better ways could gain wide adoption and supplant some or all of our products and services, making analysis of trends or predictions about our business difficult and potentially weakening our sales and our financial results.

We operate in new, rapidly evolving categories in the security industry that focus on securing our customers’ business-critical data and applications. We offer database, file and web application security in an integrated, modular cyber-security solution, data breach detection and data masking technology and cloud-based security services. Because we depend in part on the market’s acceptance of our products and customers may choose to acquire technologies that are not directly comparable to ours, it is difficult to evaluate trends that may affect our business, including how large the cyber-security market will be and what products customers will adopt. For example, organizations that use other security products, such as network firewalls, security information and event management products or data loss prevention solutions, may believe that these security solutions sufficiently protect access to sensitive data. Therefore, they may continue to devote their IT security budgets to these products and may not adopt our cyber-security solutions in addition to such products. If customers do not recognize the benefits that our cyber-security solutions offer in addition to other security products, then our revenue may not grow as anticipated or may decline, and our stock price could decline.

The introduction of products and services embodying new technologies could render some or all of our existing products and services obsolete or less attractive to customers. Other cyber-security technologies exist or could be developed in the future, and our business could be materially adversely affected if such technologies are widely adopted. We may not be able to successfully anticipate or adapt to changing technology or customer requirements on a timely basis, or at all. Even if customers purchase our products, they may not make repeat purchases or purchase products across our various product families, which trend may be exacerbated by the rapid evolution of our market. As of December 31, 2016, approximately 30% of our customers had purchased products from more than one of our product families. If we are unable to sell additional products from multiple product families to our customers, then our revenue may not grow as anticipated or may decline, and our stock price could decline. If we fail to keep up with technological changes or to convince our customers and potential customers of the value of our solutions even in light of new technologies, our business, financial condition and results of operations could be materially and adversely affected.

In addition, because of our rapidly evolving market, any predictions about our revenue in future periods may not be as accurate as they would be if we operated in a more established market.

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If we do not successfully anticipate market needs and opportunities or changes in the legal, regulatory and industry standard landscape and make timely enhancements to our products and develop new products that meet those needs, we may not be able to compete effectively and our ability to generate revenue will suffer.

The cyber-security market is characterized by rapid technological advances, changes in customer requirements, including changes driven by legal, regulatory and self-regulatory compliance mandates, frequent new product introductions and enhancements and evolving industry standards in computer hardware and software technology. Customers and industry analysts expect speedy introduction of software and new functionality to respond to new threats, requirements and risks and we may be unable to meet these expectations. As a result, we must continually improve our products and introduce new solutions in response to changes in operating systems, application software, computer and communications hardware, networking software, data center architectures, programming tools and computer language technology. Moreover, the technology in our products is especially complex because it needs to effectively identify and respond to methods of attack and theft, while minimizing the impact on network, database, file system and web application performance. In addition, our products must successfully interoperate with products from other vendors.

We cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop product enhancements or new products to meet such needs or opportunities in a timely manner or at all. Since developing new products or new versions of, or add-ons to, existing products is complex, the timetable for their commercial release is difficult to predict and may vary from our historical experience, which could result in delays in their introduction from anticipated or announced release dates. We may not offer updates as rapidly as new threats affect our customers or our newly developed products or enhancements may have defects, errors or failures. If we do not quickly respond to the rapidly changing and rigorous needs of our customers by developing and introducing on a timely basis new and effective products, upgrades and services that can respond adequately to new security threats, our competitive position, business and growth prospects will be harmed.

Even if we are able to anticipate, develop and commercially introduce enhancements and new products, there can be no assurance that we will be successful in developing sufficient market awareness of them or that such enhancements or new products will achieve widespread market acceptance. Diversifying our product offerings will require significant investment and planning, will bring us more directly into competition with software providers that may be better established or have greater resources than we do, will require additional investments of time and resources in the development and training of our channel and strategic partners and will entail a significant risk of failure.

Further, one factor that drives demand for our products and services is the legal, regulatory and industry standard framework in which our customers operate, which we expect will continue to be a factor for the foreseeable future. For example, many of our customers purchase our web application security products to help them comply with the security standards developed and maintained by the Payment Card Industry Security Standards Council (the “PCI Council”), which apply to companies that process or store credit card information. Laws, regulations and industry standards are subject to drastic changes that, particularly in the case of industry standards, may arrive with little or no notice, and these could either help or hurt the demand for our products. If we are unable to adapt our products and services to changing regulatory standards in a timely manner, or if our products fail to assist our customers with their compliance initiatives, our customers may lose confidence in our products and could switch to competing solutions. In addition, if regulations and standards related to cyber-security are changed in a manner that makes them less onerous, our customers may view government and industry regulatory compliance as less critical to their businesses, and our customers may purchase fewer of our products and services, or none at all. In either case, our sales and financial results would suffer.

Real or perceived errors, failures or bugs in our products, particularly those that result in our customers experiencing security breaches, could adversely affect our reputation and business could be harmed.

Our products and services are very complex and have contained and may contain undetected defects or errors, especially when first introduced or when new versions are released. Defects in our products may impede or block network traffic or cause our products or services to fail to help secure business-critical data and applications. Defects in our products may lead to product returns and require us to implement design changes or software updates. Any defects or errors in our products, or the perception of such defects or errors, could result in:

• expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors or defects;

• loss of existing or potential customers or channel partners;

• delayed or lost revenue;

• delay or failure to attain market acceptance;

• delay in the development or release of new products or services;

• negative publicity, which will harm our reputation;

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• warranty claims against us, which could result in an increase in our provision for doubtful accounts;

• an increase in collection cycles for accounts receivable or the expense and risk of litigation; and

• harm to our results of operations.

Data thieves are sophisticated, often affiliated with organized crime and operate large scale and complex automated attacks. In addition, their techniques change frequently and generally are not recognized until launched against a target. If we fail to identify and respond to new and complex methods of attack and to update our products to detect or prevent such threats in time to protect our customers’ business-critical data and applications, our business and reputation will suffer.

In addition, many of our customers use our products in applications that are critical to their businesses and may have a greater sensitivity to defects in our products than to defects in other, less critical, software products. An actual or perceived security breach or theft of the business-critical data of one of our customers, regardless of whether the breach is attributable to the failure of our products or services, could adversely affect the market’s perception of our security products. Despite our best efforts, there is no guarantee that our products will be free of flaws or vulnerabilities, and, even if we discover these weaknesses, we may be unable to correct them promptly, if at all. Our customers may also misuse our products, which could result in a breach or theft of business-critical data.

Although we have limitation of liability provisions in our standard terms and conditions of sale, they may not fully or effectively protect us from claims as a result of federal, state or local laws or ordinances or unfavorable judicial decisions in the United States or other countries. The sale and support of our products also entail the risk of product liability claims. We maintain insurance to protect against certain claims associated with the use of our products, but our insurance coverage may not adequately cover all claims asserted against us, or cover only a portion of such claims. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation and divert management’s time and other resources.

False detection of security breaches or false identification of malicious sources could adversely affect our business.

Our cyber-security products may falsely detect threats that do not actually exist. For example, our ThreatRadar Reputation Services product relies on information on attack sources aggregated from third-party data providers who monitor global malicious activity originating from anonymous proxies, specific IP addresses, botnets and phishing sites. If the information from these data providers is inaccurate, the potential for false positives increases. These false positives, while typical in the industry, may affect the perceived reliability of our products and may therefore adversely impact market acceptance of our products. If our products and services restrict access to important databases, files or applications based on falsely identifying users or traffic as an attack or otherwise unauthorized, then our customers’ businesses could be adversely effected. Any such false identification of users or traffic could result in negative publicity, loss of customers and sales, increased costs to remedy any problem and costly litigation.

Our success in acquiring and integrating other businesses, products or technologies could impact our financial position.

In order to remain competitive, we may seek to acquire additional businesses, products or technologies, any of which could be material to our business, operating results and financial condition. For example, we acquired assets from Camouflage Software Inc. in December 2016, Incapsula, Inc. in March 2014, Skyfence Networks Ltd. in February 2014 and assets from Tomium Software, LLC in January 2014. The environment for acquisitions in the markets in which we operate is very competitive and acquisition candidate purchase prices will likely exceed what we would prefer to pay, but may be required to pay in order to make an acquisition. Furthermore, we may not find suitable acquisition candidates, and acquisitions we complete may be difficult to successfully integrate into our overall business. Achieving the anticipated benefits of future acquisitions will depend in part upon whether we can integrate acquired operations, products and technology in a timely and cost-effective manner.

Acquisitions involve many risks, including the following:

• an acquisition may negatively impact our results of operations because it:

• may require us to incur charges and substantial debt or liabilities,

• may cause adverse tax consequences, substantial depreciation or deferred compensation charges,

• may result in acquired in-process research and development expenses or in the future may require the amortization, write-down or impairment of amounts related to deferred compensation, goodwill and other intangible assets, or

• may not generate sufficient financial return to offset acquisition costs;

• we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us;

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• an acquisition and integration process is complex, expensive and time consuming, and may disrupt our ongoing business, divert resources, increase our expenses and distract our management;

• an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company;

• we may encounter difficulties in, or may be unable to, successfully sell any acquired products;

• we may obtain unanticipated or unknown liabilities or become exposed to unanticipated risks in connection with any acquisition; and

• an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience.

If we are unable to effectively execute acquisitions, our business, financial condition and results of operations could be adversely affected.

From time to time, we may seek to divest or wind down portions of our business, both acquired or otherwise, that are no longer core to the business, which could materially affect our cash flows and results of operations.

On February 23, 2017, we completed the sale of the assets of our Skyfence business to Forcepoint LLC. The disposition of the Skyfence assets or any other future dispositions we make may involve risks and uncertainties, including our ability to sell these businesses on terms acceptable to us, or at all. Any such dispositions could result in disruption to other parts of our business, potential loss of employees, customers or revenue, exposure to unanticipated liabilities or result in ongoing obligations and liabilities to us following any such divestiture. For example, in connection with a disposition, we may enter into transition services agreements or other strategic relationships, including long-term research and development or sales arrangements, or agree to provide certain indemnities to the purchaser in any such transaction, which may result in additional expense and may adversely affect our financial condition and results of operations. In addition, dispositions may include the transfer or division of technology and/or the licensing of certain IP rights to third party purchasers, which could limit our IP rights or our ability to assert our IP rights against such purchasers or other third parties.

Our business and operations experienced rapid growth in 2015 and less growth in 2016.  If we do not appropriately manage any future growth, or are unable to improve our systems and processes, our operating results will be negatively affected.

We have experienced volatile growth over the last several years. We grew from 723 employees as of December 31, 2014 to 923 employees as of December 31, 2015 to 993 employees as of December 31, 2016. As of June 30, 2017, we had 980 employees. Changes in headcount have placed, and will continue to place, a strain on our employees, management systems and other resources. Managing our headcount has required, and will continue to require, significant expenditures and allocation of valuable management resources. We rely heavily on information technology systems to help manage critical functions, such as order processing, revenue recognition, financial forecasts and inventory and supply chain management. To manage any future growth effectively, we must continue to improve our information technology and financial infrastructure, operating and administrative systems and controls, and continue to manage headcount, capital and processes in an efficient manner. We may not be able to successfully implement improvements to these systems and processes in a timely manner.

In addition, we rely heavily on hosted SaaS technologies from third parties in order to operate critical functions of our business, including enterprise resource planning services from NetSuite Inc. and customer relationship management services from salesforce.com, inc. If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices, our expenses could increase, our ability to manage our finances could be interrupted and our processes for managing sales of our products and services and supporting our customers could be impaired until equivalent services, if available, are identified, obtained and integrated, all of which could harm our business. Also, our systems and processes may not prevent or detect all errors, omissions or fraud. Our failure to improve our systems and processes, or their failure to operate in the intended manner, may result in our inability to manage the growth of our business and to accurately forecast our revenue, expenses and earnings, or to prevent certain losses. Our productivity and the quality of our products and services may also be adversely affected if we do not integrate and train our new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination across our organization. If we fail to achieve the necessary level of efficiency in our organization as it grows or otherwise fail to manage any future growth effectively, we could incur increased costs, and experience a loss of customer and investor confidence in our internal systems and processes, any of which could result in harm to our business, results of operations and financial condition.

If we are unable to hire, retain and motivate qualified personnel, our business would suffer.

We depend on the continued contributions of our senior management and other key employees to execute on our business plan, and to identify and pursue new opportunities and product innovations. The loss of services of senior management or other key

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employees, particularly Anthony Bettencourt, our Chairman, President and Chief Executive Officer, and Amichai Shulman, one of our founders and our Chief Scientist, could significantly delay or prevent the achievement of our development and strategic objectives.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled technical, managerial, finance and other personnel, particularly in our sales and marketing, research and development and professional service departments. Any of our employees may terminate their employment at any time. Competition for highly skilled personnel is frequently intense, globally for sales personnel, as well as in the San Francisco Bay Area and in Tel Aviv and Rehovot, Israel, the locations in which we have a substantial presence and need for highly-skilled personnel. We may be unable to attract and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, and we may be required to pay increased compensation in order to do so. If we are unable to attract and retain the qualified personnel we need to succeed, our business will suffer.

Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees. Employees may be more likely to leave us if the shares or RSUs they hold have declined in value or if the exercise prices of the options that they hold exceed the market price of our common stock. If we are unable to retain our employees, our business, operating results and financial condition will be harmed.

Restructuring activities may not be as effective as anticipated.

In November 2016, we announced a restructuring plan and cost reduction initiatives to reduce expenses, streamline the organization, and reallocate resources to align more closely with future business needs. As a result of these actions, we incurred additional costs that had the effect of reducing operating margins. We cannot be sure that the cost reduction and streamlining initiatives will be successful in reducing our overall expenses as we expect, in the time frame that we expect, or that additional costs will not offset any such reductions or streamlining. If we are unable to realize the expected outcomes from the restructuring efforts, if our operating costs are higher than we expect or if we do not maintain adequate control of our costs and expenses, our business and operating results may be harmed.

Delays or interruptions in the manufacturing and delivery of SecureSphere appliances by our manufacturers may harm our business.

Our hardware appliances are built by two manufacturers in Taiwan and we rely principally on one of these two manufacturers to build the majority of our hardware appliances. We only recently began using the second manufacturer and the few entry level products they manufacture for us were released for sale in July 2017. Our primary reliance on a single manufacturer for a majority of our hardware revenue, particularly a foreign manufacturer, involves several risks, including a potential inability to obtain an adequate supply of appliances and limited control over pricing, quality and timely delivery of products. In addition, replacing this manufacturer may be difficult and could result in an inability or delay in obtaining products. As a result, we may be unable to fulfill customer orders and our operating results may fluctuate from period to period, particularly if a disruption occurs near the end of a fiscal period.

Our manufacturers’ ability to timely manufacture and ship our appliances in large quantities depends on a variety of factors. They rely on a limited number of sources for the supply of functional components, such as semiconductors, printed circuit boards and, to a lesser extent, hard disk drives. Functional component supply shortages or delays could prevent or delay the manufacture and shipment of appliances and, in the event of shortages or delays, we may not be able to procure alternative functional components on similar pricing terms, if at all. In addition, contractual restrictions or claims for infringement of intellectual property rights may restrict our manufacturers’ use of certain components. These restrictions or claims may require our manufacturers to utilize alternative components or obtain additional licenses or technologies, and may impede their ability to manufacture and deliver appliances on a timely or cost-effective basis. If at some point, either manufacturer is no longer financially viable, we may lose our source of supply with little or no notice or recourse. Further, even if quality products are timely manufactured, delays in shipping may occur, resulting in delayed satisfaction of a primary revenue recognition criterion.

In the event of an interruption from either manufacturer or any quality control issues with a manufacturer, we may be unable to develop alternate sources in a timely manner. If we are unable to procure our appliances in quantities sufficient to meet our requirements, we will not be able to deliver products to our channel partners and customers, which would materially and adversely affect present and future sales.

A failure to manage excess inventories or inventory shortages could result in decreased revenue and gross margins and harm our business.

We purchase products from our manufacturing partners outside of, and in advance of, reseller or customer orders and hold our products in inventory. If we fail to accurately predict demand and as a result our manufacturers maintain insufficient hardware or component inventory or excess inventory, we may be unable to timely deliver products to our distributors or customers or may have

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substantial inventory expense. Because our channel partners do not purchase our products in advance of customer orders, our difficulty in accurately forecasting demand for our hardware products may be exacerbated. There is a risk we may incorrectly forecast demand and may be unable to sell excess products ordered from our manufacturing partners. Inventory levels in excess of customer demand may result in inventory write-downs, and the sale of excess inventory at discounted prices could significantly impair our brand image and have an adverse effect on our financial condition and results of operations.

Conversely, if we underestimate demand for our products or if our manufacturing partners fail to supply products we require in a timely manner, we may experience inventory shortages. Inventory shortages might delay shipments to resellers, distributors and customers or cause us to lose sales. Further, as the size of individual orders increases, the risk that we may be unable to deliver unforecasted orders also increases, particularly near the end of quarterly periods. These shortages may diminish the loyalty of our channel partners or customers.

The difficulty in forecasting demand also makes it difficult to estimate our future financial condition and results of operations from period to period. A failure to accurately predict the level of demand for our products could adversely affect our net revenue and net income, and we are unlikely to forecast such effects with any certainty in advance.

We have operations outside of the United States and a significant portion of our customers and suppliers are located outside of the United States, which subjects us to a number of risks associated with conducting international operations.

We market and sell our products throughout the world and have personnel in many parts of the world. In addition, we have sales offices and research and development facilities outside the United States and we conduct, and expect to continue to conduct, a significant amount of our business with companies that are located outside the United States, particularly in Israel, Asia, Europe and Latin America. We also source our components for our products and deliver our services from various geographical regions. Therefore, we are subject to risks associated with having international sales and worldwide operations, including:

• challenges caused by distance, language, cultural and ethical differences and the competitive environment;

• multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;

• trade and foreign exchange restrictions;

• foreign currency exchange fluctuations and foreign exchange controls;

• economic, social or political instability in foreign markets;

• greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods;

• changes in regulatory requirements;

• difficulties and costs of staffing and managing foreign operations or relationships with channel partners;

• the uncertainty and limitation of protection for intellectual property rights in some countries;

• costs of complying with U.S. and foreign laws and regulations, including import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our products in certain foreign markets, and the risks and costs of non-compliance or complaints of non-compliance;

• heightened risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements;

• the potential that our operations in the U.S. may limit the acceptability of our products to some foreign customers, and that our international sourcing and operations may limit the acceptability of our products to some U.S. customers;

• the potential for acts of terrorism, hostilities or war;

• management communication and integration problems resulting from cultural differences and geographic dispersion; and

• multiple and possibly overlapping tax structures.

Our product and service sales may be subject to foreign governmental regulations, which vary substantially from country to country and change from time to time. Failure to comply with these regulations could adversely affect our business. Violations of laws or key control policies by our employees, contractors, channel partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our products and services and could have a material adverse effect on our business and results of operations.

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A portion of our revenue is generated by sales to government entities and such sales are subject to a number of challenges and risks.

Sales to U.S. and foreign federal, state and local governmental agency customers have accounted for approximately 13% of our bookings for the year ended December 31, 2015, 11% for the year ended December 31, 2016 and 12% of our bookings for the six months ended June 30, 2017, and sales to government entities may increase. Sales into government entities are subject to a number of risks. Selling to government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that we will complete a sale. Governments and governmental agencies may delay or refrain from purchasing our products and services in the future for the following reasons, which would have an adverse effect on our business, financial condition and results of operations:

• changes in fiscal or contracting policies or decreases and uncertainties in available government funding;

• changes in government programs or applicable requirements;

• the adoption of new laws or regulations or changes to existing laws or regulations;

• changes in political or social attitudes with respect to security issues; and

• potential delays or changes in the government appropriations process, including actions such as spending freezes implemented to address political or fiscal policy concerns.

Most of our sales to government entities have been made indirectly through our channel partners. Government entities may have contractual or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a default, and any such termination may adversely impact our results of operations.

In addition, for purchases by the U.S. federal government, we must comply with laws and regulations relating to U.S. federal government contracting, which affect how we and our channel partners do business in connection with U.S. federal agencies. These laws and regulations may impose added costs on our business, and failure to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for damages from our channel partners, penalties, termination of contracts and suspension or debarment from government contracting for a period of time. Any such damages, penalties, disruption or limitation in our ability to do business with the U.S. federal government may adversely impact our results of operations.

Our business in countries with a history of corruption and transactions with foreign governments increase the risks associated with our international activities.

As we operate and sell internationally, we are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. We have operations, deal with and make sales to governmental customers in countries known to experience corruption, particularly certain emerging countries in Africa, East Asia, Eastern Europe, South America and the Middle East. Our activities in these countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or channel partners that could be in violation of various anti-corruption laws, even though these parties may not be under our control. While we have implemented safeguards to prevent these practices by our employees, consultants, sales agents and channel partners, our existing safeguards and any future improvements to our processes may prove to be less than effective, and our employees, consultants, sales agents or channel partners may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, including suspension or debarment from U.S. government contracting, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

We rely significantly on revenue from maintenance and support which may decline and, because we recognize revenue from such services over the term of the relevant service period, downturns or upturns in sales are not immediately reflected in full in our operating results.

Our maintenance and support revenue accounted for 28% of our total revenue for 2015, 30% of our total revenue for 2016 and 30% of our total revenue for the six months ended June 30, 2017. Sales of new maintenance and support contracts or renewal of such services contracts may decline or fluctuate as a result of a number of factors, including customers’ level of satisfaction with our products and services, the prices of our products and services, the prices of products and services offered by our competitors or reductions in our customers’ spending levels. If our sales of new or renewal services contracts decline, our revenue or revenue growth may decline and our business will suffer. In addition, we recognize services revenue ratably over the term of the relevant service period, which is usually one to three years. As a result, much of the revenue we report each quarter is the recognition of deferred revenue from services contracts entered into during previous quarters. Consequently, a decline in new or renewal services contracts in any one quarter will not be fully reflected in revenue in that quarter, but will negatively affect our revenue in future quarters.

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Accordingly, the effect of significant downturns in new or renewal sales of our services would not be reflected in full in our results of operations until future periods.

If we are unable to increase sales to large customers, our results of operations may suffer.

We continuously seek to increase sales of our products to large enterprises, managed security service providers (“MSSPs”), cloud hosting providers and government entities. Sales to large enterprises, MSSPs, cloud hosting providers and government entities involve risks that may not be present, or are present to a lesser extent, in sales to small to mid-sized entities. These risks include:

• preexisting relationships with larger, entrenched providers of security solutions who have access to key decision makers within the organization and who also have the ability to bundle competing products with a broader product offering;

• increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us;

• more stringent requirements in our support service contracts, including stricter support response times, and increased penalties for any failure to meet support requirements; and

• longer sales cycles, including lengthening of sales cycles due to competitive pressures or the evaluation by customers of both our cloud security solutions from Incapsula and our on-premise products as potential alternatives, and the associated risk that substantial time and resources may be spent on a potential customer who elects not to purchase our products and services.

In addition, product purchases by large enterprises, MSSPs, cloud hosting providers and government entities are frequently subject to budget constraints, multiple approvals, and unplanned administrative, processing and other delays. Further, large enterprises, MSSPs, cloud hosting providers and government entities typically have longer implementation cycles; require greater product functionality and scalability and a broader range of services; demand that vendors take on a larger share of risks; sometimes require acceptance provisions that can lead to a delay in revenue recognition; and expect greater payment flexibility from vendors. Additionally, the ongoing increase in the number of security vendors competing for these entities’ business, who in some cases use overlapping or confusing messaging, may combine with these factors to extend the sales cycles for our products and services. All these factors can add risk to doing business with these customers. If our sales expectations for large customers do not materialize in a particular quarter or at all, then our business, financial condition and results of operations could be materially and adversely affected.

If our existing and potential customers migrate to hosted, cloud-based data centers that do not deploy our products, our revenue could suffer.

The majority of our current sales are made through a model in which our channel partners sell our cyber-security solutions to large enterprise customers that operate their own data centers and have the ability to choose the cyber-security solutions and configurations to fit their environment. If our large enterprise customers and potential customers choose to outsource the hosting of their data centers to large, multi-tenancy hosting providers like Rackspace Hosting, Inc., Amazon Web Services (“AWS”) and Savvis, Inc. (dba CenturyLink Technology Solutions), they may not be able to choose what cyber-security solutions are deployed in these hosted environments, and our current sales model may not be effective. Although we work with large hosting services providers like Rackspace Hosting, Inc., AWS and Savvis, Inc., to integrate our cyber-security solutions into their hosting environments so that our solutions may be offered to their hosting customers, we cannot guarantee that all such hosting service providers will adopt our solutions, offer them as a choice to their customers or promote our solutions over those of our competitors. Even if these large hosting services providers integrate our cyber-security solutions into their hosting environments and promote our solutions, they may be able to negotiate larger discounts than individual enterprise customers and, consequently, the average selling price of our products may decrease and our revenue would suffer. Alternatively, they may offer services based on our competitors’ products at lower cost or bundled with other services that we do not offer, and their customers may choose those services even if they would otherwise choose our products if making a decision on a stand-alone basis.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

Our functional and reporting currency is the U.S. dollar and we generate a majority of our revenue in U.S. dollars. However, in 2015, 2016 and the six months ended June 30, 2017, we incurred approximately 27%, 38% and 31%, respectively, of our expenses outside of the United States in foreign currencies, primarily the Israeli shekel, principally with respect to salaries and related personnel expenses associated with our Israeli operations. The exchange rate between the U.S. dollar and foreign currencies has fluctuated substantially in recent years and may continue to fluctuate substantially in the future. We expect that a majority of our revenue will continue to be generated in U.S. dollars for the foreseeable future and that a significant portion of our expenses, including personnel costs, as well as capital and operating expenditures, will continue to be denominated in Israeli shekels. Our results of operations may be adversely affected by foreign exchange fluctuations.

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We use forward foreign exchange contracts to hedge or mitigate the effect of changes in foreign exchange rates on our operating expenses denominated in certain foreign currencies. However, this strategy cannot eliminate our exposure to foreign exchange rate fluctuations and involves costs and risks of its own, such as cash expenditures, ongoing management time and expertise, external costs to implement the strategy and potential accounting implications. Additionally, our hedging activities may contribute to increased losses as a result of volatility in foreign currency markets.

Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.

Patent and other intellectual property disputes are common in the IT security industry. Some companies in the IT security industry, including some of our competitors, own large numbers of patents, copyrights, trademarks and trade secrets, which they may use to assert claims against us. This disparity between our patent portfolio and the patent portfolios of our most significant competitors may increase the risk that they may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses. In addition, there are patent holding companies or other patent owners who are solely or primarily in the business of building portfolios of patents and asserting them against operating companies, often with little merit, and who have no relevant product revenue so that potential assertions of our patents (and potential patents) against such companies may provide little or no deterrence. Third parties have asserted and may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us. For example, in May 2010, F5 Networks, Inc., an IT infrastructure company that competes with us in the web application firewall market, filed a lawsuit against us alleging patent infringement. In September 2010, we filed a counterclaim alleging patent infringement by F5 Networks, Inc. In February 2011, we entered into a settlement and license agreement with F5 Networks, Inc., which dismissed the litigation. Third parties may also assert such claims against our customers or channel partners whom we typically indemnify against claims that our products infringe, misappropriate or otherwise violate the intellectual property rights of third parties. As the numbers of products and competitors in our market increase and overlaps occur, claims of infringement, misappropriation and other violations of intellectual property rights may increase. Also, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or have divulged proprietary or other confidential information.

We cannot assure you that we are not infringing or otherwise violating any third-party intellectual property rights. Further, any claim of infringement, misappropriation or other violation of intellectual property rights by a third party, even those without merit, could be asserted against us, cause us to incur substantial costs defending against the claim and could distract our management from our business. An adverse outcome of an IP dispute may require us to pay substantial damages, including treble damages, if we are found to have willfully infringed a third party’s patents or copyrights; cease making, licensing or using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to attempt to redesign our products or services or otherwise to develop non-infringing technology, which may not be successful; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights; and indemnify our customers and partners. Royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, or may require significant royalty payments and other expenditures. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. Any of these events could seriously harm our business, financial condition and results of operations.

We rely on the availability of licenses to third-party software and other intellectual property, the loss of which could increase our costs and delay software shipments.

Many of our products and services include software or other intellectual property licensed from third parties, and we also use software and other intellectual property licensed from third parties in our business. This exposes us to risks over which we may have little or no control. For example, a licensor may have errors or defects in its products that harm our business, may have difficulties keeping up with technological changes or may stop supporting the software or other intellectual property that it licenses to us. Also, it will be necessary in the future to renew licenses, expand the scope of existing licenses or seek new licenses, relating to various aspects of these products and services, or otherwise relating to our business, which may result in increased license fees. In addition, a direct or indirect licensor may assert that we or our customers are in breach of the terms of a license, which could, among other things, give such licensor the right to terminate a license or seek damages from us, or both. Moreover, the inclusion in our products and services of software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to differentiate our products from those of our competitors.

Licensed software may not continue to be available on commercially reasonable terms, or at all. While we believe that there are currently adequate replacements for third-party software, any loss of the right to use any of this software could result in delays in producing or delivering our software until equivalent technology is identified and integrated, which delays could harm our business. Our business would be disrupted if any of the software we license from others or functional equivalents of this software were either no longer available to us or no longer offered to us on commercially reasonable terms. In either case, we would be required to either redesign our products to function with software available from other parties or to develop these components ourselves, which would result in increased costs and could result in delays in our product shipments and the release of new product offerings. Furthermore, we might be forced to

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limit the features available in our current or future products. If we fail to maintain or renegotiate any of these software licenses, we could face significant delays and diversion of resources in attempting to license and integrate a functional equivalent of the software. Any of these events could have a material adverse effect on our business, financial condition and results of operations.

Our products contain “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Certain of our products are distributed with software licensed under “open source” licenses. Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software, and that we license these modifications or derivative works under the terms of a particular open source license or subject to certain license requirements. If we combine our proprietary software with open source software in a certain manner, we could, under certain provisions of the open source licenses, be required to release the source code of our proprietary software. In addition to risks related to license requirements, usage of open source software can subject us to greater risks than use of third-party commercial software, as licensors of open source software generally do not provide warranties or any indemnification for infringement of third party intellectual property rights. We have established processes to help alleviate these risks, including a review process for screening requests from our development organization for the use of open source software, but we cannot be sure that all open source software is submitted for approval prior to use in our products. In addition, open source license terms may be ambiguous and many of the risks associated with use of open source software cannot be eliminated, and could, if not properly addressed, negatively affect our business. If we were found to have inappropriately used open source software, we might be required to re-engineer our products, to release proprietary source code, to discontinue the sale of our products in the event re-engineering could not be accomplished on a timely basis or to take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, operating results and financial condition. Disclosing the source code of our proprietary software could make it easier for malicious third parties to discover vulnerabilities in our cyber-security products and allow our competitors to create similar products with decreased development effort and time. Any of these events could have a material adverse effect on our reputation, business, financial condition and results of operations.

Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.

Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the intellectual property laws of the United States and other countries, so that we can prevent others from using our inventions and proprietary information. We attempt to protect our intellectual property under patent, trademark, copyright and trade secret laws, and through a combination of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection. If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology, and our business might be harmed. In addition, defending our intellectual property rights might entail significant expenses. Any of our patents, copyrights, trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Imperva and its subsidiaries had 33 issued patents and 17 patent applications pending as of June 30, 2017 in the United States. Our issued patents, which are limited in number compared to some of our competitors, may not provide us with any competitive advantages or may be challenged by third parties, and our patent applications may never be granted at all. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Further, for strategic and other reasons we may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Even if issued, there can be no assurance that our patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain.

Any patents that are issued may subsequently be invalidated or otherwise limited, enabling other companies to better develop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition. In addition, issuance of a patent does not guarantee that we have a right to practice the patented invention. Patent applications in the United States are typically not published until 18 months after filing, or in some cases not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our issued patents or pending patent applications or otherwise used in our products, that we were the first to file for protection in our patent applications, or that third parties do not have blocking patents that could be used to prevent us from marketing or practicing our patented products or technology. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our products and services are available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights.

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Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may adversely affect our business, operating results and financial condition.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our Israeli employees, which could result in litigation and adversely affect our business.

We have entered into assignment of invention agreements with our Israeli employees pursuant to which such individuals agree to assign to us all rights to any inventions created in the scope of their employment or engagement with us. A significant portion of our intellectual property has been developed by our Israeli employees in the course of their employment for us. Under the Israeli Patents Law, 5727-1967 (the “Patents Law”), inventions conceived by an employee during the scope of his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patents Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patents Law, shall determine whether the employee is entitled to remuneration for his or her inventions. The Committee has previously held that employees may be entitled to remuneration for intellectual property that they develop during their service for a company despite their explicit waiver of such right. In a recent decision, however, the Committee overturned its position and upheld that an employee’s waiver of his right to remuneration is valid and binding. The plaintiff in this last case filed a petition with the Israeli Supreme Court requesting to remand the case to the Committee for a second review, but the Israeli Supreme Court decided on July 8, 2015 that the Committee acted within its administrative authority and that it would not intervene in the Committee’s decision. Even though the decision still stands, the Committee’s inconsistency raises doubt as to the outcome in different sets of circumstances. Thus, although our Israeli employees have agreed to assign to us service invention rights, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former Israeli employees, or be forced to litigate such claims, which could negatively affect our business.

Confidentiality agreements with partners, employees, consultants and others may not adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary technology, processes and methods, we rely in part on confidentiality agreements and other restrictions with our customers, partners, employees, consultants and others. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Despite our efforts to protect our proprietary technology, processes and methods, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them. We may be unable to determine the extent of any unauthorized use or infringement of our products, technologies or intellectual property rights. In addition, others may independently develop identical or substantially similar technology and in these cases we would not be able to assert any trade secret rights against those parties. Moreover, policing unauthorized use of our technologies, products and intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

Our business activities are subject to various restrictions under U.S. export controls and trade and economic sanctions laws, including the U.S. Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). If we fail to comply with these laws and regulations, we could be subject to civil or criminal penalties and reputational harm. U.S. export control laws and economic sanctions laws also prohibit certain transactions with U.S. embargoed or sanctioned countries, governments, persons and entities.

Many of our products incorporate encryption technology and may be exported outside the U.S. only if we obtain an export license or qualify for an export license exception. Compliance with applicable regulatory requirements regarding the export of our products may prevent our customers with international operations from deploying our products throughout their global systems or, in some cases, prevent the export of our products to some countries altogether. Further, various countries regulate the import of encryption technology and appliance-based products and have enacted laws that could limit our ability to distribute products, could create delays in the introduction of our products in those countries or could limit our customers’ ability to implement our products in those countries.

U.S. export control laws and economic sanctions prohibit the shipment of certain products to U.S. embargoed or sanctioned countries, governments and persons. While we and our channel partners take precautions to prevent our products from being shipped

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to, downloaded or accessed by U.S. sanctions targets, our products could be shipped to, downloaded or accessed by persons located in countries that are the subject of U.S. embargoes despite our efforts. Any such shipment or access could have negative consequences, including government investigations, penalties and reputational harm. For example, in 2015, we discovered that some of our free downloadable software evaluation products may have been downloaded by a limited number of persons located in countries that are the subject of U.S. embargoes. We terminated the unauthorized accounts, filed an initial disclosure with the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) and with OFAC and filed final reports with BIS and OFAC on September 2, 2015 and September 22, 2015, respectively. We have implemented new screening measures designed to prevent users in embargoed countries and prohibited persons from purchasing, downloading or accessing our free downloadable evaluation software or other products or services. OFAC issued a cautionary letter on October 14, 2015 as a final enforcement response to the apparent violations and did not impose any monetary penalties. BIS issued a warning letter on October 5, 2016 in response to the our voluntary self-disclosure and closed the matter, having determined not to take any further action.  Even though we take precautions to prevent transactions with U.S. sanctions targets, any such precautions, or any new precautions we may implement inthe future, may be ineffective. As a result, there is risk that in the future we could provide our products to or permit our products to be downloaded or accessed by such targets despite these precautions. This could result in negative consequences to us, including government investigations, penalties and reputational harm.

In the future, there may be changes in our products or changes in export and import regulations or economic sanctions. Similarly, there may be shifts in the enforcement or scope of existing regulations or restrictions or changes in the countries, governments, persons or technologies targeted by such regulations and restrictions. Such changes and shifts may create delays in the introduction and sale of our products in international markets, could result in decreased use of our products or, in some cases, prevent the sale of our products to certain countries, governments or persons altogether, including by current customers or potential customers. Any such limitation, delay, restriction or reduction could adversely affect our business, financial condition, results of operations and prospects.

Conditions in Israel may limit our ability to develop and sell our products. This could result in a decline in revenue.

Our principal research and development facilities are located in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries, as well as incidents of civil unrest, and a number of state and non-state actors have publicly committed to its destruction. Political, economic and military conditions in Israel could directly affect our operations. We could be adversely affected by any major hostilities involving Israel, including acts of terrorism or any other hostilities involving or threatening Israel, the interruption or curtailment of trade between Israel and its trading partners, a significant increase in inflation or a significant downturn in the economic or financial condition of Israel. Any on-going or future violence between Israel and the Palestinians, including a resumption of the conflict in Gaza, armed conflicts, terrorist activities, tension along the Israeli borders or with other countries in the region, including Iran, or political instability in the region could disrupt international trading activities in Israel and may materially and negatively affect our business and could harm our results of operations.

Certain countries, as well as certain companies and organizations, continue to participate in a boycott of Israeli firms, firms with large Israeli operations and others doing business with Israel and Israeli companies. In addition, such boycott, restrictive laws, policies or practices may change over time in unpredictable ways, and could, individually or in the aggregate, have a material adverse effect on our business in the future.

Some of our employees in Israel are obligated to perform annual military reserve duty in the Israel Defense Forces, depending on their age and position in the armed forces. Furthermore, they may be called to active reserve duty at any time under emergency circumstances for extended periods of time. For example, in 2016, approximately 90 of our employees in Israel were called for active reserve duty, each serving for an average of nine to ten days. Our operations could be disrupted by the absence, for a significant period, of one or more of our executive officers or key employees due to military service, and any significant disruption in our operations could harm our business.

Our internal network system and website may be subject to intentional disruption that could adversely impact our reputation and future sales.

Because we are a leading provider of cyber-security products, hackers and others may try to access our data or compromise our systems. Similarly, experienced computer programmers may attempt to penetrate our network security or the security of our website and cause interruptions of our services. Because the techniques used by hackers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. The theft and/or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an event could adversely affect our competitive position, reputation, brand and future sales of our products, and could impair our ability to operate our business, including our ability to provide subscription or maintenance and support services to our customers. We could suffer monetary and other losses and reputational harm in the event of such incidents.

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Outages, interruptions or delays in hosting services could impair the delivery of our cloud-based security services and harm our business.

We operate infrastructure that supports our ThreatRadar and Security Operations Center (“SOC”) services and use third party hosting facilities for certain ThreatRadar services. Despite precautions taken within our own internal network and at these third party facilities, the occurrence of a natural disaster or an act of terrorism or other unanticipated problems could result in lengthy interruptions in our services.

The cloud-based security services that we provide through our subsidiary, Incapsula, are operated from a network of third party facilities that host the software and systems that operate these security services. Any damage to, or failure of, our internal systems or systems at third party hosting facilities could result in outages or interruptions in our cloud-based services. Outages or interruptions in our cloud-based security services may cause our customers and potential customers to believe our cloud-based security services are unreliable or suffer from perceived vulnerabilities, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers, ultimately harming our business and revenue.  Our Incapsula service has experienced outages in the past and we may continue to experience such outages in the future.

Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

We are subject to income taxation in the United States and numerous foreign jurisdictions. Determining our provision for income taxes requires significant management judgment. In addition, our provision for income taxes is subject to volatility and could be adversely affected by many factors, including, among other things, changes to our operating or holding structure, changes in the amounts of earnings in jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws. We are subject to ongoing tax examinations in various jurisdictions. For example, we are currently under audit by the Israeli Tax Authority. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing, determinations regarding the inclusion of stock-based compensation expense as part of a cost-plus arrangement and taxes owed on the purchase and sale of Skyfence intellectual property and related assets or other matters and assess additional taxes. While we regularly assess the likely outcomes of these examinations to determine the adequacy of our provision for income taxes, there can be no assurance that the outcomes of such examinations will not have a material impact on our operating results and cash flows.

Significant judgment is required to determine the recognition and measurement attributes prescribed in Accounting Standards Codification (“ASC”) 740-25 (formerly referred to as Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109”). In addition, ASC 740-25 applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes or additional paid-in capital. In addition, we are subject to the continuous examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our results of operations.

Our ability to use our net operating loss carryforwards may be subject to limitations and may result in increased future tax liability to us.

Generally, a change of more than 50% in the ownership of a corporation’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal and applicable state income tax purposes. An ownership change may limit a company’s ability to use its net operating loss carryforwards attributable to the period prior to such change. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended, has occurred after each of our previous private placements of preferred stock or after the issuance of shares of common stock in connection with our initial public offering and follow-on public offering. In the event we have undergone an ownership change under Section 382, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increased future tax liability to us.

Our business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade events such as terrorist attacks.

A significant natural disaster, such as an earthquake, fire or a flood, or a significant power outage could have a material adverse impact on our business, financial condition and results of operations. Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity, on land reclaimed from the bay that is susceptible to high liquefaction risk in the event of an earthquake. In addition, natural disasters could affect our manufacturing vendors or logistics providers’ ability to perform services such as manufacturing products on a timely basis and assisting with shipments on a timely basis. In the event our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of the events discussed above, shipments could be delayed,

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resulting in missing financial targets, such as revenue and shipment targets, for a particular quarter. Further, if a natural disaster occurs in a region from which we derive a significant portion of our revenue, customers in that region may delay or forego purchases of our products, which may materially and adversely impact our results of operations for a particular period. In addition, acts of terrorism could cause disruptions in our business or the business of our manufacturer, logistics providers, partners, customers or the economy as a whole. Given our typical concentration of sales at each quarter end, any disruption in the business of our manufacturer, logistics providers, partners or customers that impacts sales at the end of our quarter could have a significant adverse impact on our quarterly results. All of the aforementioned risks may be augmented if the business continuity plans for us and our suppliers prove to be inadequate. To the extent that any of the above results in delays or cancellations of customer orders, or the delay in the manufacture, deployment or shipment of our products, our business, financial condition and results of operations would be adversely affected.

Risks Related to Ownership of our Common Stock

If we fail to maintain an effective system of disclosure controls and procedures and internal controls over financial reporting, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations of the NASDAQ Stock Market LLC. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place strains on our personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our current controls and any new controls that we develop may become inadequate because of changes in conditions, and the degree of compliance with the policies or procedures may deteriorate. In addition, weaknesses in our internal controls over financial reporting may be discovered in the future. Our filings with the SEC are subject to periodic review by the SEC, and our auditors are subject to periodic inspection by the Public Company Accounting Oversight Board. Any failure to maintain effective controls over financial reporting, any difficulties encountered in the implementation of additional controls or the improvement of existing controls, or any issues that emerge as a result of regulatory review, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a revision or restatement of our prior period financial statements. Any failure to maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our annual reports filed with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.

For example, in connection with the review of our unaudited interim condensed consolidated financial statements in our Form 10-Q filed with the SEC on November 7, 2014, management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our disclosure controls and procedures as of September 30, 2014. Based on that assessment, management concluded that our disclosure controls and procedures were not effective as of September 30, 2014, because of a material weakness in internal control over financial reporting related to insufficient oversight and review controls to ensure the proper determination of stock-based compensation expense for certain complex equity awards that were not issued in the ordinary course. While these control deficiencies were remediated, we continue to identify risks and make improvements to our internal controls and we cannot assure you that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended significant resources, and anticipate that we will continue to add personnel and provide significant management oversight, which involve substantial accounting-related costs. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In the event that we are not able to continue to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Select Market.

We also have implemented elements of a disaster recovery/business continuity plan for our accounting and related information technology systems but we have not yet implemented a complete disaster recovery/business continuity plan that covers all of our operations. If the elements that we have developed and plan to develop in the future prove inadequate in the circumstances of a

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particular disaster or other business continuity event, our ability to maintain timely accounting and reporting may be materially impaired.

Market volatility may affect our stock price and the value of your investment

The trading prices of the securities of technology companies generally, and of our stock in particular, have been highly volatile. The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot predict or control, including:

• announcements of new products, services or technologies, commercial relationships, acquisitions, dispositions, strategic partnerships, joint ventures, capital commitments or other events by us or our competitors;

• fluctuations in operating performance and in stock market prices and trading volumes of securities of other technology companies generally, or those in our industry in particular;

• general market conditions and overall price and volume fluctuations in U.S. equity markets;

• actual or anticipated variations in our operating results, or the operating results of our competitors;

• the financial and other projections we may provide to the public, any changes in these projections or our failure to meet these projections or changes in our financial guidance or securities analysts’ estimates of our financial performance;

• failure of securities analysts to maintain coverage of us, changes in financial or other estimates by any securities analysts who follow us, or our failure to meet these estimates or the expectations of our investors;

• ratings or other changes by any securities analysts who follow our company or our industry;

• announcements of restructurings, reductions in force, departure of key employees and/or consolidation of operations;

• sales or purchases of large blocks of our common stock, including by our executive officers, directors, significant stockholders and activist stockholders;

• rumors and market speculation involving Imperva or other companies in our industry, particularly with respect to strategic transactions; and

• lawsuits threatened or filed against us and changing legal or regulatory developments in the United States and other countries.

In addition, the stock market in general, and the NASDAQ Stock Market in particular, have experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of particular companies. These broad market fluctuations or factors affecting us more specifically may cause the trading price of our common stock to decline. In the past, securities class action litigation has often been brought against a company after a period of volatility in the market price of its common stock.

We face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards.

We are currently and may in the future become subject to claims and litigation alleging violations of the securities laws or similar claims, which could harm our business and require us to incur significant costs. For example, on April 11, 2014, a purported stockholder class action lawsuit was filed in the United States District Court for the Northern District of California against us and certain of our officers alleging that defendants made false and misleading statements and purporting to assert claims for violations of the federal securities laws, and seeking unspecified compensatory damages and other relief. As described further in Part II, Item 1 (Legal Proceedings), in July 2017 the parties reached an agreement in principle to settle this matter, but future litigation of this type may require significant attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial position, results of operations and cash flows.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our industry. If we do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

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We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the value of their stock.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include:

• authorizing “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock, which would increase the number of outstanding shares and could thwart a takeover attempt;

• a classified board of directors whose members can be dismissed only for cause;

• the prohibition on actions by written consent of our stockholders;

• the limitation on who may call a special meeting of stockholders;

• the establishment of stock ownership and advance notice requirements for stockholders who intend to submit proposals to be acted upon at stockholder meetings, including nominations of persons for election to our board of directors; and

• the requirement that at least 75% of our outstanding capital stock must approve any amendment of the foregoing second through fifth provisions.

In addition, because we are incorporated in Delaware, we are governed by the provisions of the anti-takeover provisions of the Delaware General Corporation Law, which may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

The announcement that we have concluded our review of strategic alternatives and will remain a standalone company may create uncertainty about our prospects.

On August 4, 2016, we announced that we retained advisors to assist us in a comprehensive review of strategic alternatives and on November 3, 2016, we announced that we had concluded the review process.  The process did not result in a transaction or any other specific strategic action, but did result in a restructuring plan that was also announced.  These announcements may create uncertainty about our prospects as a standalone entity, and may lead to a perception of instability, irrespective of the actual circumstances, which may be exploited by our competitors, cause concern to our current or potential customers and partners, and make it more difficult to attract and retain qualified personnel. Such issues or perceptions may negatively impact our business, disrupt our operations and divert the attention of management and our employees, all of which could materially and adversely affect our operations and operating results. In addition, our stock price may experience periods of increased volatility as a result of prolonged rumors and speculation about our business. Further, while we have concluded the review of strategic alternatives, it is possible that a strategic transaction or other type of strategic action may arise in the future.

Our business could be negatively affected by stockholder activism, which could impact the trading price and volatility of our common stock.   

An activist investor, Elliott Associates, L.P., and its affiliates, took an ownership position in our common stock in June 2016 and disclosed in a Schedule 13D that it economically owns approximately 7% of our common stock (with additional economic exposure through derivatives of approximately 4% of our common stock).  Since then, Elliott Associates has communicated to us its opinions regarding strategic and operational opportunities that it believes would meaningfully increase value to our stockholders. In the future, Elliott Associates may take actions that could be costly and time-consuming to us, disrupt our operations and divert the attention of management and our employees, such as public proposals and requests for special meetings, potential nominations of candidates for election to our board of directors, requests to pursue a strategic combination or other transaction, or other special requests. Additionally, perceived uncertainties as to our future direction or changes to the composition of our board may be exploited by our

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competitors, cause concern to our current or potential customers and partners, and make it more difficult to attract and retain qualified personnel. Such uncertainties may adversely impact our business and future financial results. In addition, our stock price may experience periods of increased volatility as a result of stockholder activism, including in reaction to any future acquisition or disposition of our common stock by Elliott or other activists.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Use of Proceeds from Public Offering of Common Stock

The Form S-1 Registration Statement (Registration No. 333-175008) relating to our initial public offering (“IPO”) was declared effective by the SEC on November 8, 2011. The net proceeds to us of our IPO after deducting $6.9 million of underwriters’ discounts and $5.8 million of offering expenses were $86.2 million.  As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016 that was filed on February 27, 2017 (File No. 001-35338), through February 2017 we had used $29.4 million of the proceeds in connection with acquisitions.  Other than as disclosed in our Annual Report on Form 10-K there were no additional uses of proceeds for the six months ended June 30, 2017.  We expect to use remaining net IPO proceeds for working capital and general corporate purposes, including acquisitions. Although we may also use a portion of the net proceeds for acquisition of complementary businesses, technologies or other assets, we have no present understandings, commitments or agreements to enter into any acquisitions.

Our management will retain broad discretion in the allocation and use of the net proceeds of our IPO, and investors will be relying on the judgment of our management regarding the application of the net proceeds. Pending specific utilization of the net proceeds as described above, we have invested the net proceeds of the offering in short-term, interest-bearing obligations. The goal with respect to the investment of the net proceeds will be capital preservation and liquidity so that such funds are readily available to fund our operations.

Unregistered Sales of Equity Securities

For the quarter ended June 30, 2017, we did not sell any unregistered securities.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

See Exhibit Index.

59

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 3, 2017	IMPERVA, INC.
	By:	/s/ Anthony Bettencourt
		Anthony Bettencourt
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 3, 2017
	By:	/s/ Terrence J. Schmid
		Terrence J. Schmid
		Chief Financial Officer
		(Principal Financial Officer)

60

EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.01	2011 Stock Option and Incentive Plan, Subplan and Forms of Agreements Thereunder, as Amended. (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on July 27, 2017 (File No. 001-35338)).
31.01	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
31.02	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
32.01*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).
32.02*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

* This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Imperva, Inc. specifically incorporates it by reference.

61

EX-31.01

Exhibit 31.01

CERTIFICATION OF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(a) OF THE SECURITIES

EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anthony Bettencourt, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Imperva, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2017	By:	/s/ Anthony Bettencourt
		Anthony Bettencourt
		President and Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14(a) OF THE

SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Terrence J. Schmid, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Imperva, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2017	By:	/s/ Terrence J. Schmid
		Terrence J. Schmid
		Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, Anthony Bettencourt, the Chief Executive Officer of Imperva, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

(i) the Quarterly Report on Form 10-Q for the period ended June 30, 2017 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2017	By:	/s/ Anthony Bettencourt
		Anthony Bettencourt
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-32.02

Exhibit 32.02

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, Terrence J. Schmid, the Chief Financial Officer of Imperva, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that:

(i) the Quarterly Report on Form 10-Q for the period ended June 30, 2017 of the Company (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2017	By:	/s/ Terrence J. Schmid
		Terrence J. Schmid
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	IMPV
Entity Registrant Name	IMPERVA INC
Entity Central Index Key	0001364962
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		33,814,837

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	[1]
CURRENT ASSETS:
Cash and cash equivalents	$ 147,427	$ 107,343
Short-term investments	172,460	153,749
Restricted cash	52	68
Accounts receivable, net of allowance of $1,641 and $ 1,784 as of June 30, 2017 and December 31, 2016, respectively	59,333	62,571
Inventory	436	590
Prepaid expenses and other current assets	11,340	7,922
Insurance recoveries receivable	19,000
Total current assets	410,048	332,243
Property and equipment, net	24,788	21,496
Goodwill	36,389	37,448
Acquired intangible assets, net	3,449	8,393
Severance pay fund	6,280	5,070
Restricted cash	2,054	1,884
Deferred tax assets	2,813	1,220
Other assets	6,162	1,065
TOTAL ASSETS	491,983	408,819
CURRENT LIABILITIES:
Accounts payable	6,044	5,529
Accrued compensation and benefits	21,342	20,840
Accrued and other current liabilities	8,898	7,683
Accrued legal settlement	19,000	0
Deferred revenue	106,332	104,042
Total current liabilities	161,616	138,094
Other liabilities	8,282	6,637
Deferred revenue	27,818	26,429
Accrued severance pay	7,152	5,696
TOTAL LIABILITIES	204,868	176,856
Commitments and Contingencies (Note 6)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value - 5,000,000 shares authorized, no shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	0	0
Common stock, $0.0001 par value - 145,000,000 shares authorized, 33,813,897 and 33,088,990 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	3	3
Additional paid-in capital	546,205	510,257
Accumulated deficit	(259,813)	(276,819)
Accumulated other comprehensive income (loss)	720	(1,478)
TOTAL STOCKHOLDERS' EQUITY	287,115	231,963
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 491,983	$ 408,819

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts	$ 1,641	$ 1,784
Preferred stock, par value, per share	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value, per share	$ 0.0001	$ 0.0001
Common stock, shares authorized	145,000,000	145,000,000
Common stock, shares issued	33,813,897	33,088,990
Common stock, shares outstanding	33,813,897	33,088,990

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Net revenue:
Products and license	$ 20,012,000	$ 14,830,000	$ 39,590,000	$ 35,671,000
Services	54,423,000	43,043,000	107,153,000	81,975,000
Total net revenue	74,435,000	57,873,000	146,743,000	117,646,000
Cost of revenue:
Products and license	1,823,000	1,814,000	3,755,000	3,998,000
Services	13,751,000	10,703,000	26,771,000	21,487,000
Total cost of revenue	15,574,000	12,517,000	30,526,000	25,485,000
Gross profit	58,861,000	45,356,000	116,217,000	92,161,000
Operating expenses:
Research and development	14,528,000	15,576,000	31,978,000	31,595,000
Sales and marketing	36,388,000	40,977,000	73,512,000	81,717,000
General and administrative	12,375,000	12,245,000	25,911,000	26,131,000
Restructuring charges	0	0	667,000	0
Amortization of acquired intangible assets	132,000	352,000	449,000	704,000
Total operating expenses	63,423,000	69,150,000	132,517,000	140,147,000
Loss from operations	(4,562,000)	(23,794,000)	(16,300,000)	(47,986,000)
Gain on sale of business	0	0	35,871,000	0
Other income (expense), net	158,000	(241,000)	66,000	(158,000)
(Loss) income before provision for income taxes	(4,404,000)	(24,035,000)	19,637,000	(48,144,000)
(Benefit) provision for income taxes	(914,000)	681,000	44,000	579,000
Net (loss) income	$ (3,490,000)	$ (24,716,000)	$ 19,593,000	$ (48,723,000)
Earnings per share:
Basic	$ (0.10)	$ (0.77)	$ 0.59	$ (1.52)
Diluted	$ (0.10)	$ (0.77)	$ 0.58	$ (1.52)
Shares used in computing earnings per share:
Basic	33,640	32,163	33,425	31,984
Diluted	33,640	32,163	33,984	31,984

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net Income (loss)	$ (3,490)	$ (24,716)	$ 19,593	$ (48,723)
Other comprehensive gain (loss) (net of tax):
Net change in net unrealized gain (loss) on investments	22	37	50	206
Net change in unrealized gain (loss) on hedging instruments	419	(654)	2,148	262
Other comprehensive income (loss)	441	(617)	2,198	468
Comprehensive income (loss)	$ (3,049)	$ (25,333)	$ 21,791	$ (48,255)

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total		Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning balance at Dec. 31, 2015	$ 240,201		$ 3	$ 448,069	$ (206,540)	$ (1,331)
Beginning balance, shares at Dec. 31, 2015			31,837,144
Issuance of common stock under employee equity plans, net of repurchases	5,682			5,682
Issuance of common stock under employee equity plans, net of repurchases, shares			540,602
Issuance of holdback shares in connection with acquisitions, shares			206,499
Stock-based compensation	29,635			29,635
Income tax deficiencies from employee stock option exercises	(14)			(14)
Shares withheld for tax withholding on vesting of restricted stock units	(3,954)			(3,954)
Components of other comprehensive income (loss), net of tax
Change in unrealized gain (loss) on investments	206					206
Change in unrealized gain (loss) on hedging instruments	262					262
Net income (loss)	(48,723)				(48,723)
Comprehensive income (loss)	(48,255)
Ending balance at Jun. 30, 2016	223,295		$ 3	479,418	(255,263)	(863)
Ending balance, shares at Jun. 30, 2016			32,584,245
Beginning balance at Mar. 31, 2016						(246)
Components of other comprehensive income (loss), net of tax
Change in unrealized gain (loss) on investments	37
Change in unrealized gain (loss) on hedging instruments	(654)
Net income (loss)	(24,716)
Comprehensive income (loss)	(25,333)
Ending balance at Jun. 30, 2016	223,295		$ 3	479,418	(255,263)	(863)
Ending balance, shares at Jun. 30, 2016			32,584,245
Beginning balance at Dec. 31, 2016	231,963	[1]	$ 3	510,257	(276,819)	(1,478)
Beginning balance, shares at Dec. 31, 2016			33,088,990
Cumulative effect of a change in accounting principle	14			2,601	(2,587)
Issuance of common stock under employee equity plans, net of repurchases	14,851			14,851
Issuance of common stock under employee equity plans, net of repurchases, shares			724,907
Stock-based compensation	25,117			25,117
Shares withheld for tax withholding on vesting of restricted stock units	(6,621)			(6,621)
Components of other comprehensive income (loss), net of tax
Change in unrealized gain (loss) on investments	50					50
Change in unrealized gain (loss) on hedging instruments	2,148					2,148
Net income (loss)	19,593				19,593
Comprehensive income (loss)	21,791
Ending balance at Jun. 30, 2017	287,115		$ 3	546,205	(259,813)	720
Ending balance, shares at Jun. 30, 2017			33,813,897
Beginning balance at Mar. 31, 2017						279
Components of other comprehensive income (loss), net of tax
Change in unrealized gain (loss) on investments	22
Change in unrealized gain (loss) on hedging instruments	419
Net income (loss)	(3,490)
Comprehensive income (loss)	(3,049)
Ending balance at Jun. 30, 2017	$ 287,115		$ 3	$ 546,205	$ (259,813)	$ 720
Ending balance, shares at Jun. 30, 2017			33,813,897

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017		Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)	$ 19,593		$ (48,723)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	4,943		2,961
Stock-based compensation	25,117		32,759
Amortization of acquired intangibles	449		704
Loss on disposals	0		255
Amortization of premiums/accretion of discounts on short-term investments	(104)		111
Excess tax deficiencies from share-based compensation	0		14
Gain on sale of business	(35,871)		0
Other	(1,255)		(228)
Changes in operating assets and liabilities:
Accounts receivable, net	3,238		17,172
Inventory	192		(26)
Prepaid expenses and other assets	(864)		281
Accounts payable	(1,901)		(2,570)
Accrued compensation and benefits	3,626		(7,037)
Accrued and other liabilities	2,990		(209)
Severance pay (net)	246		328
Deferred revenue	5,132		8,160
Deferred tax assets	(1,593)		(158)
Net cash provided by operating activities	23,938		3,794
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales/maturities of short-term investments	50,923		34,331
Purchase of short-term investments	(69,451)		(77,067)
Proceeds from sale of business	35,015		0
Net purchases of property and equipment	(6,546)		(8,263)
Change in restricted cash	(154)		12
Net cash provided by (used in) investing activities	9,787		(50,987)
CASH FLOWS FROM FINANCING ACTIVITIES:
Settlement of holdback liability	0		(7,157)
Proceeds from issuance of common stock, net of repurchases	11,725		5,682
Shares withheld for tax withholding on vesting of restricted stock units	(6,621)		(3,954)
Offering costs relating to follow-on public offering	0		(112)
Excess tax deficiencies from share-based compensation	0		(14)
Net cash provided by (used in) financing activities	5,104		(5,555)
Effect of exchange rate changes on cash and cash equivalents	1,255		228
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	40,084		(52,520)
CASH AND CASH EQUIVALENTS - Beginning of period	107,343	[1]	168,252
CASH AND CASH EQUIVALENTS - End of period	147,427		115,732
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired but not yet paid	$ 2,520		$ 2,375

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

1. Basis of Presentation and Summary of Significant Accounting Policies

Business

Imperva, Inc. (together with its subsidiaries, the “Company”) was incorporated in April 2002 in Delaware. The Company is headquartered in Redwood Shores, California and has subsidiaries located throughout the world including Israel, Asia and Europe. The Company is engaged in the development, marketing, sales, service and support of cyber-security solutions that protect business-critical data and applications whether in the cloud or on premises.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with Article 10 of Regulation S-X and pursuant to the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and footnote disclosure it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its consolidated financial position, results of operations, and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 27, 2017 (the “Annual Report”).

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.

Concentration of Revenue and Accounts Receivable

Significant customers are those which represent 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date. The Company primarily sells products and services through channel partners, including distributors and resellers, which sell to end-user customers. For the six months ended June 30, 2017 and 2016, no single end-user customer represented 10% or more of the Company’s total revenue or gross accounts receivable balance.  

During those periods, the Company had one reseller that represented 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date as follows:

Revenue												Accounts Receivable
For the three months ended June 30,						For the six months ended June 30,						As of June 30,			As of December 31,
2017			2016			2017			2016			2017			2016
	12	%		12	%		12	%		13	%		21	%		18	%

Significant Accounting Policies

The Company adopted the guidance in Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting, on January 1, 2017. Under this ASU, entities are permitted to make an accounting policy election to either estimate forfeitures on share-based payment awards, as previously required, or to recognize forfeitures as they occur. The Company has elected to recognize forfeitures as they occur and the impact of that change in accounting policy has been recorded as a $2.6 million cumulative effect adjustment to increase our accumulated deficit as of January 1, 2017. Additionally, the Company has elected to use a prospective transition method for presentation of excess tax benefits on the statement of cash flows. The remaining provisions of ASU 2016-09 did not have a material impact on the accompanying condensed consolidated financial statements.

Insurance Recoveries Receivable

Insurance recoveries receivable consists of amounts receivable to the Company from insurance recoveries in connection with settlement costs and professional fees. Claims for loss recoveries are generally recognized when a loss event has occurred and recovery is considered probable.

There have been no other material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting”, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. The standard is effective for the Company on January 1, 2018, with early adoption permitted. The new guidance must be applied prospectively to awards modified on or after the adoption date. The future impact of ASU 2017-09 will be dependent on the nature of future stock award modifications.

In January 2017, FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which simplifies the measurement of goodwill impairment by removing the second step of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. Under this guidance, goodwill impairment is to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value with the loss recognized not to exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective beginning January 1, 2020 on a prospective basis, with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The standard is to be applied on a prospective basis. The Company does not anticipate a material impact to the consolidated financial statements once implemented.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and should be applied prospectively with early adoption permitted under certain scenarios. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard will be effective for the Company beginning January 1, 2018, with early application permitted. The standard will require adoption on a retrospective basis. The new accounting pronouncements will not have a significant impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will be effective for the Company beginning January 1, 2018, with early application permitted. The standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In June 2016, the FASB Issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The standard will be effective for the Company beginning January 1, 2020, with early application permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 regarding ASC Topic 842 “Leases.” The amendments in this guidance require balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The standard will be effective for the Company beginning January 1, 2019. The amendments require a modified retrospective approach with optional practical expedients. While the Company continues to evaluate the effect of the standard on its ongoing financial reporting, the Company anticipates that the adoption of the ASU may materially affect its Balance Sheet.

In May 2014, the FASB issued ASU 2014-09—Revenue (Topic 606): Revenue from Contracts with Customers. The standard will replace most existing U.S. GAAP guidance on this topic. The standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.

The standard will be effective for the Company beginning January 1, 2018 using either of two methods: (1) retrospective application of the standard to each prior reporting period presented with the option to elect certain practical expedients as defined within the standard, or (2) retrospective application of the standard with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per the standard. The Company plans to adopt the standard under the modified retrospective method effective January 1, 2018. The Company’s ability to adopt using the modified retrospective method is dependent on several factors such as the significance of the impact of the new standard on the Company’s financial results, and system readiness, including software procured from third-party providers and the completion of the Company’s analysis of information necessary to determine the cumulative effect of adoption recognized as of the date of initial application.

The Company has developed a project plan for this transition, which includes necessary changes to accounting policies, processes, internal controls, and system requirements and is progressing as planned. The Company expects to implement the plan in time to report in accordance with ASC 606 for the first quarterly filing on Form 10-Q for the period ended March 31, 2018.

As part of its preliminary evaluation, the Company has considered the impact of the standard’s requirements with respect to capitalization and amortization of incremental costs of obtaining a contract, primarily sales commissions. Under the Company’s current accounting policy, contract origination costs are expensed as incurred. The new standard requires the capitalization of all incremental costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained, provided the Company expects to recover the costs. The Company is reviewing historical costs to identify those that meet the new standard’s capitalization requirement. Under the new standard, the Company will amortize these costs over a period of benefit, as estimated by management, which may extend beyond the contract term.

The Company’s contracts with customers frequently include multiple performance obligations. For such arrangements, we will allocate revenue to each performance obligation based on its relative standalone selling price. The Company is analyzing its historical sales data and expects to determine standalone selling prices based on the prices charged to customers.

While the Company continues to assess the potential impacts of the new standard on its consolidated financial statements and related disclosures, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. The preliminary assessments are subject to change as the Company continues to assess the new standard along with industry trends and additional interpretive guidance.

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Cash, Cash Equivalents, and Short-Term Investments

6 Months Ended

Jun. 30, 2017

Cash And Cash Equivalents [Abstract]

Cash, Cash Equivalents, and Short-Term Investments

2. Cash, Cash Equivalents, and Short-Term Investments

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of cash on hand, highly liquid investments in commercial paper, money market funds corporate debt obligations and various deposit accounts.

The Company considers all high quality investments purchased with original maturities at the date of purchase greater than three months to be short-term investments. Investments are available to be used for current operations and are, therefore, classified as current assets even though maturities may extend beyond one year. Cash equivalents and short-term investments are classified as available-for-sale and are, therefore, recorded at fair value on the condensed consolidated balance sheets, with any unrealized gains and losses reported in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity in its condensed consolidated balance sheets, until realized. The Company uses the specific-identification method to compute gains and losses on the investments. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included as a component of other income (expense), net in the condensed consolidated statements of operations.

Cash, cash equivalents and short-term investments consist of the following (in thousands):

	As of June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash	$	53,728	$	-	$	-	$	53,728
Commercial paper		5,490		-		1		5,489
Money market funds		84,359		-		-		84,359
Corporate debt obligations		3,852		-		1		3,851
Total	$	147,429	$	-	$	2	$	147,427
Short-term investments:
Commercial paper	$	14,228	$	-	$	11	$	14,217
Corporate debt obligations		143,078		1		266		142,813
US government agencies		14,998		-		47		14,951
Bank deposits		480		-		1		479
Total	$	172,784	$	1	$	325	$	172,460

	As of December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash	$	63,642	$	-	$	-	$	63,642
Commercial paper		6,995		-		2		6,993
Money market funds		36,708		-		-		36,708
Total	$	107,345	$	-	$	2	$	107,343
Short-term investments:
Commercial paper	$	14,245	$	-	$	8	$	14,237
Corporate debt obligations		110,062		-		347		109,715
US government agencies		18,998		2		50		18,950
Bank deposits		10,846		1		-		10,847
Total	$	154,151	$	3	$	405	$	153,749

The following table summarizes the cost and estimated fair value of short-term investments based on stated effective maturities as of June 30, 2017 (in thousands):

	As of June 30, 2017
			Estimated
	Amortized		Fair
	Cost		Value
Short-term investments:
Due within one year	$	88,396	$	88,258
Due within two years		84,388		84,202
Total	$	172,784	$	172,460

The gross unrealized loss related to these securities was due primarily to changes in interest rates. The Company reviews its short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. The Company considers factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and its intent to sell, or whether it is more likely than not the Company will be required to sell, the investment before recovery of the investment’s amortized cost basis. If the Company believes that an other-than-temporary decline exists in one of these securities, the Company writes down these investments to fair value. For debt securities, the portion of the write-down related to credit loss would be recorded to other income (expense), net, in the Company’s condensed consolidated statements of operations. Any portion not related to credit loss would be recorded to accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity in the Company’s condensed consolidated balance sheets. During the three and six months ended June 30, 2017 and 2016, the Company did not consider any of its investments to be other-than-temporarily impaired.

The following tables show the short-term investments in an unrealized loss position and the related gross unrealized losses and fair value and length of time that the short-term investments have been in a continuous unrealized loss position (in thousands):

	As of June 30, 2017
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	14,217	$	11	$	-	$	-	$	14,217	$	11
Corporate debt obligations		89,716		186		50,082		80		139,798	$	266
US government agencies		9,458		40		5,493		7		14,951		47
Bank deposits		480		1		-		-		480	$	1
	$	113,871	$	238	$	55,575	$	87	$	169,446	$	325

	As of December 31, 2016
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	14,237	$	8	$	-	$	-	$	14,237	$	8
Corporate debt obligations		78,821		323		29,689		24		108,510	$	347
US government agencies		11,451		46		3,496		4		14,947		50
	$	104,509	$	377	$	33,185	$	28	$	137,694	$	405

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. There have been no transfers between fair value measurement levels during the three and six months ended June 30, 2017.

The Company’s cash equivalents and short-term investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include mutual funds and money market securities, and are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on quoted prices in less active markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability include U.S. agency securities, investment-grade corporate bonds, bank deposits, and commercial paper. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The Company executes its foreign currency contracts primarily in the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large multi-national and regional banks. The Company’s foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

The following table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2017 and December 31, 2016, by level within the fair value hierarchy (in thousands):

	As of June 30, 2017
	Level I		Level II		Level III		FairValue
Financial Assets:
Cash equivalents:
Commercial paper	$	-	$	5,489	$	-	$	5,489
Money market funds		84,359		-		-		84,359
Corporate debt obligations		-		3,851		-		3,851
Short-term investments:
Commercial paper		-		14,217		-		14,217
Corporate debt obligations		-		142,813		-		142,813
US government agencies		-		14,951		-		14,951
Bank deposits		-		479		-		479
Prepaid expenses and other current assets - Forward foreign exchange    contracts		-		2,263		-		2,263
Total financial assets	$	84,359	$	184,063	$	-	$	268,422

	As of December 31, 2016
	Level I		Level II		Level III		Fair Value
Financial Assets:
Cash equivalents:
Commercial paper	$	-	$	6,993	$	-	$	6,993
Money market funds		36,708		-		-		36,708
Short-term investments:
Commercial paper		-		14,237		-		14,237
Corporate debt obligations		-		109,715		-		109,715
US government agencies		-		18,950		-		18,950
Bank deposits		-		10,847		-		10,847
Total financial assets	$	36,708	$	160,742	$	-	$	197,450
Financial Liability:
Accrued and other current liabilities - Forward foreign exchange    contracts	$	-	$	639	$	-	$	639

In addition to the amounts disclosed in the above table, the fair value of the Company’s Israeli severance pay assets, which were comprised of Level II assets, was $6.3 million and $5.1 million as of June 30, 2017 and December 31, 2016, respectively.

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Derivative Instruments

6 Months Ended

Jun. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments

4. Derivative Instruments

The Company’s primary objective for holding derivative instruments is to reduce its exposure to foreign currency rate changes. The Company reduces its exposure by entering into forward foreign exchange contracts with respect to operating expenses that are forecast to be incurred in currencies other than U.S. dollars. Substantially all of the Company’s revenue and capital purchasing activities and a majority of its operating expenditures are transacted in U.S. dollars. However, certain operating expenditures are incurred in or exposed to other currencies, primarily the Israeli shekel and the Euro.

The Company has established forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. The Company’s currency risk management program includes forward foreign exchange contracts designated as cash flow hedges. These forward foreign exchange contracts generally mature within 12 months. The Company does not enter into derivative financial instruments for trading purposes.

Derivative instruments measured at fair value and their classification on the condensed consolidated balance sheets are presented in the following tables (in thousands):

	As of June 30, 2017				As of December 31, 2016
	Notional Amount		Fair Value		Notional Amount		Fair Value
Foreign exchange forward contract derivatives in    cash flow hedging relationships -  included in    prepaid expenses and other current assets    (accrued and other current liabilities)	$	27,664	$	2,696	$	60,756	$	(639	)

Gains (losses) on derivative instruments and their classification on the condensed consolidated statement of operations are presented in the following table (in thousands):

	For the three months ended June 30						For the six months ended June 30
	2017			2016			2017			2016
Foreign Exchange Forward Contract Derivatives    in cash flow hedging relationships:
Gains recognized in OCI (a)	$	1,445		$	-		$	4,332		$	1,316
Losses recognized in OCI (a)	$	(17	)	$	(906	)	$	(17	)	$	(1,005	)
Gains recognized from accumulated OCI into    net income (b)	$	782		$	149		$	988		$	149
Losses recognized from accumulated OCI into    net income (b)	$	(5	)	$	(47	)	$	(10	)	$	(241	)

(a) Net change in the fair value of the effective portion classified in other comprehensive income (loss) (“OCI”).

(b) Effective portion of cash flow hedges reclassified from accumulated other comprehensive income (loss) into net income, of which $54 and $723 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2017; $68 and $910 were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2017. $6 and $96 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2016 and $(7) and $(85) were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2016. All amounts are reflected within the respective condensed consolidated statement of operations.

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Goodwill and Acquired Intangible Assets

6 Months Ended

Jun. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Acquired Intangible Assets

5. Goodwill and Acquired Intangible Assets

In February 2017, the Company completed the sale of its assets related to the Skyfence cloud access security broker business (“Skyfence”) to Forcepoint LLC and its Israeli subsidiary. We allocated goodwill of $1.1 million to the business being disposed of. Additionally, the acquired intangible assets with the carrying value of $4.5 million were derecognized in connection with this transaction. The Company did not have any goodwill impairments during three and six months ended June 30, 2017 and 2016.

The changes in the carrying amount of goodwill for the periods ended June 30, 2017 and December 31, 2016 were as follows (in thousands):

Balance as of December 31, 2016	$	37,448
Goodwill disposed with sale of Skyfence		(1,059	)
Balance as of June 30, 2017	$	36,389

The Company amortizes intangible assets, which consist of purchased technologies that have estimated useful lives ranging from 7 to 10 years, using the straight-line method when the consumption pattern of the asset is not apparent. The Company reviews such assets for impairment whenever an impairment indicator exists and continually monitors events and changes in circumstances that could indicate carrying amounts of the intangible assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets exceed the estimates of future undiscounted future cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s estimated fair value. There was no impairment of intangible assets recorded for the three and six months ended June 30, 2017 and 2016. The weighted average remaining useful life of the Company’s acquired technology, customer relationships, and trade names and other intangible assets is 6.5 years, 6.5 years, and 6.5 years, respectively as of June 30, 2017.

Acquired intangible assets subject to amortization are presented as follows (in thousands):

	As of June 30, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired technology	$	3,753	$	(1,004	)	$	2,749
Customer relationships		480		(38	)		442
Trade name and other		280		(22	)		258
Total	$	4,513	$	(1,064	)	$	3,449
	As of December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired technology	$	11,718	$	(4,085	)	$	7,633
Customer relationships		480		-			480
Trade name and other		280		-			280
Total	$	12,478	$	(4,085	)	$	8,393

Acquired intangible assets are amortized over their estimated useful lives of 7 to 10 years. As of June 30, 2017, the amortization expense in future periods is expected to be as follows (in thousands):

	Acquired
Fiscal Year	Technology
2017 (remaining 6 months)	$	265
2018		528
2019		528
2020		528
2021		528
Thereafter		1,072
Total expected amortization expense	$	3,449

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

(a) Operating Leases

The Company rents its facilities under operating leases with lease periods expiring through 2022. Future minimum payments under these facility operating leases and minimum rentals to be received under non-cancellable subleases are as follows as of June 30, 2017 (in thousands):

	Operating Leases		Estimated Sublease Income
Period Ending December 31:
2017 (remaining 6 months)	$	3,601	$	356
2018		8,459		683
2019		4,741		-
2020		4,461		-
2021		301		-
Thereafter		49		-
Total	$	21,612	$	1,039

Rent expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. Rent expense for the six months ended June 30, 2017 and 2016 was $3.2 million and $3.0 million, respectively.

In connection with leases of office space, the Company may receive tenant improvement allowances from lessors for certain improvements the Company makes to the leased properties. The Company records the tenant improvement allowances as a leasehold improvement within property and equipment, net, and as deferred rent within other liabilities on the condensed consolidated balance sheets. The deferred rent liability is amortized to rent expense over the term of the lease on a straight-line basis. The leasehold improvements are amortized to expense over the period from when the improvements were placed into service until the end of their useful life, which is the end of the lease term. For the six months ending June 30, 2017 and 2016, the Company did not receive any tenant improvement allowances.

In addition, certain of the Company’s operating lease agreements for office space also include rent holidays and scheduled rent escalations during the initial lease term. The Company has recorded the rent holidays as a deferred rent within other liabilities on the condensed consolidated balance sheets. The Company recognizes the deferred rent liability and scheduled rent increase on a straight-line basis into rent expense over the lease term commencing on the date the Company takes possession of the lease space.

As of June 30, 2017 and December 31, 2016 the Company had $2.1 million and $1.9 million, respectively, in restricted deposits to secure bank guarantees provided to its lessors.

(b) Cancelable Lease Agreement

The Company leases motor vehicles under cancelable operating lease agreements. The Company has an option to cancel the lease agreements, which may result in penalties in a maximum amount of $0.1 million as of June 30, 2017. Motor vehicle lease expenses for the six months ended June 30, 2017 and 2016 were $1.5 million and $1.4 million, respectively.

(c) Purchase Commitments

As of June 30, 2017 and December 31, 2016, the Company had purchase commitments of $3.4 million and $3.8 million, respectively, to purchase inventory, trial units, and research and development equipment from its vendors. The purchase commitments result from the Company’s contractual obligation to order or build inventory in advance of anticipated sales. According to the Company’s agreements with its vendors, the Company committed to purchase inventory within six months from the date the inventory arrived at the vendor’s warehouse.

(d) Litigation

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business.

On April 11, 2014, a purported shareholder class action lawsuit was filed in the United States District Court for the Northern District of California against the Company and certain of its current and former officers. On August 7, 2014, the Court entered an order appointing lead plaintiff and counsel for the purported class. The lead plaintiff filed an amended complaint on October 10, 2014. The lawsuit named the Company and certain of its current and former officers and purported to bring suit on behalf of those investors who purchased the Company’s publicly traded securities between May 2, 2013 and April 9, 2014. The plaintiff alleged that defendants made false and misleading statements about the Company’s operations and business and financial results and purported to assert claims for violations of the federal securities laws. The amended complaint sought unspecified compensatory damages, interest thereon, costs incurred in the action and equitable/injunctive or other relief. On January 6, 2015, defendants filed a motion to dismiss the amended complaint. On September 17, 2015, the Court granted defendants’ motion to dismiss with leave to amend. The lead plaintiff filed an amended complaint on January 13, 2016, again naming the same current and former officers, alleging false and misleading statements about the Company’s operations and business and financial results, and seeking the same relief.  On February 10, 2016, defendants filed a motion to dismiss the amended complaint. On May 16, 2016, the Court granted the motion in part and denied the motion in part.  On September 7, 2016, defendants filed their operative answer to the amended complaint. In July 2017, with the help of a mediator, the parties reached an agreement in principle to settle the action.  The settlement, which is subject to final documentation and the approval of the Court, among other conditions, will be funded entirely by the Company’s insurance carriers, and has been accrued in current assets and current liabilities for the period ended June 30, 2017. The settlement is not deemed material to our results of operations, liquidity or capital resources as a result of the insurance receivable.

In addition, the Company receives, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend the Company, the Company’s channel partners and the Company’s customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights.

In the opinion of management, liabilities associated with these claims from third parties, while possible, are not probable at this time, and therefore the Company has not recorded any accrual for them as of June 30, 2017 and December 31, 2016. Further, any possible range of loss cannot be reasonably estimated at this time. The ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, potential negative publicity, diversion of management resources and other factors. Accordingly, there can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on the Company’s business, consolidated financial position, results of operations or cash flows.

(e) Indemnification

Under the indemnification provisions of its standard sales contracts, the Company agrees to defend its end customers and certain channel partners against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks, or trade secrets, and to pay judgments and settlements entered on such claims. The Company’s exposure under these indemnification provisions is generally limited to the total amount paid under the agreement. However, some agreements include indemnification provisions that could potentially expose the Company to losses in excess of the amount received under the agreement. To date, there have been no claims under such indemnification provisions. Accordingly, the Company has not recorded a liability on its condensed consolidated balance sheets for these indemnification provisions.

In addition to the foregoing, the Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and officers.

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Stock Plans

6 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Plans

7. Stock Plans

(a) 2003 Stock Plan

During 2003, the Board of Directors adopted the 2003 Stock Plan (the “2003 Plan”), which allowed for the grant of both incentive stock options and non-qualified stock options and the direct award or sale of shares of the Company’s common stock (including restricted common stock) to officers, employees, directors, consultants and other key persons. In connection with the Company’s initial public offering, which was completed in November 2011, the Board of Directors determined not to grant any further awards under the 2003 Plan upon completion of the public offering.  The 2011 Stock Option and Incentive Plan (the “2011 Plan”) replaced the 2003 Plan in November 2011.  Under the 2003 Plan, incentive stock options could have been granted to employees with exercise prices of no less than the fair value of the common stock on the grant date, and non-qualified options could have been granted to employees, directors, or consultants at exercise prices of no less than 85% of the fair value of the common stock on the grant date, as determined by the Board of Directors. If, at the time the Company granted an option, the optionee directly or by attribution owned stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the option price had to have been at least 110% of the fair value. Options granted under the 2003 Plan generally expire no later than ten years from the date of grant and, in general, vest four years from the date of grant.

(b) 2011 Stock Option and Incentive Plan

In September 2011, the Board of Directors adopted the 2011 Plan which was subsequently approved by the Company’s stockholders. The 2011 Plan replaced the 2003 Plan and the Company no longer grants awards under the 2003 Plan. The Company initially reserved a total of 1,000,000 shares of common stock for issuance under the 2011 Plan. In addition, 955,568 reserved but unissued shares under the 2003 Stock Plan were added to the number of shares reserved for issuance under the 2011 Plan. The 2011 Plan also provided that the number of shares reserved and available for issuance under the plan would automatically increase each January 1, beginning in 2012 and ending in 2015, by 4% of the outstanding number of shares of common stock on the immediately preceding December 31. The last automatic increase occurred on January 1, 2015.  In April 2017 and May 2016, the Company’s stockholders approved an increase to the share reserve under the 2011 Plan by 850,000 shares and 1,300,000 shares respectively.

The 2011 Plan permits the granting of incentive stock options, non-qualified stock options, restricted stock units (“RSUs”), stock appreciation rights, restricted shares of common stock and performance share awards. The exercise price of stock options may not be less than 100% of the fair market value of the common stock on the date of grant. Options granted pursuant to the 2011 Plan generally expire no later than ten years from the date of grant. The Company also grants RSUs.  RSUs granted to new hires and merit grants to existing employees generally vest over a four-year period with 25% vesting at the end of one year and the remainder vesting quarterly thereafter. Additionally, from time to time, the Company grants performance-based RSUs (“PRSUs”).  During the quarter ended March 31, 2017, the Company granted PRSUs to its executives to align with the Company’s pay-for-performance philosophy. During the quarter ended June 30, 2017, the Company granted supplemental merit-based PRSUs to two executives on substantially the same terms as those granted during the prior quarter. The PRSUs provide for a target number of shares that generally vest over three years including a one year performance period and two years of service-based vesting.  The PRSUs vest contingent upon the Company’s achievement of an annual contract value of subscription bookings target for fiscal 2017 and total operating expenses for 2017 that are at 110% or less of the internal operating plan.  The amount of PRSUs earned may vary from zero to 200% of the target award amount depending on level of achievement, and provided the award recipient remains employed through each applicable vesting date. In addition, from the PRSUs awarded to executives during the quarter ended March 31, 2016, an aggregate of 46,619 PRSUs were issued during the quarter ended March 31, 2017, based on the Company’s achievement against its annual contract value of subscription bookings target for fiscal 2016 and achieving total operating expenses for 2016 that were 110% or less of the internal operating plan. The PRSUs are subject to vest over a two-year period and vest quarterly through February 15, 2019.

(c) 2011 Employee Stock Purchase Plan

In September 2011, the Board of Directors adopted the 2011 Employee Stock Purchase Plan (the “ESPP”) which was subsequently approved by the Company’s stockholders. The ESPP took effect on November 8, 2011, the effective date of the registration statement for the Company’s initial public offering. The ESPP permits eligible employees to acquire shares of the Company’s common stock by accumulating funds through periodic payroll deductions of up to 15% of base salary. Each offering period may run for no more than 24 months and consist of no more than five purchase periods. The purchase price for shares of the Company’s common stock purchased under the ESPP will be 85% of the lesser of the fair market value of the Company’s common stock on the first day of the offering period or the last trading day of the applicable purchase period within that offering period.

The Company initially reserved a total of 500,000 shares of common stock for future issuance under the ESPP. The number of shares reserved for issuance under the ESPP increases automatically on January 1 of each of the first eight years commencing in 2012 by the number of shares equal to 1% of the Company’s total outstanding shares as of the immediately preceding December 31. The Board of Directors or compensation committee may reduce the amount of the increase in any particular year. No more than 20,000,000 shares of common stock may be issued under the ESPP and no other shares may be added to the ESPP without the approval of the Company’s stockholders. On January 1, 2017, the share reserve under the 2011 Employee Stock Purchase Plan was automatically increased by 330,889 shares.

(d) Inducement Stock Option Plan and Agreement and Inducement Restricted Stock Unit Plan and Agreement

In August 2014 and August 2015, the Compensation Committee of the Board of Directors adopted Inducement Stock Option Plans and Agreements (the “Inducement Option Plans”) and Inducement Restricted Stock Unit Plans and Agreements (the “Inducement RSU Plans”), in each case created as employment inducement awards. In accordance with the terms of the Inducement Option Plans, the Company issued options to purchase an aggregate of 290,000 shares of the Company’s common stock at an exercise price equal to the fair market value of a share of the Company’s common stock on the dates of grant of the options. The options, which have a ten-year term, vest at the rate of 25% of the shares on each of the first anniversary of the vesting commencement date with an additional 6.25% of the shares subject to the option vesting each quarter thereafter so long as the participant has not been terminated. In accordance with the terms of the Inducement RSU Plans, the Company issued RSUs representing an aggregate of 290,000 shares of the Company’s common stock. The RSUs, which expire following settlement, vest at the rate of 25% of the shares on each of the first anniversary of the vesting commencement date with an additional 6.25% of the shares subject to the RSU vesting each quarter thereafter so long as the participant has not been terminated.

(e) 2015 Equity Inducement Plan

In October 2015, the Board of Directors adopted the 2015 Equity Inducement Plan, a non-stockholder approved plan that provides for the granting of stock options and RSUs as employment inducement awards and in connection with acquisitions, subject to compliance with applicable securities laws and stock exchange requirements for such plans.  The Company has reserved 100,000 shares of common stock for issuance under the 2015 Equity Inducement Plan.  No awards have been made under the 2015 Equity Inducement Plan and the entire reserve remains available for grant.  Under the terms of the 2015 Equity Inducement Plan, the exercise price of stock options may not be less than 100% of the fair market value of common stock on the date of grant and generally expire no later than ten years from the date of grant.

(f) Incapsula 2010 Share Incentive Plan

In March 2010, Incapsula’s board of directors adopted the Incapsula 2010 Share Incentive Plan (the “Incapsula Plan”), pursuant to which Incapsula was able to grant to its employees and service providers options to purchase shares of its common stock, restricted shares, or RSUs. As of November 2013, the total number of shares of common stock that could have been granted under the Incapsula Plan was not to exceed 10,263,211 shares in the aggregate, subject to certain adjustments.

In November 2013, the board of directors of Incapsula approved the grant of RSUs for 7,095,461 shares of Incapsula’s common stock (“Incapsula RSUs”). As part of the Incapsula acquisition, the Incapsula RSUs were assumed and replaced by performance-based RSUs for Company Common Stock to be issued to continuing employees of Incapsula. The Incapsula RSUs were earned upon Incapsula’s achievement of revenue targets for Incapsula and Incapsula-related products and services for fiscal year 2014 and were converted into approximately 198,825 shares of Company Common Stock at the same exchange ratio applicable to the shares of Incapsula common stock acquired in the acquisition. In addition to performance conditions, the awards were dependent on the market price of Imperva’s common stock during February 2014, which was deemed a market condition under ASC 718.

The outstanding options and RSUs under the Incapsula 2010 Stock Incentive Plan were assumed as part of the Incapsula acquisition and at the time they were assumed were equivalent to 247,184 shares of Company common stock on an as-converted basis.  As of June 30, 2017, there were 4,348 assumed Incapsula options and 118 assumed Incapsula RSUs outstanding.  The Company does not intend to grant any additional shares under the Incapsula 2010 Stock Incentive Plan.

Option Activity

The following table summarizes option activity under the Plans and related information:

	Options Outstanding					Weighted- Average Remaining
	Number of Shares			Weighted Average Exercise Price		Contractual Term (in years)		Aggregate Intrinsic Value (in thousands) (1)
Balances - January 1, 2017		1,570,765		$	39.64		6.90	$	9,226
Granted		-
Exercised		(272,676	)	$	30.63
Cancelled or forfeited		(119,002	)	$	49.77
Balances - June 30, 2017		1,179,087		$	40.70		6.51	$	12,754
Vested and expected to vest - June 30, 2017		1,179,087		$	40.70		6.51	$	12,754
Exercisable - June 30, 2017		815,232		$	38.95		6.10	$	9,919

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $47.85 of the Company’s common stock on June 30, 2017.

RSU Activity

The following table summarizes RSU activity under the Plans and related information:

	Number of Restricted Stock Units Outstanding			Weighted- Average Grant Date Fair Value
Unvested - January 1, 2017		1,994,790		$	51.42
Granted		1,052,009		$	42.67
Granted, performance RSUs		301,900		$	41.96
Released		(495,356	)	$	47.30
Cancelled or forfeited		(435,994	)	$	50.34
Unvested - June 30, 2017		2,417,349		$	47.47

The aggregate intrinsic value of options exercised under the Plans was $4.2 million for the six months ended June 30, 2017. The aggregate intrinsic value is calculated as the difference between the fair market value of the Company’s common stock on the date of the exercise and the exercise price of each option multiplied by the number of options exercised. As of June 30, 2017, total compensation cost related to unvested stock-based awards granted to employees under the Plans, but not yet recognized, was $97.2 million. As of June 30, 2017, this cost will be amortized to expense over a weighted-average remaining period of 2.7 years. Future stock-based award grants will increase the amount of compensation expense to be recorded in these periods.

There was no capitalized stock-based compensation expense during the three and six months ended June 30, 2017 and 2016.

(g) Stock Compensation Expense

The Company recognized stock-based compensation expense under the 2011 Stock Option and Incentive Plan, 2003 Stock Plan, Inducement Plans, 2011 Employee Stock Purchase Plan, and the Incapsula 2010 Share Incentive Plan in the condensed consolidated statements of operations as follows (in thousands):

	For the three months ended June 30				For the six months ended June 30
	2017		2016		2017		2016
Cost of revenue	$	1,403	$	1,132	$	2,672	$	2,525
Research and development		2,560		3,802		7,328		8,051
Sales and marketing		3,700		7,683		7,166		12,777
General and administrative		3,844		4,487		7,276		9,406
Restructuring charges		0		-		675		-
Total stock-based compensation expense	$	11,507	$	17,104	$	25,117	$	32,759

The Company did not issue stock option grants for the three months ended June 30, 2017 and 2016 and six months ended June 30, 2017. The fair value of stock option grants for the six months ended June 30, 2016 and ESPP grants for the three and six months ended June 30, 2017 and 2016 was estimated using the following weighted average assumptions:

	For the three months ended June 30						For the six months ended June 30
	2017			2016			2017			2016
Stock option grants:
Dividend rate		-			-			-			0	%
Risk-free interest rate		-			-			-			1.5	%
Expected term (in years)		-			-			-			6.1
Expected volatility		-			-			-			58	%
ESPP grants:
Dividend rate		0	%		0	%		0	%		0	%
Risk-free interest rate		1.1	%		0.4	%		1.1	%		0.4	%
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		52	%		58	%		52	%		58	%

The fair value of the RSUs is determined using the closing price of the Company’s common stock on the date of the grant. Compensation is recognized on a straight-line basis over the requisite service period of each grant.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

8. Accumulated Other Comprehensive Income (Loss)

The changes in the balances of accumulated other comprehensive income (loss) by component are as follows (in thousands):

	For the three months ended June 30, 2017									For the three months ended June 30, 2016
	Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total			Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total
Balance at April 1	$	664		$	(385	)	$	279		$	(105	)	$	(141	)	$	(246	)
Other comprehensive income    (loss) before reclassifications		1,196			22			1,218			(552	)		37			(515	)
Amounts reclassified to net    income (loss)		(777	)		-			(777	)		(102	)		-			(102	)
Change in other comprehensive    income (loss)		419			22			441			(654	)		37			(617	)
Balance at June 30	$	1,083		$	(363	)	$	720		$	(759	)	$	(104	)	$	(863	)

	For the six months ended June 30, 2017									For the six months ended June 30, 2016
	Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total			Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total
Balance at January 1	$	(1,065	)	$	(413	)	$	(1,478	)	$	(1,021	)	$	(310	)	$	(1,331	)
Other comprehensive income    (loss) before reclassifications		3,126			50			3,176			170			206			376
Amounts reclassified to net loss		(978	)		-			(978	)		92			-			92
Change in other comprehensive    income (loss)		2,148			50			2,198			262			206			468
Balance at June 30	$	1,083		$	(363	)	$	720		$	(759	)	$	(104	)	$	(863	)

The following is a summary of reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 (in thousands):

	For the three months ended June 30, 2017									For the three months ended June 30, 2016
	Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount			Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount
Unrealized gains (losses) on    cash flow hedges:
Current period unrealized gain    (loss)	$	1,428			(232	)	$	1,196		$	(906	)		354		$	(552	)
Reclassification adjustments 1		(777	)		-			(777	)		(102	)		-			(102	)
Unrealized gains (losses) on    cash flow hedges, net		651			(232	)		419			(1,008	)		354			(654	)
Unrealized gains (losses) on    investments:
Current period unrealized gain    (loss)	$	34			(12	)		22		$	57			(20	)		37
Unrealized gains (losses) on    investments:		34			(12	)		22			57			(20	)		37
Other comprehensive income (loss)	$	685		$	(244	)	$	441		$	(951	)	$	334		$	(617	)

	For the six months ended June 30, 2017									For the six months ended June 30, 2016
	Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount			Pre-Tax Amount		Tax Expense (Benefit)			After-Tax Amount
Unrealized gains (losses) on    cash flow hedges:
Current period unrealized gain    (loss)	$	4,315			(1,189	)	$	3,126		$	311		(141	)	$	170
Reclassification adjustments 1		(978	)		-			(978	)		92					92
Unrealized gains (losses) on    cash flow hedges, net		3,337			(1,189	)		2,148			403		(141	)		262
Unrealized gains (losses) on    investments:
Current period unrealized gain    (loss)	$	78			(28	)		50		$	317		(111	)		206
Unrealized gains (losses) on    investments:		78			(28	)		50			317		(111	)		206
Other comprehensive income    (loss)	$	3,415		$	(1,217	)	$	2,198		$	720	$	(252	)	$	468

¹ Refer to note 4 for the affected line items in the condensed consolidated statement of operations.

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely. For the three months ended June 30, 2017 and 2016, the Company recorded an income tax benefit of $0.9 million and income tax expense of $0.7 million respectively. The income tax benefit for the three months ended June 30, 2017, was primarily attributable to tax benefits related to employee gains from their sale of Company stock and intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income, offset in part by foreign and state income taxes. The income tax expense for the three months ended June 30, 2016 was primarily attributable to foreign and state income taxes. For the six months ended June 30, 2017 and 2016, the Company recorded income tax expense of less than $0.1 million and $0.6 million, respectively. The income tax expense for the six months ended June 30, 2017, was primarily attributable to foreign and state income taxes including tax effects of the gain related to the sale of the Skyfence business, offset in part by tax benefits related to employee gains from their sale of Company stock and an intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income. Additionally, the amount of unrecognized tax benefits increased during the six months ended June 30, 2017, which also contributed to the change in income tax expense for the period. The income tax expense for the six months ended June 30, 2016 was primarily attributable to foreign and state income taxes, offset in part by an intraperiod tax benefit allocation related to unrealized gains reported in other comprehensive income.  

Factors that impact the income tax provision include, but are not limited to, stock-based compensation expense, permanent tax adjustments, foreign operations and a valuation allowance against the Company’s domestic deferred tax assets.

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Segment Information

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment Information

10. Segment Information

The Company operates its business in one operating segment, which is the development, marketing, sales, service and support of cyber-security solutions that protect business-critical data and applications whether in cloud or on premises. Operating segments are defined as components of an enterprise that engage in business activities for which separate financial information is available and evaluated by the chief operating decision maker in deciding how to allocate resources and assessing performance. The chief operating decision maker is the Company’s Chief Executive Officer.

The Company’s net revenue by geographic region, based on the customer’s location, is summarized as follows (in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
United States	$	36,701	$	30,208	$	74,346	$	63,879
EMEA		14,842		11,891		28,622		23,175
APAC		14,596		10,640		28,302		21,977
Other		8,296		5,134		15,473		8,615
Total net revenue	$	74,435	$	57,873	$	146,743	$	117,646

The following table presents long-lived assets by location (in thousands):

	As of June 30,		As of December 31,
	2017		2016
United States	$	23,461	$	20,525
Israel		4,540		9,344
Other		236		20
Total long-lived assets	$	28,237	$	29,889

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Restructuring Charges

6 Months Ended

Jun. 30, 2017

Restructuring Charges [Abstract]

Restructuring Charges

11. Restructuring Charges

In November 2016, we implemented a restructuring plan and cost reduction initiatives to reduce expenses, streamline the organization, and reallocate resources to align more closely with future business needs. We incurred no restructuring charges during the three months ended June 30, 2017. The restructuring charge during the six months ended June 30, 2017 was $0.7 million, related to stock-based compensation. During the six months ended June 30, 2017 we also paid $1.1 million, of restructuring charges, which were recorded as a current liability within accrued compensation and benefits on the consolidated balance sheet as of December 31, 2016. There was no payment of restructuring charges during the three months ended June 30, 2017. The restructuring activity was completed by the end of the first quarter of 2017.

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Net Income (Loss) per Share

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Net Income (Loss) per Share

12. Net Income (Loss) per Share

Basic and diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. The computation of net income (loss) per share for each period, including the number of weighted-average shares outstanding, is shown on the face of the condensed consolidated statements of operations. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we recognize a net loss, we exclude the impact of outstanding stock awards from the diluted loss per share calculation as their inclusion would have an antidilutive effect.

The table below shows the reconciliation of the basic and diluted shares for the three and six months ended June 30, 2017, in thousands:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Weighted average number of shares    outstanding:
Basic		33,640		32,163		33,425		31,984
Dilutive effects of:
Employee stock options, RSU’s and share    based payment awards issued to employees		-		-		559		-
Diluted		33,640		32,163		33,984		31,984

The following outstanding shares of common stock and potential common shares were excluded from the computation of diluted net income (loss) per share of common stock for the three months ended June 30, 2017 and 2016 because including them would have been antidilutive:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Stock options to purchase common stock		1,179,087		1,812,415		670,872		1,812,415
Restricted stock units for common stock		2,417,349		2,454,882		550,544		2,454,882
Restricted stock issued in connection with    Skyfence acquisition		-		257,847		-		257,847

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Disposition of Business

6 Months Ended

Jun. 30, 2017

Discontinued Operations And Disposal Groups [Abstract]

Disposition of Business

13. Disposition of Business

On February 23, 2017, the Company completed the sale of the assets of its Skyfence cloud access security broker business (“Skyfence”) to Forcepoint LLC and its Israeli subsidiary for consideration of approximately $40 million in cash. Of the total consideration, approximately $5.0 million was remitted directly to escrow to secure the Company’s indemnification obligations. This escrowed amount is recorded in other assets on our condensed consolidated balance sheet as of June 30, 2017, and represents a noncash item in our condensed consolidated statement of cash flows. As a result of the sale, we recognized a gain of $35.9 million during the first quarter of 2017 included in gain on sale of Skyfence in our condensed consolidated statement of operations.

The following table presents the carrying amounts of Skyfence immediately preceding the disposition on February 23, 2017:

	(dollarsin thousands)
Assets
Prepaid and other current assets	$	46
Property and equipment, net		219
Goodwill		1,058
Acquired intangible assets, net		4,496
Total assets	$	5,819
Liabilities
Accounts payable	$	104
Accrued and other current liabilities		117
Deferred revenue		1,454
Total liabilities	$	1,675

We evaluated the disposition of Skyfence and determined it did not meet the criteria for classification as a discontinued operation and determined that the disposition is not expected to have a material impact to our quarterly consolidated operating loss and net income. However, we determined that the disposition does represent an individually significant component of our business. The following table presents certain amounts related to Skyfence in our consolidated results of operations through its disposal on February 23, 2017:

	Forthe three months ended June 30,				For the six months ended June 30,
	2017	2016			2017			2016
	(dollars in thousands)				(dollars in thousands)
Operating loss	-	$	(3,735	)	$	(3,567	)	$	(8,998	)
Loss before taxes	-		(3,735	)		(3,648	)	$	(8,998	)
Net loss	-		(3,821	)		(3,659	)		(9,129	)

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Business

Business

Imperva, Inc. (together with its subsidiaries, the “Company”) was incorporated in April 2002 in Delaware. The Company is headquartered in Redwood Shores, California and has subsidiaries located throughout the world including Israel, Asia and Europe. The Company is engaged in the development, marketing, sales, service and support of cyber-security solutions that protect business-critical data and applications whether in the cloud or on premises.

Basis of Presentation

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with Article 10 of Regulation S-X and pursuant to the rules and regulations for Form 10-Q of the Securities and Exchange Commission (the “SEC”). Pursuant to those rules and regulations, the Company has condensed or omitted certain information and footnote disclosure it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its consolidated financial position, results of operations, and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 27, 2017 (the “Annual Report”).

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.

Concentration of Revenue and Accounts Receivable

Concentration of Revenue and Accounts Receivable

Significant customers are those which represent 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date. The Company primarily sells products and services through channel partners, including distributors and resellers, which sell to end-user customers. For the six months ended June 30, 2017 and 2016, no single end-user customer represented 10% or more of the Company’s total revenue or gross accounts receivable balance.  

During those periods, the Company had one reseller that represented 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date as follows:

Revenue												Accounts Receivable
For the three months ended June 30,						For the six months ended June 30,						As of June 30,			As of December 31,
2017			2016			2017			2016			2017			2016
	12	%		12	%		12	%		13	%		21	%		18	%

Significant Accounting Policies

Significant Accounting Policies

The Company adopted the guidance in Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting, on January 1, 2017. Under this ASU, entities are permitted to make an accounting policy election to either estimate forfeitures on share-based payment awards, as previously required, or to recognize forfeitures as they occur. The Company has elected to recognize forfeitures as they occur and the impact of that change in accounting policy has been recorded as a $2.6 million cumulative effect adjustment to increase our accumulated deficit as of January 1, 2017. Additionally, the Company has elected to use a prospective transition method for presentation of excess tax benefits on the statement of cash flows. The remaining provisions of ASU 2016-09 did not have a material impact on the accompanying condensed consolidated financial statements.

Insurance Recoveries Receivable

Insurance Recoveries Receivable

Insurance recoveries receivable consists of amounts receivable to the Company from insurance recoveries in connection with settlement costs and professional fees. Claims for loss recoveries are generally recognized when a loss event has occurred and recovery is considered probable.

There have been no other material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting”, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. The standard is effective for the Company on January 1, 2018, with early adoption permitted. The new guidance must be applied prospectively to awards modified on or after the adoption date. The future impact of ASU 2017-09 will be dependent on the nature of future stock award modifications.

In January 2017, FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which simplifies the measurement of goodwill impairment by removing the second step of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. Under this guidance, goodwill impairment is to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value with the loss recognized not to exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective beginning January 1, 2020 on a prospective basis, with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The standard is to be applied on a prospective basis. The Company does not anticipate a material impact to the consolidated financial statements once implemented.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and should be applied prospectively with early adoption permitted under certain scenarios. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard will be effective for the Company beginning January 1, 2018, with early application permitted. The standard will require adoption on a retrospective basis. The new accounting pronouncements will not have a significant impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will be effective for the Company beginning January 1, 2018, with early application permitted. The standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In June 2016, the FASB Issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The standard will be effective for the Company beginning January 1, 2020, with early application permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02 regarding ASC Topic 842 “Leases.” The amendments in this guidance require balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The standard will be effective for the Company beginning January 1, 2019. The amendments require a modified retrospective approach with optional practical expedients. While the Company continues to evaluate the effect of the standard on its ongoing financial reporting, the Company anticipates that the adoption of the ASU may materially affect its Balance Sheet.

In May 2014, the FASB issued ASU 2014-09—Revenue (Topic 606): Revenue from Contracts with Customers. The standard will replace most existing U.S. GAAP guidance on this topic. The standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.

The standard will be effective for the Company beginning January 1, 2018 using either of two methods: (1) retrospective application of the standard to each prior reporting period presented with the option to elect certain practical expedients as defined within the standard, or (2) retrospective application of the standard with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per the standard. The Company plans to adopt the standard under the modified retrospective method effective January 1, 2018. The Company’s ability to adopt using the modified retrospective method is dependent on several factors such as the significance of the impact of the new standard on the Company’s financial results, and system readiness, including software procured from third-party providers and the completion of the Company’s analysis of information necessary to determine the cumulative effect of adoption recognized as of the date of initial application.

The Company has developed a project plan for this transition, which includes necessary changes to accounting policies, processes, internal controls, and system requirements and is progressing as planned. The Company expects to implement the plan in time to report in accordance with ASC 606 for the first quarterly filing on Form 10-Q for the period ended March 31, 2018.

As part of its preliminary evaluation, the Company has considered the impact of the standard’s requirements with respect to capitalization and amortization of incremental costs of obtaining a contract, primarily sales commissions. Under the Company’s current accounting policy, contract origination costs are expensed as incurred. The new standard requires the capitalization of all incremental costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained, provided the Company expects to recover the costs. The Company is reviewing historical costs to identify those that meet the new standard’s capitalization requirement. Under the new standard, the Company will amortize these costs over a period of benefit, as estimated by management, which may extend beyond the contract term.

The Company’s contracts with customers frequently include multiple performance obligations. For such arrangements, we will allocate revenue to each performance obligation based on its relative standalone selling price. The Company is analyzing its historical sales data and expects to determine standalone selling prices based on the prices charged to customers.

While the Company continues to assess the potential impacts of the new standard on its consolidated financial statements and related disclosures, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. The preliminary assessments are subject to change as the Company continues to assess the new standard along with industry trends and additional interpretive guidance.

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Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Schedule of Percentage of Total Revenue or Gross Accounts Receivable Balance

During those periods, the Company had one reseller that represented 10% or more of the Company’s total revenue or gross accounts receivable balance at each respective balance sheet date as follows:

Revenue												Accounts Receivable
For the three months ended June 30,						For the six months ended June 30,						As of June 30,			As of December 31,
2017			2016			2017			2016			2017			2016
	12	%		12	%		12	%		13	%		21	%		18	%

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Cash, Cash Equivalents, and Short-Term Investments (Tables)

6 Months Ended

Jun. 30, 2017

Cash And Cash Equivalents [Abstract]

Summary of Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments consist of the following (in thousands):

	As of June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash	$	53,728	$	-	$	-	$	53,728
Commercial paper		5,490		-		1		5,489
Money market funds		84,359		-		-		84,359
Corporate debt obligations		3,852		-		1		3,851
Total	$	147,429	$	-	$	2	$	147,427
Short-term investments:
Commercial paper	$	14,228	$	-	$	11	$	14,217
Corporate debt obligations		143,078		1		266		142,813
US government agencies		14,998		-		47		14,951
Bank deposits		480		-		1		479
Total	$	172,784	$	1	$	325	$	172,460

	As of December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash	$	63,642	$	-	$	-	$	63,642
Commercial paper		6,995		-		2		6,993
Money market funds		36,708		-		-		36,708
Total	$	107,345	$	-	$	2	$	107,343
Short-term investments:
Commercial paper	$	14,245	$	-	$	8	$	14,237
Corporate debt obligations		110,062		-		347		109,715
US government agencies		18,998		2		50		18,950
Bank deposits		10,846		1		-		10,847
Total	$	154,151	$	3	$	405	$	153,749

Summary of Cost and Estimated Fair Value of Short-Term Investments

The following table summarizes the cost and estimated fair value of short-term investments based on stated effective maturities as of June 30, 2017 (in thousands):

	As of June 30, 2017
			Estimated
	Amortized		Fair
	Cost		Value
Short-term investments:
Due within one year	$	88,396	$	88,258
Due within two years		84,388		84,202
Total	$	172,784	$	172,460

Schedule of Short-Term Investments at Fair Value and Length of Continuous Unrealized Loss Position

The following tables show the short-term investments in an unrealized loss position and the related gross unrealized losses and fair value and length of time that the short-term investments have been in a continuous unrealized loss position (in thousands):

	As of June 30, 2017
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	14,217	$	11	$	-	$	-	$	14,217	$	11
Corporate debt obligations		89,716		186		50,082		80		139,798	$	266
US government agencies		9,458		40		5,493		7		14,951		47
Bank deposits		480		1		-		-		480	$	1
	$	113,871	$	238	$	55,575	$	87	$	169,446	$	325

	As of December 31, 2016
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	14,237	$	8	$	-	$	-	$	14,237	$	8
Corporate debt obligations		78,821		323		29,689		24		108,510	$	347
US government agencies		11,451		46		3,496		4		14,947		50
	$	104,509	$	377	$	33,185	$	28	$	137,694	$	405

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Assets and Liabilities Subject to Fair Value Measurements on Recurring Basis

The following table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2017 and December 31, 2016, by level within the fair value hierarchy (in thousands):

	As of June 30, 2017
	Level I		Level II		Level III		FairValue
Financial Assets:
Cash equivalents:
Commercial paper	$	-	$	5,489	$	-	$	5,489
Money market funds		84,359		-		-		84,359
Corporate debt obligations		-		3,851		-		3,851
Short-term investments:
Commercial paper		-		14,217		-		14,217
Corporate debt obligations		-		142,813		-		142,813
US government agencies		-		14,951		-		14,951
Bank deposits		-		479		-		479
Prepaid expenses and other current assets - Forward foreign exchange    contracts		-		2,263		-		2,263
Total financial assets	$	84,359	$	184,063	$	-	$	268,422

	As of December 31, 2016
	Level I		Level II		Level III		Fair Value
Financial Assets:
Cash equivalents:
Commercial paper	$	-	$	6,993	$	-	$	6,993
Money market funds		36,708		-		-		36,708
Short-term investments:
Commercial paper		-		14,237		-		14,237
Corporate debt obligations		-		109,715		-		109,715
US government agencies		-		18,950		-		18,950
Bank deposits		-		10,847		-		10,847
Total financial assets	$	36,708	$	160,742	$	-	$	197,450
Financial Liability:
Accrued and other current liabilities - Forward foreign exchange    contracts	$	-	$	639	$	-	$	639

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments Measured at Fair Value and Classification on Condensed Consolidated Balance Sheets

Derivative instruments measured at fair value and their classification on the condensed consolidated balance sheets are presented in the following tables (in thousands):

	As of June 30, 2017				As of December 31, 2016
	Notional Amount		Fair Value		Notional Amount		Fair Value
Foreign exchange forward contract derivatives in    cash flow hedging relationships -  included in    prepaid expenses and other current assets    (accrued and other current liabilities)	$	27,664	$	2,696	$	60,756	$	(639	)

Gains (Losses) on Derivative Instruments and Classification on Condensed Consolidated Statement of Operations

Gains (losses) on derivative instruments and their classification on the condensed consolidated statement of operations are presented in the following table (in thousands):

	For the three months ended June 30						For the six months ended June 30
	2017			2016			2017			2016
Foreign Exchange Forward Contract Derivatives    in cash flow hedging relationships:
Gains recognized in OCI (a)	$	1,445		$	-		$	4,332		$	1,316
Losses recognized in OCI (a)	$	(17	)	$	(906	)	$	(17	)	$	(1,005	)
Gains recognized from accumulated OCI into    net income (b)	$	782		$	149		$	988		$	149
Losses recognized from accumulated OCI into    net income (b)	$	(5	)	$	(47	)	$	(10	)	$	(241	)

(a) Net change in the fair value of the effective portion classified in other comprehensive income (loss) (“OCI”).

(b) Effective portion of cash flow hedges reclassified from accumulated other comprehensive income (loss) into net income, of which $54 and $723 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2017; $68 and $910 were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2017. $6 and $96 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2016 and $(7) and $(85) were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2016. All amounts are reflected within the respective condensed consolidated statement of operations.

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Goodwill and Acquired Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Changes in the Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the periods ended June 30, 2017 and December 31, 2016 were as follows (in thousands):

Balance as of December 31, 2016	$	37,448
Goodwill disposed with sale of Skyfence		(1,059	)
Balance as of June 30, 2017	$	36,389

Summary of Acquired Intangible Assets Subject to Amortization

Acquired intangible assets subject to amortization are presented as follows (in thousands):

	As of June 30, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired technology	$	3,753	$	(1,004	)	$	2,749
Customer relationships		480		(38	)		442
Trade name and other		280		(22	)		258
Total	$	4,513	$	(1,064	)	$	3,449
	As of December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Acquired technology	$	11,718	$	(4,085	)	$	7,633
Customer relationships		480		-			480
Trade name and other		280		-			280
Total	$	12,478	$	(4,085	)	$	8,393

Schedule of Expected Amortization Expense in Future Periods

As of June 30, 2017, the amortization expense in future periods is expected to be as follows (in thousands):

	Acquired
Fiscal Year	Technology
2017 (remaining 6 months)	$	265
2018		528
2019		528
2020		528
2021		528
Thereafter		1,072
Total expected amortization expense	$	3,449

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Payments Under Operating Leases and Minimum Rentals to be Received Under Non-Cancellable Subleases

Future minimum payments under these facility operating leases and minimum rentals to be received under non-cancellable subleases are as follows as of June 30, 2017 (in thousands):

	Operating Leases		Estimated Sublease Income
Period Ending December 31:
2017 (remaining 6 months)	$	3,601	$	356
2018		8,459		683
2019		4,741		-
2020		4,461		-
2021		301		-
Thereafter		49		-
Total	$	21,612	$	1,039

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Stock Plans (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Option Activity under Plans and Related Information

The following table summarizes option activity under the Plans and related information:

	Options Outstanding					Weighted- Average Remaining
	Number of Shares			Weighted Average Exercise Price		Contractual Term (in years)		Aggregate Intrinsic Value (in thousands) (1)
Balances - January 1, 2017		1,570,765		$	39.64		6.90	$	9,226
Granted		-
Exercised		(272,676	)	$	30.63
Cancelled or forfeited		(119,002	)	$	49.77
Balances - June 30, 2017		1,179,087		$	40.70		6.51	$	12,754
Vested and expected to vest - June 30, 2017		1,179,087		$	40.70		6.51	$	12,754
Exercisable - June 30, 2017		815,232		$	38.95		6.10	$	9,919

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $47.85 of the Company’s common stock on June 30, 2017.

Summary of RSU Activity Outstanding and Weighted Average Grant Date Fair Value

The following table summarizes RSU activity under the Plans and related information:

	Number of Restricted Stock Units Outstanding			Weighted- Average Grant Date Fair Value
Unvested - January 1, 2017		1,994,790		$	51.42
Granted		1,052,009		$	42.67
Granted, performance RSUs		301,900		$	41.96
Released		(495,356	)	$	47.30
Cancelled or forfeited		(435,994	)	$	50.34
Unvested - June 30, 2017		2,417,349		$	47.47

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense under the 2011 Stock Option and Incentive Plan, 2003 Stock Plan, Inducement Plans, 2011 Employee Stock Purchase Plan, and the Incapsula 2010 Share Incentive Plan in the condensed consolidated statements of operations as follows (in thousands):

	For the three months ended June 30				For the six months ended June 30
	2017		2016		2017		2016
Cost of revenue	$	1,403	$	1,132	$	2,672	$	2,525
Research and development		2,560		3,802		7,328		8,051
Sales and marketing		3,700		7,683		7,166		12,777
General and administrative		3,844		4,487		7,276		9,406
Restructuring charges		0		-		675		-
Total stock-based compensation expense	$	11,507	$	17,104	$	25,117	$	32,759

Weighted Average Assumptions for Fair Value of Stock Options Grants and ESPP Grants

The Company did not issue stock option grants for the three months ended June 30, 2017 and 2016 and six months ended June 30, 2017. The fair value of stock option grants for the six months ended June 30, 2016 and ESPP grants for the three and six months ended June 30, 2017 and 2016 was estimated using the following weighted average assumptions:

	For the three months ended June 30						For the six months ended June 30
	2017			2016			2017			2016
Stock option grants:
Dividend rate		-			-			-			0	%
Risk-free interest rate		-			-			-			1.5	%
Expected term (in years)		-			-			-			6.1
Expected volatility		-			-			-			58	%
ESPP grants:
Dividend rate		0	%		0	%		0	%		0	%
Risk-free interest rate		1.1	%		0.4	%		1.1	%		0.4	%
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		52	%		58	%		52	%		58	%

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Changes in Balances of Accumulated Other Comprehensive Income (Loss)

The changes in the balances of accumulated other comprehensive income (loss) by component are as follows (in thousands):

	For the three months ended June 30, 2017									For the three months ended June 30, 2016
	Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total			Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total
Balance at April 1	$	664		$	(385	)	$	279		$	(105	)	$	(141	)	$	(246	)
Other comprehensive income    (loss) before reclassifications		1,196			22			1,218			(552	)		37			(515	)
Amounts reclassified to net    income (loss)		(777	)		-			(777	)		(102	)		-			(102	)
Change in other comprehensive    income (loss)		419			22			441			(654	)		37			(617	)
Balance at June 30	$	1,083		$	(363	)	$	720		$	(759	)	$	(104	)	$	(863	)

	For the six months ended June 30, 2017									For the six months ended June 30, 2016
	Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total			Unrealized gain (loss) on cash flow hedges			Unrealized gain (loss) on investments			Total
Balance at January 1	$	(1,065	)	$	(413	)	$	(1,478	)	$	(1,021	)	$	(310	)	$	(1,331	)
Other comprehensive income    (loss) before reclassifications		3,126			50			3,176			170			206			376
Amounts reclassified to net loss		(978	)		-			(978	)		92			-			92
Change in other comprehensive    income (loss)		2,148			50			2,198			262			206			468
Balance at June 30	$	1,083		$	(363	)	$	720		$	(759	)	$	(104	)	$	(863	)

Summary of Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

The following is a summary of reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 (in thousands):

	For the three months ended June 30, 2017									For the three months ended June 30, 2016
	Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount			Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount
Unrealized gains (losses) on    cash flow hedges:
Current period unrealized gain    (loss)	$	1,428			(232	)	$	1,196		$	(906	)		354		$	(552	)
Reclassification adjustments 1		(777	)		-			(777	)		(102	)		-			(102	)
Unrealized gains (losses) on    cash flow hedges, net		651			(232	)		419			(1,008	)		354			(654	)
Unrealized gains (losses) on    investments:
Current period unrealized gain    (loss)	$	34			(12	)		22		$	57			(20	)		37
Unrealized gains (losses) on    investments:		34			(12	)		22			57			(20	)		37
Other comprehensive income (loss)	$	685		$	(244	)	$	441		$	(951	)	$	334		$	(617	)

	For the six months ended June 30, 2017									For the six months ended June 30, 2016
	Pre-Tax Amount			Tax Expense (Benefit)			After-Tax Amount			Pre-Tax Amount		Tax Expense (Benefit)			After-Tax Amount
Unrealized gains (losses) on    cash flow hedges:
Current period unrealized gain    (loss)	$	4,315			(1,189	)	$	3,126		$	311		(141	)	$	170
Reclassification adjustments 1		(978	)		-			(978	)		92					92
Unrealized gains (losses) on    cash flow hedges, net		3,337			(1,189	)		2,148			403		(141	)		262
Unrealized gains (losses) on    investments:
Current period unrealized gain    (loss)	$	78			(28	)		50		$	317		(111	)		206
Unrealized gains (losses) on    investments:		78			(28	)		50			317		(111	)		206
Other comprehensive income    (loss)	$	3,415		$	(1,217	)	$	2,198		$	720	$	(252	)	$	468

¹ Refer to note 4 for the affected line items in the condensed consolidated statement of operations.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Company's Revenue by Geographic Region, Based on Customer's Location

The Company’s net revenue by geographic region, based on the customer’s location, is summarized as follows (in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
United States	$	36,701	$	30,208	$	74,346	$	63,879
EMEA		14,842		11,891		28,622		23,175
APAC		14,596		10,640		28,302		21,977
Other		8,296		5,134		15,473		8,615
Total net revenue	$	74,435	$	57,873	$	146,743	$	117,646

Long-Lived Assets by Location

The following table presents long-lived assets by location (in thousands):

	As of June 30,		As of December 31,
	2017		2016
United States	$	23,461	$	20,525
Israel		4,540		9,344
Other		236		20
Total long-lived assets	$	28,237	$	29,889

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Net Income (Loss) per Share (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Shares

The table below shows the reconciliation of the basic and diluted shares for the three and six months ended June 30, 2017, in thousands:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Weighted average number of shares    outstanding:
Basic		33,640		32,163		33,425		31,984
Dilutive effects of:
Employee stock options, RSU’s and share    based payment awards issued to employees		-		-		559		-
Diluted		33,640		32,163		33,984		31,984

Antidilutive Securities Excluded from Computation of Diluted Net Income (Loss) Per Share of Common Stock

The following outstanding shares of common stock and potential common shares were excluded from the computation of diluted net income (loss) per share of common stock for the three months ended June 30, 2017 and 2016 because including them would have been antidilutive:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Stock options to purchase common stock		1,179,087		1,812,415		670,872		1,812,415
Restricted stock units for common stock		2,417,349		2,454,882		550,544		2,454,882
Restricted stock issued in connection with    Skyfence acquisition		-		257,847		-		257,847

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Disposition of Business (Tables)

6 Months Ended

Jun. 30, 2017

Discontinued Operations And Disposal Groups [Abstract]

Schedule of Carrying Amounts Immediately Preceding Disposition and Consolidated Results of Operations Through Disposal

The following table presents the carrying amounts of Skyfence immediately preceding the disposition on February 23, 2017:

	(dollarsin thousands)
Assets
Prepaid and other current assets	$	46
Property and equipment, net		219
Goodwill		1,058
Acquired intangible assets, net		4,496
Total assets	$	5,819
Liabilities
Accounts payable	$	104
Accrued and other current liabilities		117
Deferred revenue		1,454
Total liabilities	$	1,675

The following table presents certain amounts related to Skyfence in our consolidated results of operations through its disposal on February 23, 2017:

	Forthe three months ended June 30,				For the six months ended June 30,
	2017	2016			2017			2016
	(dollars in thousands)				(dollars in thousands)
Operating loss	-	$	(3,735	)	$	(3,567	)	$	(8,998	)
Loss before taxes	-		(3,735	)		(3,648	)	$	(8,998	)
Net loss	-		(3,821	)		(3,659	)		(9,129	)

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Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands		6 Months Ended
	Jan. 01, 2017 USD ($)	Jun. 30, 2017 USD ($) Customer Reseller	Jun. 30, 2016 Customer Reseller
Revenue, Major Customer [Line Items]
Number of reseller | Reseller		1	1
Cumulative effect adjustment to accumulated deficit | $		$ 14
ASU 2016-09 [Member]
Revenue, Major Customer [Line Items]
Cumulative effect adjustment to accumulated deficit | $	$ 2,600
Credit Concentration Risk [Member]
Revenue, Major Customer [Line Items]
Number of customers representing 10% or more of gross accounts receivable | Customer		0	0
Revenue [Member] | Customer Concentration Risk [Member]
Revenue, Major Customer [Line Items]
Number of customers representing 10% or more of revenue | Customer		0	0

XML

Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Percentage of Total Revenue or Gross Accounts Receivable Balance (Detail)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Revenue [Member] | Customer Concentration Risk [Member]
Revenue, Major Customer [Line Items]
Minimum percentage of revenue or gross accounts receivable balance	12.00%	12.00%	12.00%	13.00%
Accounts Receivable [Member] | Credit Concentration Risk [Member]
Revenue, Major Customer [Line Items]
Minimum percentage of revenue or gross accounts receivable balance			21.00%		18.00%

XML

Cash, Cash Equivalents, and Short-Term Investments - Summary of Cash, Cash Equivalents and Short-Term Investments (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Investments [Line Items]
Cash and cash equivalents, Amortized Cost	$ 147,429	$ 107,345
Cash and cash equivalents, Gross Unrealized Gains	0	0
Cash and cash equivalents, Gross Unrealized Losses	2	2
Cash and cash equivalents, Fair Value	147,427	107,343
Short-term investments, Amortized Cost	172,784	154,151
Short-term investments, Gross Unrealized Gains	1	3
Short-term investments, Gross Unrealized Losses	325	405
Short-term investments, Estimated Fair Value	172,460	153,749	[1]
Cash [Member]
Schedule of Investments [Line Items]
Cash and cash equivalents, Amortized Cost	53,728	63,642
Cash and cash equivalents, Gross Unrealized Gains	0	0
Cash and cash equivalents, Gross Unrealized Losses	0	0
Cash and cash equivalents, Fair Value	53,728	63,642
Commercial Paper [Member]
Schedule of Investments [Line Items]
Cash and cash equivalents, Amortized Cost	5,490	6,995
Cash and cash equivalents, Gross Unrealized Gains	0	0
Cash and cash equivalents, Gross Unrealized Losses	1	2
Cash and cash equivalents, Fair Value	5,489	6,993
Short-term investments, Amortized Cost	14,228	14,245
Short-term investments, Gross Unrealized Gains	0	0
Short-term investments, Gross Unrealized Losses	11	8
Short-term investments, Estimated Fair Value	14,217	14,237
Money Market Funds [Member]
Schedule of Investments [Line Items]
Cash and cash equivalents, Amortized Cost	84,359	36,708
Cash and cash equivalents, Gross Unrealized Gains	0	0
Cash and cash equivalents, Gross Unrealized Losses	0	0
Cash and cash equivalents, Fair Value	84,359	36,708
Corporate Debt Obligations [Member]
Schedule of Investments [Line Items]
Cash and cash equivalents, Amortized Cost	3,852
Cash and cash equivalents, Gross Unrealized Gains	0
Cash and cash equivalents, Gross Unrealized Losses	1
Cash and cash equivalents, Fair Value	3,851
Short-term investments, Amortized Cost	143,078	110,062
Short-term investments, Gross Unrealized Gains	1	0
Short-term investments, Gross Unrealized Losses	266	347
Short-term investments, Estimated Fair Value	142,813	109,715
US Government Agencies [Member]
Schedule of Investments [Line Items]
Short-term investments, Amortized Cost	14,998	18,998
Short-term investments, Gross Unrealized Gains	0	2
Short-term investments, Gross Unrealized Losses	47	50
Short-term investments, Estimated Fair Value	14,951	18,950
Bank Deposits [Member]
Schedule of Investments [Line Items]
Short-term investments, Amortized Cost	480	10,846
Short-term investments, Gross Unrealized Gains	0	1
Short-term investments, Gross Unrealized Losses	1	0
Short-term investments, Estimated Fair Value	$ 479	$ 10,847

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Cash, Cash Equivalents, and Short-Term Investments - Summary of Cost and Estimated Fair Value of Short-Term Investments (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Short Term Investments [Abstract]
Amortized Cost of short-term investments, Due within one year	$ 88,396
Amortized Cost of short-term investments, Due within two years	84,388
Short-term investments, Amortized Cost	172,784	$ 154,151
Estimated fair value of short-term investments, Due within one year	88,258
Estimated fair value of short-term investments, Due within two years	84,202
Short-term investments, Estimated Fair Value	$ 172,460	$ 153,749	[1]

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Cash, Cash Equivalents, and Short-Term Investments - Schedule of Short-Term Investments at Fair Value and Length of Continuous Unrealized Loss Position (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 113,871	$ 104,509
Less than 12 Months, Unrealized Losses	238	377
12 Months or Greater, Fair Value	55,575	33,185
12 Months or Greater, Unrealized Losses	87	28
Total, Fair Value	169,446	137,694
Total, Unrealized Losses	325	405
Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	14,217	14,237
Less than 12 Months, Unrealized Losses	11	8
12 Months or Greater, Fair Value	0	0
12 Months or Greater, Unrealized Losses	0	0
Total, Fair Value	14,217	14,237
Total, Unrealized Losses	11	8
Corporate Debt Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	89,716	78,821
Less than 12 Months, Unrealized Losses	186	323
12 Months or Greater, Fair Value	50,082	29,689
12 Months or Greater, Unrealized Losses	80	24
Total, Fair Value	139,798	108,510
Total, Unrealized Losses	266	347
US Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	9,458	11,451
Less than 12 Months, Unrealized Losses	40	46
12 Months or Greater, Fair Value	5,493	3,496
12 Months or Greater, Unrealized Losses	7	4
Total, Fair Value	14,951	14,947
Total, Unrealized Losses	47	$ 50
Bank Deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	480
Less than 12 Months, Unrealized Losses	1
12 Months or Greater, Fair Value	0
12 Months or Greater, Unrealized Losses	0
Total, Fair Value	480
Total, Unrealized Losses	$ 1

XML

Fair Value of Financial Instruments - Additional Information (Detail) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value transfers between level 1 to level 2	$ 0	$ 0
Fair value transfers between level 2 to level 1	0	0
Fair value transfers into level 3	0	0
Fair value transfers out of level 3	0	0
Level II [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Severance pay assets	$ 6,300,000	$ 6,300,000	$ 5,100,000

XML

Fair Value of Financial Instruments - Assets and Liabilities Subject to Fair Value Measurements on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	$ 147,427	$ 107,343
Short-term investments	172,460	153,749	[1]
Commercial Paper [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	5,489	6,993
Short-term investments	14,217	14,237
Money Market Funds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	84,359	36,708
Corporate Debt Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	3,851
Short-term investments	142,813	109,715
US Government Agencies [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	14,951	18,950
Bank Deposits [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	479	10,847
Fair Value, Measurements, Recurring [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total financial assets	268,422	197,450
Fair Value, Measurements, Recurring [Member] | Commercial Paper [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	5,489	6,993
Short-term investments	14,217	14,237
Fair Value, Measurements, Recurring [Member] | Money Market Funds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	84,359	36,708
Fair Value, Measurements, Recurring [Member] | Corporate Debt Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	3,851
Short-term investments	142,813	109,715
Fair Value, Measurements, Recurring [Member] | US Government Agencies [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	14,951	18,950
Fair Value, Measurements, Recurring [Member] | Bank Deposits [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	479	10,847
Fair Value, Measurements, Recurring [Member] | Level I [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total financial assets	84,359	36,708
Fair Value, Measurements, Recurring [Member] | Level I [Member] | Commercial Paper [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level I [Member] | Money Market Funds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	84,359	36,708
Fair Value, Measurements, Recurring [Member] | Level I [Member] | Corporate Debt Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level I [Member] | US Government Agencies [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level I [Member] | Bank Deposits [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level II [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total financial assets	184,063	160,742
Fair Value, Measurements, Recurring [Member] | Level II [Member] | Commercial Paper [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	5,489	6,993
Short-term investments	14,217	14,237
Fair Value, Measurements, Recurring [Member] | Level II [Member] | Money Market Funds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Fair Value, Measurements, Recurring [Member] | Level II [Member] | Corporate Debt Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	3,851
Short-term investments	142,813	109,715
Fair Value, Measurements, Recurring [Member] | Level II [Member] | US Government Agencies [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	14,951	18,950
Fair Value, Measurements, Recurring [Member] | Level II [Member] | Bank Deposits [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	479	10,847
Fair Value, Measurements, Recurring [Member] | Level III [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total financial assets	0	0
Fair Value, Measurements, Recurring [Member] | Level III [Member] | Commercial Paper [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level III [Member] | Money Market Funds [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Fair Value, Measurements, Recurring [Member] | Level III [Member] | Corporate Debt Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level III [Member] | US Government Agencies [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Level III [Member] | Bank Deposits [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Short-term investments	0	0
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Prepaid Expenses and Other Current Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Prepaid expenses and other current assets - Forward foreign exchange contracts	2,263
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Accrued and Other Current Liabilities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Accrued and other current liabilities - Forward foreign exchange contracts		639
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Level I [Member] | Prepaid Expenses and Other Current Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Prepaid expenses and other current assets - Forward foreign exchange contracts	0
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Level I [Member] | Accrued and Other Current Liabilities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Accrued and other current liabilities - Forward foreign exchange contracts		0
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Level II [Member] | Prepaid Expenses and Other Current Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Prepaid expenses and other current assets - Forward foreign exchange contracts	2,263
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Level II [Member] | Accrued and Other Current Liabilities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Accrued and other current liabilities - Forward foreign exchange contracts		639
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Level III [Member] | Prepaid Expenses and Other Current Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Prepaid expenses and other current assets - Forward foreign exchange contracts	$ 0
Fair Value, Measurements, Recurring [Member] | Forward Foreign Exchange Contracts [Member] | Level III [Member] | Accrued and Other Current Liabilities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Accrued and other current liabilities - Forward foreign exchange contracts		$ 0

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Derivative Instruments - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2017
Forward Foreign Exchange Contracts [Member]
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Derivative contracts maturity	12 months

XML

Derivative Instruments - Derivative Instruments Measured at Fair Value and Classification on Condensed Consolidated Balance Sheets (Detail) - Forward Foreign Exchange Contracts [Member] - Designated As Hedging Instrument [Member] - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Prepaid Expenses and Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative Notional Amount	$ 27,664,000	$ 60,756,000
Derivative Fair Value	$ 2,696,000
Accrued and Other Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative Fair Value		$ (639,000)

XML

Derivative Instruments - Gains (Losses) on Derivative Instruments and Classification on Condensed Consolidated Statement of Operations (Detail) - Designated As Hedging Instrument [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Derivatives, Fair Value [Line Items]
Gains recognized in OCI	$ 1,445	$ 0	$ 4,332	$ 1,316
Losses recognized in OCI	(17)	(906)	(17)	(1,005)
Gains recognized from accumulated OCI into net income	782	149	988	149
Losses recognized from accumulated OCI into net income	$ (5)	$ (47)	$ (10)	$ (241)

XML

Derivative Instruments - Gains (Losses) on Derivative Instruments and Classification on Condensed Consolidated Statement of Operations (Parenthetical) (Detail) - Designated As Hedging Instrument [Member] - Unrealized Gain (Loss) on Cash Flow Hedges [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Cost of Sales [Member]
Derivatives, Fair Value [Line Items]
Cash flow hedge Gain (loss) reclassified	$ 54	$ 6	$ 68	$ (7)
Operating Expenses [Member]
Derivatives, Fair Value [Line Items]
Cash flow hedge Gain (loss) reclassified	$ 723	$ 96	$ 910	$ (85)

XML

Goodwill and Acquired Intangible Assets - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 28, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Finite Lived Intangible Assets [Line Items]
Goodwill allocated to disposal of assets				$ 1,059,000
Goodwill impairments		$ 0	$ 0	0	$ 0
Impairment of intangible assets		$ 0	$ 0	$ 0	$ 0
Minimum [Member]
Finite Lived Intangible Assets [Line Items]
Estimated useful life				7 years
Maximum [Member]
Finite Lived Intangible Assets [Line Items]
Estimated useful life				10 years
Acquired Technology [Member]
Finite Lived Intangible Assets [Line Items]
Weighted average remaining useful life				6 years 6 months
Customer Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Weighted average remaining useful life				6 years 6 months
Trade Name and Other [Member]
Finite Lived Intangible Assets [Line Items]
Weighted average remaining useful life				6 years 6 months
Skyfence Cloud Access Security Broker Business [Member]
Finite Lived Intangible Assets [Line Items]
Goodwill allocated to disposal of assets	$ 1,100,000
Intangible assets derecognized in connection with disposal of assets	$ 4,500,000

XML

Goodwill and Acquired Intangible Assets - Changes in the Carrying Amount of Goodwill (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Balance as of December 31, 2016	$ 37,448	[1]
Goodwill disposed with sale of Skyfence	(1,059)
Balance as of June 30, 2017	$ 36,389

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Goodwill and Acquired Intangible Assets - Summary of Acquired Intangible Assets Subject to Amortization (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 4,513	$ 12,478
Accumulated Amortization	(1,064)	(4,085)
Net Book Value	3,449	8,393	[1]
Acquired Technology [Member]
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	3,753	11,718
Accumulated Amortization	(1,004)	(4,085)
Net Book Value	2,749	7,633
Customer Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	480	480
Accumulated Amortization	(38)	0
Net Book Value	442	480
Trade Name and Other [Member]
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	280	280
Accumulated Amortization	(22)	0
Net Book Value	$ 258	$ 280

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Goodwill and Acquired Intangible Assets - Schedule of Expected Amortization Expense in Future Periods (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	[1]
Goodwill And Intangible Assets Disclosure [Abstract]
2017 (remaining 6 months)	$ 265
2018	528
2019	528
2020	528
2021	528
Thereafter	1,072
Net Book Value	$ 3,449	$ 8,393

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Loss Contingencies [Line Items]
Operating lease expiration year	2022
Rent expense	$ 3,200,000	$ 3,000,000
Tenant improvement allowances	0	0
Restricted cash	2,054,000		$ 1,884,000	[1]
Purchase commitments	$ 3,400,000		3,800,000
Period of purchase commitment of inventory from specified date	6 months
Loss contingency accrual	$ 0		$ 0
Cancelable Lease Agreement [Member]
Loss Contingencies [Line Items]
Motor vehicle lease expenses	1,500,000	$ 1,400,000
Maximum [Member] | Cancelable Lease Agreement [Member]
Loss Contingencies [Line Items]
Penalties	$ 100,000

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

XML

Commitments and Contingencies - Future Minimum Payments Under Operating Leases and Minimum Rentals to be Received Under Non-Cancellable Subleases (Detail) $ in Thousands	Jun. 30, 2017 USD ($)
Operating Leases
2017 (remaining 6 months)	$ 3,601
2018	8,459
2019	4,741
2020	4,461
2021	301
Thereafter	49
Total	21,612
Estimated Sublease Income
2017 (remaining 6 months)	356
2018	683
2019	0
2020	0
2021	0
Thereafter	0
Total	$ 1,039

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Stock Plans - Additional Information (Detail)			1 Months Ended						3 Months Ended		6 Months Ended
	Apr. 26, 2017 shares	Jan. 01, 2017 shares	May 31, 2016 shares	Oct. 31, 2015 shares	Aug. 31, 2014 shares	Nov. 30, 2013 shares	Jan. 31, 2012	Sep. 30, 2011 Period shares	Jun. 30, 2017 USD ($) Executive shares	Jun. 30, 2016 USD ($) shares	Jun. 30, 2017 USD ($) Executive shares	Jun. 30, 2016 USD ($)	Dec. 31, 2016 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based restricted stock units granted											1,052,009
Number of stock option outstanding, granted									0	0	0
Number of options outstanding									1,179,087		1,179,087		1,570,765
Number of restricted stock units outstanding									2,417,349		2,417,349		1,994,790
Intrinsic value of options exercised | $											$ 4,200,000
Compensation cost related to unvested stock-based awards granted, but not yet recognized | $									$ 97,200,000		$ 97,200,000
Nonvested awards, compensation cost not yet recognized, period for recognition											2 years 8 months 12 days
Capitalized stock-based compensation expense | $									$ 0	$ 0	$ 0	$ 0
Restricted Stock Units for Common Stock [Member] | Incapsula [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issuable, as-converted to common stock-basis						198,825
Performance-based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of executives | Executive									2		2
Restricted Stock Units And Outstanding Options [Member] | Incapsula [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issuable, as-converted to common stock-basis											247,184
2003 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserve of common stock for future issuance									955,568		955,568
2003 Stock Plan [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum percentage of fair value of common stock on grant date											85.00%
2003 Stock Plan [Member] | Stock options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period											10 years
2003 Stock Plan [Member] | Stock options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period											4 years
2003 Stock Plan [Member] | Stock options [Member] | Greater 10% Ownership [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum percentage of fair value of common stock on grant date											110.00%
Minimum percentage of combined voting power											10.00%
2011 Stock Option and Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserve of common stock for future issuance								1,000,000
Increase percentage of common stock outstanding											4.00%
Increase in reserve share	850,000		1,300,000
2011 Stock Option and Incentive Plan [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum percentage of fair value of common stock on grant date											100.00%
Expiration period											10 years
2011 Stock Option and Incentive Plan [Member] | Restricted Stock Units for Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period											4 years
Description of vesting terms											The Company also grants RSUs. RSUs granted to new hires and merit grants to existing employees generally vest over a four-year period with 25% vesting at the end of one year and the remainder vesting quarterly thereafter.
2011 Stock Option and Incentive Plan [Member] | Restricted Stock Units for Common Stock [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage at the end of period											25.00%
2011 Stock Option and Incentive Plan [Member] | Performance-based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period											3 years
Vesting performance period											1 year
Vesting service period											2 years
Description of vesting terms											The PRSUs provide for a target number of shares that generally vest over three years including a one year performance period and two years of service-based vesting. The PRSUs vest contingent upon the Company’s achievement of an annual contract value of subscription bookings target for fiscal 2017 and total operating expenses for 2017 that are at 110% or less of the internal operating plan.
Vest contingent upon the company’s achievement of total operating expenses at the internal operating plan, percentage											110.00%
Award expiration date											Feb. 15, 2019
2011 Stock Option and Incentive Plan [Member] | Performance-based RSUs [Member] | Executives [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based restricted stock units granted											46,619
2011 Stock Option and Incentive Plan [Member] | Performance-based RSUs [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Earned percentage on target award amount, depending on level of achievement											200.00%
2011 Stock Option and Incentive Plan [Member] | Performance-based RSUs [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Earned percentage on target award amount, depending on level of achievement											0.00%
2011 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserve of common stock for future issuance								500,000
Increase percentage of common stock outstanding							1.00%
Increase in reserve share		330,889
Program effective date								Nov. 08, 2011
Percentage in payroll of deduction base salary to acquire shares of common stock								15.00%
Offering period								24 months
Percentage of fair value of common stock on offering period								85.00%
Number of years, shares reserved for issuance increase							8 years
2011 Employee Stock Purchase Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserve of common stock for future issuance								20,000,000
Number of purchase periods for offering | Period								5
Inducement Stock Option Plan And Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Description of vesting terms											In accordance with the terms of the Inducement Option Plans, the Company issued options to purchase an aggregate of 290,000 shares of the Company’s common stock at an exercise price equal to the fair market value of a share of the Company’s common stock on the dates of grant of the options. The options, which have a ten-year term, vest at the rate of 25% of the shares on each of the first anniversary of the vesting commencement date with an additional 6.25% of the shares subject to the option vesting each quarter thereafter so long as the participant has not been terminated.
Number of stock option outstanding, granted					290,000
Inducement Stock Option Plan And Agreement [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage at the end of period					25.00%
Inducement Stock Option Plan And Agreement [Member] | Quarterly Vesting [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage at the end of period					6.25%
Inducement Restricted Stock Unit Plan and Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Description of vesting terms											In accordance with the terms of the Inducement RSU Plans, the Company issued RSUs representing an aggregate of 290,000 shares of the Company’s common stock. The RSUs, which expire following settlement, vest at the rate of 25% of the shares on each of the first anniversary of the vesting commencement date with an additional 6.25% of the shares subject to the RSU vesting each quarter thereafter so long as the participant has not been terminated.
Shares available for grant					290,000
Inducement Restricted Stock Unit Plan and Agreement [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage at the end of period					25.00%
Inducement Restricted Stock Unit Plan and Agreement [Member] | Quarterly Vesting [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage at the end of period					6.25%
2015 Equity Inducement Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserve of common stock for future issuance				100,000
2015 Equity Inducement Plan [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum percentage of fair value of common stock on grant date				100.00%
Expiration period				10 years
Incapsula 2010 Share Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reserve of common stock for future issuance						10,263,211
Incapsula 2010 Share Incentive Plan [Member] | Restricted Stock Units for Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance-based restricted stock units granted						7,095,461
Incapsula 2010 Share Incentive Plan [Member] | Assumed Outstanding Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options outstanding									4,348		4,348
Incapsula 2010 Share Incentive Plan [Member] | Assumed RSUs Outstanding [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of restricted stock units outstanding									118		118

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Stock Plans - Summary of Option Activity under Plans and Related Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Dec. 31, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Stock Options Outstanding, Beginning balance			1,570,765
Number of Stock Options Outstanding, Granted	0	0	0
Number of Stock Options Outstanding, Exercised			(272,676)
Number of Stock Options Outstanding, Cancelled or forfeited			(119,002)
Number of Stock Options Outstanding, Ending balance	1,179,087		1,179,087	1,570,765
Number of Shares, Vested and expected to vest	1,179,087		1,179,087
Number of Shares, Exercisable	815,232		815,232
Weighted Average Exercise Price of Stock Options Outstanding	$ 40.70		$ 40.70	$ 39.64
Weighted Average Exercise Price, Granted			0
Weighted Average Exercise Price, Exercised			30.63
Weighted Average Exercise Price, Cancelled or forfeited			49.77
Weighted Average Exercise Price, Vested and expected to vest	40.70		40.70
Weighted Average Exercise Price, Exercisable	$ 38.95		$ 38.95
Weighted-Average Remaining Contractual Term (in years)			6 years 6 months 3 days	6 years 10 months 25 days
Weighted-Average Remaining Contractual Term (in years), Vested and expected to vest			6 years 6 months 3 days
Weighted-Average Remaining Contractual Term (in years), Exercisable			6 years 1 month 6 days
Aggregate Intrinsic Value	$ 12,754		$ 12,754	$ 9,226
Aggregate Intrinsic Value, Vested and expected to vest	12,754		12,754
Aggregate Intrinsic Value, Exercisable	$ 9,919		$ 9,919

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Stock Plans - Summary of Option Activity under Plans and Related Information (Parenthetical) (Detail)	Jun. 30, 2017 $ / shares
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Closing stock price	$ 47.85

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Stock Plans - Summary of RSU Activity Outstanding and Weighted Average Grant Date Fair Value (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of Restricted Stock Units Outstanding, Unvested - Beginning Balance	1,994,790
Number of Restricted Stock Units Outstanding, Granted	1,052,009
Number of Restricted Stock Units Outstanding, Granted, performance RSUs	301,900
Number of Restricted Stock Units Outstanding, Released	(495,356)
Number of Restricted Stock Units Outstanding, Cancelled or forfeited	(435,994)
Number of Restricted Stock Units Outstanding, Unvested - Ending Balance	2,417,349
Weighted-Average Grant Date Fair Value, Unvested	$ 47.47	$ 51.42
Weighted-Average Grant Date Fair Value, Granted	42.67
Weighted-Average Grant Date Fair Value, Granted, performance RSUs	41.96
Weighted-Average Grant Date Fair Value, Released	47.30
Weighted-Average Grant Date Fair Value, Cancelled or forfeited	$ 50.34

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Stock Plans - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 11,507	$ 17,104	$ 25,117	$ 32,759
Cost of revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	1,403	1,132	2,672	2,525
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	2,560	3,802	7,328	8,051
Sales and Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	3,700	7,683	7,166	12,777
General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	3,844	4,487	7,276	9,406
Restructuring Charges [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 0	$ 0	$ 675	$ 0

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Stock Plans - Weighted Average Assumptions for Fair Value of Stock Options Grants and ESPP Grants (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend rate	0.00%	0.00%	0.00%	0.00%
Risk-free interest rate	0.00%	0.00%	0.00%	1.50%
Expected term (in years)	0 years	0 years	0 years	6 years 1 month 6 days
Expected volatility	0.00%	0.00%	0.00%	58.00%
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend rate	0.00%	0.00%	0.00%	0.00%
Risk-free interest rate	1.10%	0.40%	1.10%	0.40%
Expected term (in years)	6 months	6 months	6 months	6 months
Expected volatility	52.00%	58.00%	52.00%	58.00%

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Accumulated Other Comprehensive Income (Loss) - Changes in Balances of Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017		Jun. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance			$ 231,963	[1]	$ 240,201
Other comprehensive income (loss) before reclassifications	$ 1,218	$ (515)	3,176		376
Amounts reclassified to net income (loss)	(777)	(102)	(978)		92
Other comprehensive income (loss)	441	(617)	2,198		468
Ending balance	287,115	223,295	287,115		223,295
Unrealized Gain (Loss) on Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	664	(105)	(1,065)		(1,021)
Other comprehensive income (loss) before reclassifications	1,196	(552)	3,126		170
Amounts reclassified to net income (loss)	(777)	(102)	(978)		92
Other comprehensive income (loss)	419	(654)	2,148		262
Ending balance	1,083	(759)	1,083		(759)
Unrealized Gain (Loss) on Investments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(385)	(141)	(413)		(310)
Other comprehensive income (loss) before reclassifications	22	37	50		206
Amounts reclassified to net income (loss)	0	0	0		0
Other comprehensive income (loss)	22	37	50		206
Ending balance	(363)	(104)	(363)		(104)
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	279	(246)	(1,478)		(1,331)
Ending balance	$ 720	$ (863)	$ 720		$ (863)

[1] The Condensed Consolidated Balance Sheet as of December 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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Accumulated Other Comprehensive Income (Loss) - Summary of Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss), Pre-Tax Amount	$ 685	$ (951)	$ 3,415	$ 720
Other comprehensive income (loss), Tax Expense (Benefit)	(244)	334	(1,217)	(252)
Other comprehensive income (loss) before reclassification adjustments, After-Tax Amount	1,218	(515)	3,176	376
Other comprehensive income (loss), Reclassification adjustments, After-Tax Amount	(777)	(102)	(978)	92
Other comprehensive income (loss)	441	(617)	2,198	468
Unrealized Gains (Losses) on Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassification adjustments, Pre-Tax Amount	1,428	(906)	4,315	311
Other comprehensive income (loss), Reclassification adjustments, Pre-Tax Amount	(777)	(102)	(978)	92
Other comprehensive income (loss), Pre-Tax Amount	651	(1,008)	3,337	403
Other comprehensive income (loss) before reclassification adjustments, Tax Expense (Benefit)	(232)	354	(1,189)	(141)
Other comprehensive income (loss), Reclassification adjustments, Tax Expense (Benefit)	0	0	0	0
Other comprehensive income (loss), Tax Expense (Benefit)	(232)	354	(1,189)	(141)
Other comprehensive income (loss) before reclassification adjustments, After-Tax Amount	1,196	(552)	3,126	170
Other comprehensive income (loss), Reclassification adjustments, After-Tax Amount	(777)	(102)	(978)	92
Other comprehensive income (loss)	419	(654)	2,148	262
Unrealized Gains (Losses) on Investments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassification adjustments, Pre-Tax Amount	34	57	78	317
Other comprehensive income (loss), Pre-Tax Amount	34	57	78	317
Other comprehensive income (loss) before reclassification adjustments, Tax Expense (Benefit)	(12)	(20)	(28)	(111)
Other comprehensive income (loss), Tax Expense (Benefit)	(12)	(20)	(28)	(111)
Other comprehensive income (loss) before reclassification adjustments, After-Tax Amount	22	37	50	206
Other comprehensive income (loss), Reclassification adjustments, After-Tax Amount	0	0	0	0
Other comprehensive income (loss)	$ 22	$ 37	$ 50	$ 206

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Tax Expenses [Line Items]
Income tax expense (benefit)	$ (914)	$ 681	$ 44	$ 579
Maximum [Member]
Income Tax Expenses [Line Items]
Income tax expense (benefit)			$ 100	$ 600

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Segment Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2017 Segment
Segment Reporting [Abstract]
Number of operating segments	1

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Segment Information - Company's Revenue by Geographic Region, Based on Customer's Location (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenue	$ 74,435	$ 57,873	$ 146,743	$ 117,646
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenue	36,701	30,208	74,346	63,879
EMEA [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenue	14,842	11,891	28,622	23,175
APAC [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenue	14,596	10,640	28,302	21,977
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenue	$ 8,296	$ 5,134	$ 15,473	$ 8,615

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Segment Information - Long-Lived Assets by Location (Detail) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 28,237	$ 29,889
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	23,461	20,525
Israel [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	4,540	9,344
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets	$ 236	$ 20

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Restructuring Charges - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Restructuring And Related Activities [Abstract]
Restructuring plan approval date by board of directors			2016-11
Restructuring charges	$ 0	$ 0	$ 667,000	$ 0
Payments for restructuring charges	$ 0		$ 1,100,000

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Net Income (Loss) per Share - Reconciliation of Basic and Diluted Shares (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Weighted average number of shares outstanding:
Basic	33,640	32,163	33,425	31,984
Dilutive effects of:
Employee stock options, RSU’s and share based payment awards issued to employees	0	0	559	0
Diluted	33,640	32,163	33,984	31,984

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Net Income (Loss) per Share - Antidilutive Securities Excluded from Computation of Diluted Net Income (Loss) Per Share of Common Stock (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	1,179,087	1,812,415	670,872	1,812,415
Restricted Stock Units for Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	2,417,349	2,454,882	550,544	2,454,882
Restricted Stock Issued In Connection with Skyfence Acquisition [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	0	257,847	0	257,847

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Disposition of Business - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Feb. 23, 2017
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Recognized gain on sale of Skyfence	$ 0		$ 0	$ 35,871	$ 0
Skyfence Cloud Access Security Broker Business [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Cash consideration on sale of assets						$ 40,000
Escrow to secure indemnification obligations						$ 5,000
Recognized gain on sale of Skyfence		$ 35,900

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Disposition of Business - Schedule of Carrying Amounts Immediately Preceding Disposition (Detail) - Skyfence Networks Ltd. [Member] $ in Thousands	Feb. 23, 2017 USD ($)
Assets
Prepaid and other current assets	$ 46
Property and equipment, net	219
Goodwill	1,058
Acquired intangible assets, net	4,496
Total assets	5,819
Liabilities
Accounts payable	104
Accrued and other current liabilities	117
Deferred revenue	1,454
Total liabilities	$ 1,675

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Disposition of Business - Schedule of Consolidated Results of Operations Through Disposal (Detail) - Skyfence Cloud Access Security Broker Business [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Operating loss	$ 0	$ (3,735)	$ (3,567)	$ (8,998)
Loss before taxes	0	(3,735)	(3,648)	(8,998)
Net loss	$ 0	$ (3,821)	$ (3,659)	$ (9,129)