Ruckus Wireless (RKUS) 10-Q 2015 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2015

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

For the transition period from to        

Commission file number: 001-35734

Ruckus Wireless, Inc.

(Exact name of registrant as specified in its charter)

Delaware	54-2072041
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

350 West Java Drive

Sunnyvale, California 94089

(650) 265-4200

(Address, including zip code, and telephone number,

including area code, of registrant's principal executive offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 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   x     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   x     No   o

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.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

On July 24, 2015, 87,596,785 shares of the registrant's common stock, $0.001 par value, were outstanding.

TABLE OF CONTENTS

	PART I - FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities And Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
	Signatures	50

“Ruckus Wireless,” the Ruckus logos and other trademarks or service marks of Ruckus Wireless, Inc. appearing in this Quarterly Report on Form 10-Q are the property of Ruckus Wireless, Inc. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders.

1

PART I. FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS

RUCKUS WIRELESS, INC.

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except par value)

	June 30,			December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	63,379		$	56,083
Short-term investments	148,478			142,706
Accounts receivable, net of allowance for doubtful accounts of $800 as of June 30, 2015 and December 31, 2014	67,692			59,553
Inventories	24,059			21,064
Deferred costs	3,122			4,414
Deferred tax assets	6,094			6,205
Prepaid expenses and other current assets	6,250			5,367
Total current assets	319,074			295,392
Property and equipment, net	18,275			13,636
Goodwill	9,945			9,945
Intangible assets, net	5,941			7,351
Non-current deferred tax asset	24,568			21,166
Restricted cash	5,000			5,000
Other assets	1,414			1,504
Total assets	$	384,217		$	353,994
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	28,527		$	23,538
Accrued compensation	14,554			13,765
Accrued liabilities	7,654			5,282
Deferred revenue	36,228			39,231
Total current liabilities	86,963			81,816
Non-current deferred revenue	11,870			10,554
Non-current deferred tax liabilities	410			596
Other non-current liabilities	1,438			1,379
Total liabilities	100,681			94,345
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock, $0.001 par value; 250,000 shares authorized as of June 30, 2015 and December 31, 2014; 87,524 and 85,110 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	88			85
Additional paid-in capital	296,935			273,276
Accumulated other comprehensive loss	(58		)	(97		)
Accumulated deficit	(13,429		)	(13,615		)
Total stockholders’ equity	283,536			259,649
Total liabilities and stockholders’ equity	$	384,217		$	353,994

See notes to condensed consolidated financial statements.

2

RUCKUS WIRELESS, INC.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenue:
Product	$	85,040		$	75,352		$	160,337		$	145,427
Service	7,190			5,648			13,971			10,625
Total revenue	92,230			81,000			174,308			156,052
Cost of revenue:
Product	26,720			22,209			49,951			43,705
Service	3,683			2,932			7,225			5,691
Total cost of revenue	30,403			25,141			57,176			49,396
Gross profit	61,827			55,859			117,132			106,656
Operating expenses:
Research and development	22,843			18,954			44,139			37,093
Sales and marketing	27,696			24,412			53,774			47,682
General and administrative	9,921			8,358			19,355			16,795
Total operating expenses	60,460			51,724			117,268			101,570
Operating income (loss)	1,367			4,135			(136		)	5,086
Interest income	156			46			297			92
Other expense, net	(94		)	(84		)	(172		)	(110		)
Income (loss) before income taxes	1,429			4,097			(11		)	5,068
Income tax expense (benefit)	670			2,658			(197		)	3,356
Net income	$	759		$	1,439		$	186		$	1,712
Net income per share:
Basic	$	0.01		$	0.02		$	0.00		$	0.02
Diluted	$	0.01		$	0.02		$	0.00		$	0.02
Weighted average shares used in computing net income per share:
Basic	87,017			82,315			86,331			81,799
Diluted	95,465			92,358			95,001			92,967

See notes to condensed consolidated financial statements.  

3

RUCKUS WIRELESS, INC.

Condensed Consolidated Statements of Comprehensive Income

(unaudited, in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015		2014
Net income	$	759		$	1,439		$	186	$	1,712
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on short-term investments	(46		)	(7		)	39		(13		)
Comprehensive income	$	713		$	1,432		$	225	$	1,699

See notes to condensed consolidated financial statements.  

4

RUCKUS WIRELESS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities
Net income	$	186		$	1,712
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	5,891			4,261
Provision for doubtful accounts	—			400
Stock-based compensation	14,407			12,686
Amortization of investment premiums, net of accretion of purchase discounts	1,165			580
Deferred income taxes	(1,038		)	2,812
Excess tax benefit from employee stock incentive plans	(2,491		)	(2,226		)
Other	10			—
Changes in operating assets and liabilities:
Accounts receivable	(8,139		)	(14,464		)
Inventories	(2,995		)	139
Deferred costs	1,292			(105		)
Prepaid expenses and other current assets	(940		)	(379		)
Other assets	106			(226		)
Accounts payable	4,345			(67		)
Accrued compensation	789			2,292
Accrued liabilities	2,431			1,175
Deferred revenue	(1,687		)	7,269
Net cash provided by operating activities	13,332			15,859
Cash flows from investing activities
Purchase of investments	(62,741		)	(66,335		)
Proceeds from the maturity of investments	55,952			49,321
Purchase of property and equipment	(8,486		)	(4,523		)
Increase in facility lease deposits	(16		)	(15		)
Net cash used in investing activities	(15,291		)	(21,552		)
Cash flows from financing activities:
Proceeds from exercise of stock options	4,404			3,169
Proceeds from employee stock purchase plan	2,360			2,033
Excess tax benefit from employee stock incentive plans	2,491			2,226
Net cash provided by financing activities	9,255			7,428
Net increase in cash and cash equivalents	7,296			1,735
Cash and cash equivalents at beginning of period	56,083			91,282
Cash and cash equivalents at end of period	$	63,379		$	93,017
Supplemental disclosure of cash flow information
Cash paid for income taxes	$	506		$	426
Non-cash investing and financing activities
Purchases of property and equipment recorded in accounts payable	$	1,735		$	832

See notes to condensed consolidated financial statements.

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business— Ruckus Wireless, Inc. (“Ruckus”) is a global supplier of advanced, carrier-class WiFi solutions. Ruckus’ solutions, which are called Smart WiFi, are used by service providers and enterprises to solve a range of network capacity, coverage and reliability challenges associated with increasing wireless traffic demands created by the growth in the number of users equipped with more powerful smart wireless devices using increasingly data rich applications and services. Ruckus markets and sells its products and technology directly and indirectly through a network of channel partners to a variety of service providers and enterprises around the world. Its Smart WiFi solutions offer carrier-class features and functionality such as enhanced reliability, consistent performance, extended range and massive scalability. Ruckus’ products include high capacity, high-speed hardware gateways, controllers, wireless bridges and indoor and outdoor access points, software platforms providing gateway, controller and reporting, analytics and management solutions, and unique WiFi-related cloud services, such as location-based positioning (“LBS”) and public access. These hardware and software products and cloud services incorporate various elements of Ruckus’ proprietary technologies, including Smart Radio, SmartCast, SmartMesh, SmartCell and Smart Scaling, to enable high performance in a variety of challenging operating environments.

Basis of Presentation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in Ruckus’ Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 25, 2015.

The condensed consolidated balance sheet as of December 31, 2014, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2015 or any future period.

Principles of Consolidation— The condensed financial statements include the accounts of Ruckus and its wholly owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates— The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by management include the determination of revenue recognition, inventory, goodwill and intangible asset valuation, accounting for income taxes, stock-based compensation and warranty liability. Management bases its estimates on historical experience and also on assumptions that it believes are reasonable. Actual results could materially differ from those estimates.

Summary of Significant Accounting Policies— There have been no material changes to our significant accounting policies as compared to those described in our Annual Report on Form 10-K for the year ended December 31, 2014.

Recent Accounting Pronouncements— In May 2014, the Financial Accounting Standard Board (“FASB”) and International Accounting Standards Board (“IASB”) issued accounting standards update (“ASU”) 2014-09, Revenue from Contracts with Customers, a converged standard on revenue recognition. Some of the main areas of transition to the new standard include, among others, transfer of control (revenue is recognized when a customer obtains control of a good or service), allocation of transaction price based on relative standalone selling price (entities that sell multiple goods or services in a single arrangement must allocate the consideration to each of those goods or services), contract costs (entities sometimes incur costs, such as sales commissions or mobilization activities, to obtain or fulfill a contract), and disclosures (extensive disclosures are required to provide greater insight into both revenue that has been recognized, and revenue that is expected to be recognized in the future from existing contracts). In July 2015, the FASB affirmed a one-year deferral of the effective date of the new revenue standard. The accounting standard will be effective for the Company beginning in its first quarter of 2018, with early adoption permitted, but not before the original effective date of annual periods beginning after December 15, 2016, using one of two methods of adoption: (i) retrospective to each prior reporting period presented, with the option to elect certain practical expedients as defined within the standard; or (ii) retrospective with the cumulative effect of initially applying the standard recognized at the date of initial application inclusive of certain additional disclosures. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial position, results of operations and cash flows.

Concentrations of Credit Risk and Significant Customers— Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash, cash equivalents, short-term investments and accounts receivable. The Company invests only in high credit quality instruments and maintains its cash, cash equivalents and short-term investments in fixed income securities. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, are subject to minimal credit risk. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company’s accounts receivable are primarily derived from distributors and service providers located in the Americas, Europe, and Asia Pacific. The Company generally does not require its customers to provide collateral to support accounts receivable. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial condition. The Company has recorded an allowance for doubtful accounts for those receivables management has determined to not be collectible.

6

The percentages of revenue from individual customers totaling greater than 10% of total consolidated revenue were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Channel partner A	16.7	%	15.8	%	15.1	%	15.3	%
Channel partner B	13.8	%	14.0	%	12.1	%	13.5	%
Channel partner C	11.3	%	11.8	%	*		11.8	%
* Less than 10%

No single end-customer accounted for more than 10% of total consolidated revenue. 

The percentage of receivables from individual customers totaling greater than 10% of total consolidated accounts receivable were as follows:

	June 30,		December 31,
	2015		2014
Channel partner C	22.4	%	12.5	%

NOTE 2—FAIR VALUE DISCLOSURE

Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The Company categorizes its financial instruments into a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Hierarchical levels that are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2	Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3	Unobservable inputs are used when little or no market data is available.

The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented. The Company’s assets that were measured at fair value by level within the fair value hierarchy were as follows (in thousands):

	June 30, 2015
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	367	$	367	$	—	$	—
Short-term investments:
Corporate debt securities	122,232		—		122,232		—
U.S. government agency securities	26,246		—		26,246		—
Total assets measured and recorded at fair value	$	148,845	$	367	$	148,478	$	—

7

	December 31, 2014
	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	2,771	$	2,771	$	—	$	—
Corporate debt securities	3,000		—		3,000		—
Short-term investments:
Corporate debt securities	118,323		—		118,323		—
U.S. government agency securities	24,383		—		24,383		—
Total assets measured and recorded at fair value	$	148,477	$	2,771	$	145,706	$	—

NOTE 3—SHORT-TERM INVESTMENTS

Short-term investments consisted of the following (in thousands):

	June 30, 2015
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt securities	$	122,309	$	11	$	(88	)	$	122,232
U.S. government agency securities	26,234		12		—			26,246
Total short-term investments	$	148,543	$	23	$	(88	)	$	148,478

	December 31, 2014
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt securities	$	118,470	$	—	$	(147	)	$	118,323
U.S. government agency securities	24,392		4		(13		)	24,383
Total short-term investments	$	142,862	$	4	$	(160	)	$	142,706

The gross realized gains and losses related to the Company’s short-term investments were not material for the six months ended June 30, 2015.

The cost basis and fair value of the short-term investments by contractual maturity consist of the following (in thousands):

	June 30, 2015				December 31, 2014
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	111,553	$	111,503	$	114,231	$	114,113
Over one year and less than two years	36,990		36,975		28,631		28,593
Total short-term investments	$	148,543	$	148,478	$	142,862	$	142,706

8

Short-term investments in an unrealized loss position consisted of the following (in thousands):

	June 30, 2015					December 31, 2014
	Less Than 12 Months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate debt securities	$	99,219	$	(88	)	$	105,187	$	(147	)
U.S. government agency securities	—		—			15,773		(13		)
Total short-term investments	$	99,219	$	(88	)	$	120,960	$	(160	)

As of June 30, 2015 and December 31, 2014, no short-term investments were in a continuous unrealized loss position for more than twelve months. The Company does not intend to sell any of these investments, and it is not more likely than not, that the Company would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity.

NOTE 4—GOODWILL AND INTANGIBLE ASSETS

Intangible assets consisted of the following (in thousands, except years):

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Life
June 30, 2015
Purchased technology	$	12,600	$	(6,659	)	$	5,941	2.4 years
December 31, 2014
Purchased technology	$	12,600	$	(5,249	)	$	7,351	2.8 years

The following table presents the estimated future amortization expense of intangible assets as of June 30, 2015 (in thousands):

Year ending December 31,	Amount
2015 (remaining six months)	$	1,410
2016	2,531
2017	1,500
2018	500
Total amortization	$	5,941

The Company had goodwill of $9.9 million as of June 30, 2015 and December 31, 2014. No impairment has been recognized related to the goodwill balance.

9

NOTE 5—DEFERRED REVENUE

Deferred revenue consisted of the following (in thousands):

	June 30,		December 31,
	2015		2014
Product	$	17,410	$	22,900
Service	30,688		26,885
Total deferred revenue	$	48,098	$	49,785
Reported as:
Current	$	36,228	$	39,231
Non-current	11,870		10,554
Total deferred revenue	$	48,098	$	49,785

Deferred product revenue relates to arrangements where not all revenue recognition criteria have been met. Deferred service revenue represents support contracts and software licensed as a service (“SaaS”) billed in advance and revenue is recognized ratably over the service period, typically one to 5 years.

NOTE 6—COMMITMENTS AND CONTINGENCIES

Operating Leases—The Company’s primary facilities are located in Sunnyvale, California, Shenzhen, China, Singapore, Taipei, Taiwan, Bangalore, India and Woodburn Green, United Kingdom and are leased under non-cancelable operating lease arrangements.

Future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

Years ending December 31,	Amount
2015 (remaining six months)	$	2,044
2016	3,994
2017	3,620
2018	3,266
2019	2,567
Thereafter	7,489
Operating lease obligations	$	22,980

Litigation— The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business. Management is not currently aware of any matters that it expects will have a material adverse effect on the consolidated financial position, results of operations, or cash flows of the Company.

For the three months ended June 30, 2015 and 2014, and six months ended June 30, 2015, the Company did not have any material legal settlements. For the six months ended June 30, 2014, the Company settled several patent litigation claims for a net gain of $0.8 million, which is included in general and administrative expense in the condensed consolidated statements of operations.

Purchase Commitments— As of June 30, 2015, the Company had current purchase commitments of $13.4 million for inventory and specific contractual services.

Indemnification Agreements— The Company indemnifies its directors for certain events or occurrences, subject to certain limits, while the director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the director’s term of service. The Company may terminate the indemnification agreements with its directors upon the termination of their services as directors of the Company, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. The maximum amount of potential future indemnification is unlimited; however, the Company has a director insurance liability policy that limits its exposure. The Company believes the fair value of these indemnification agreements is minimal. The Company has also entered into customary indemnification agreements with each of its officers.

10

The Company indemnifies its channel partners against certain claims alleging that the Company’s products (excluding custom products and/or custom support) infringe a patent, copyright, trade secret, or trademark, provided that a channel partner promptly notifies the Company in writing of the claim and such channel partner cooperates with the Company and grants the Company the authority to control the defense and any related settlement.

The Company has not recorded any liabilities for these agreements as of June 30, 2015 and December 31, 2014.

Reimbursement of Penalties— As of June 30, 2015 and December 31, 2014, the Company held $5.0 million in escrow to secure an indemnification agreement. If triggered, the Company will indemnify a channel partner for reimbursement of penalties assessed under the Information Technology Act of India (“IT Act”). The IT Act specifies penalties for network service providers in the event of illegal or unauthorized use of computers, computer systems and data stored therein. In the event that Ruckus equipment is the cause of a network service provider breach, the Company is required to indemnify the channel partner, without limitation to the amount, for penalties reimbursed by the channel partner to the network service provider under the IT Act. The indemnification period is six years beginning from April 2013. To date no claims have been made under the IT Act, for which the Company would be potentially liable.

Warranties— The Company offers a limited lifetime hardware warranty on its indoor WLAN products and a limited warranty for all other hardware products for a period of up to one year. The Company estimates the costs that may be incurred under its warranties and records a liability for products sold as a charge to cost of revenue. Estimates of future warranty costs are largely based on historical experience of product failure rates and material usage incurred in correcting product failures. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

The warranty liability is included as a component of accrued liabilities in the accompanying condensed consolidated balance sheets. Changes in the warranty liability were as follows (in thousands): 

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Balance at beginning of period	$	924		$	896		$	803		$	1,038
Changes in existing warranty	22			(207		)	(60		)	(114		)
Warranty expense	170			298			560			554
Obligations fulfilled	(176		)	(140		)	(363		)	(631		)
Balance at end of period	$	940		$	847		$	940		$	847

NOTE 7—EQUITY AWARD PLANS     

Stock Option Activity

The following table summarizes the outstanding stock option activity and a summary of information related to stock options (in thousands, except per share amounts and years):

	Common Stock Options Outstanding
	Number of Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance, December 31, 2014	17,042	$	5.60	6.7	$	119,782
Options granted	279	11.12
Options exercised	(1,645)	2.68
Options forfeited	(496)	9.84
Balance, June 30, 2015	15,180	$	5.88	6.2	$	82,680
Options exercisable as of June 30, 2015	11,415	$	4.28	5.6	$	75,610
Options vested and expected to vest as of June 30, 2015	15,054	$	5.83	6.2	$	82,544

11

The weighted average grant date fair value of stock options was approximately $5.65 and $6.26 per share for the three months ended June 30, 2015 and 2014, respectively, and $5.68 and $6.84 for the six months ended June 30, 2015 and 2014.

The total intrinsic value of options exercised was approximately $4.3 million and $3.4 million for the three months ended June 30, 2015 and 2014, respectively and $14.2 million and $16.7 million for the six months ended June 30, 2015 and 2014.

Restricted Stock Unit Activity

The following table summarizes the outstanding activity of Restricted Stock Units (“RSUs”) and a summary of information related to RSUs (in thousands, except per share amounts and years):

	Restricted Stock Units Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance, December 31, 2014	2,825		$	13.65	1.7	$	33,955
RSUs granted	676		10.83
RSUs vested	(517	)	14.09
RSUs forfeited	(214	)	13.99
Balance, June 30, 2015	2,770		$	12.85	1.7	$	28,641

The following table summarizes the stock activity and the total number of shares available for grant under the Company's Amended & Restated 2012 Equity Incentive Plan as of June 30, 2015 (in thousands):

	Number of Shares
Balance, December 31, 2014	9,398
Additional shares reserved for issuance	4,256
Options granted	(279	)
Options forfeited	496
RSUs granted	(676	)
RSUs forfeited	214
Balance, June 30, 2015	13,409

Fair Value Disclosures

Employee Stock Options

The fair value of each option is estimated on the date of grant using the Black-Scholes model. The following table summarizes the weighted average assumptions relating to the Company's stock options:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Volatility	54.6	%	63.5	%	55.0	%	63.8	%
Expected term (years)	5.6		6.1		5.6		6.1
Risk-free interest rate	1.8	%	1.9	%	1.8	%	1.9	%
Dividend yield	—		—		—		—

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Employee Stock Purchase Plan

The following table summarizes the assumptions relating to the Company's ESPP:

	Three and Six Months Ended June 30,
	2015		2014
Volatility	42.9	%	45.8	%
Expected term (years)	0.5		0.5
Risk-free interest rate	0.1	%	0.1	%
Dividend yield	—		—

Stock-based Compensation Expense

The following table summarizes the stock-based compensation expense recorded in the condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Cost of revenue	$	249	$	253	$	565	$	498
Research and development	2,348		2,126		5,070		4,222
Sales and marketing	1,866		1,710		3,483		3,325
General and administrative	2,622		2,251		5,289		4,641
Total stock-based compensation	$	7,085	$	6,340	$	14,407	$	12,686

At June 30, 2015, the total unrecognized stock-based compensation expense under the Company's stock plans was $53.5 million, net of estimated forfeitures. The unamortized expense will be recognized over a weighted-average period of 2.1 years.

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NOTE 8—EARNINGS PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of common shares outstanding, including potential dilutive common shares assuming the dilutive effect of outstanding stock awards using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock awards, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumed to be used to repurchase shares.

The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator:
Net income	$	759	$	1,439	$	186	$	1,712
Denominator:
Weighted-average shares used in computing basic net income per share	87,017		82,315		86,331		81,799
Weighted-average effect of potentially dilutive shares:
Employee stock options	8,115		9,994		8,351		11,032
RSUs and ESPP	333		49		319		136
Diluted	95,465		92,358		95,001		92,967
Net income per share:
Basic	$	0.01	$	0.02	$	0.00	$	0.02
Diluted	$	0.01	$	0.02	$	0.00	$	0.02

The following table summarizes the weighted-average outstanding stock awards that were excluded from the diluted per share calculation because to include them would have been anti-dilutive for the period (in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Stock options	3,341	2,419	3,493	2,333
RSUs and ESPP	404	946	1,699	772
Total	3,745	3,365	5,192	3,105

NOTE 9—INCOME TAXES

Income tax expense was $0.7 million and $2.7 million for the three months ended June 30, 2015 and 2014, respectively. The effective tax rate exceeded the statutory rate for the periods primarily due to certain non-deductible stock-based compensation expenses and certain foreign taxes.

Income tax benefit was $0.2 million for the six months ended June 30, 2015 and income tax expense was $3.4 million for the six months ended June 30, 2014. The effective tax rate exceeded the statutory rate for the periods primarily due to certain non-deductible stock-based compensation expenses and certain foreign taxes. 

The Company evaluates the realization of its deferred tax assets based on the expiration period of the asset, projections of future taxable income in the relevant tax jurisdiction, the effect of tax planning strategies, and other factors. Both positive and negative evidence is weighed using significant judgment. Based on an evaluation of these factors, the Company believes that the realization of its deferred tax assets is more likely than not and, therefore, a valuation allowance against its deferred tax assets is not required. In future periods, positive and negative evidence can change due to revised projections of future taxable income in the relevant jurisdictions and other factors listed above. If future circumstances require a valuation allowance to be recorded, there would be an increase in tax expense in the consolidated statements of operations without any change in net cash provided by operating activities in the consolidated statements of cash flows.

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NOTE 10—SEGMENT INFORMATION

The Company operates in one industry segment selling gateways, controllers and access points along with related software and services.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its chief executive officer. The Company’s chief executive officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity, and there are no segment managers who are held accountable for operations, operating results and plans for products or components below the consolidated unit level. Accordingly, the Company reports as a single operating segment. The Company and its chief executive officer evaluate performance based primarily on revenue in the geographic locations in which the Company operates. Revenue is attributed by geographic location based on the bill-to location of the Company’s customers.

The following presents total revenue by geographic region (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Americas:
United States	$	47,055	$	39,667	$	86,021	$	78,142
Other Americas	2,900		2,274		4,673		4,286
Total Americas	49,955		41,941		90,694		82,428
EMEA:
Total EMEA	22,334		21,419		44,307		41,471
APAC:
Total APAC	19,941		17,640		39,307		32,153
Total revenue	$	92,230	$	81,000	$	174,308	$	156,052

As of June 30, 2015, the Company had property and equipment, net of $13.3 million, $0.6 million and $4.4 million located in the Americas, EMEA, and APAC respectively.

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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 our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission, or SEC, filings, including our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 25, 2015. The following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this discussion and analysis and elsewhere in this Quarterly Report, including statements regarding our future financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions described under the section titled “Risk Factors” and elsewhere in this Quarterly Report and our other SEC filings, regarding, among other things:

• our ability to predict our revenue, operating results and gross margin accurately;

• our ability to maintain an adequate rate of revenue growth and remain profitable;

• the length and unpredictability of our sales cycles with service provider end-customers;

• any potential loss of or reductions in orders from our larger customers;

• the effects of increased competition in our market;

• our ability to continue to enhance and broaden our product offering;

• our ability to maintain, protect and enhance our brand;

• our ability to effectively manage our growth;

• our ability to maintain effective internal controls;

• the quality of our products and services;

• our ability to continue to build and enhance relationships with channel partners;

• the attraction and retention of qualified employees and key personnel;

• our ability to sell our products and effectively expand internationally;

• our ability to protect our intellectual property;

• claims that we infringe intellectual property rights of others; and

• other risk factors included under the section titled “Risk Factors.”

Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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Overview

Ruckus is a global supplier of advanced, carrier-class WiFi solutions. Our solutions, which we call Smart WiFi, are used by service providers and enterprises to solve a range of network capacity, coverage and reliability challenges associated with increasing wireless traffic demands created by the growth in the number of users equipped with more powerful smart wireless devices using increasingly data rich applications and services. We market and sell our products and technology directly and indirectly through a network of channel partners to a variety of service providers and enterprises around the world. Our Smart WiFi solutions offer carrier-class features and functionality such as enhanced reliability, consistent performance, extended range and massive scalability. Our products include high capacity, high-speed hardware gateways, controllers, wireless bridges and indoor and outdoor access points, software platforms providing gateway, controller and reporting, analytics and management solutions, and unique WiFi-related cloud services, such as location-based positioning and public access. These hardware and software products and cloud services incorporate various elements of our proprietary technologies, including Smart Radio, SmartCast, SmartMesh, SmartCell and Smart Scaling, to enable high performance in a variety of challenging operating environments.

Our service provider end-customers include mobile network operators, fixed line operators, cable companies and emerging “over the top” providers. These customers use our Smart WiFi solutions in multiple ways to grow their businesses, including augmenting 3G/4G capacity, mobile data traffic offload to unlicensed spectrum, WiFi access to increase their network footprint, backhaul assets to provide mobility services to existing customers and providing managed WiFi services to enterprise customers.

Our enterprise end-customers span a wide range of industries, including hospitality, education, warehousing and logistics, corporate enterprise, retail, state and local governments, healthcare and public venues, such as stadiums, convention centers, airports, and major outdoor public areas.

We sell our products globally through direct and indirect channels. We target both enterprises and service providers that require carrier-class WiFi solutions through our global force of sales personnel and systems engineers. They work with a vast network of value-added resellers and distributors, which we collectively refer to as channel partners, to reach and service our end-customers. Our channel partners provide lead generation, pre-sales support, product fulfillment and, in certain circumstances, post-sales customer service and support. In some instances, service providers may also act as a channel partner for sales of our solutions to enterprises. Our sales personnel and systems engineers typically engage directly with selected large service providers and large enterprises whether or not product fulfillment involves our channel partners. In contrast, the majority of our enterprise sales are originated and completed by our channel partners with little or no direct engagement with us.

Each of our greater than 10% customers are channel partners. The Company’s agreements with these channel partners were made in the ordinary course of business and may be terminated with or without cause by either party with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of these channel partners was terminated, the Company believes that such termination would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, because the Company has engaged or believes that it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end-customers within a quarter following the termination of any agreement with one of these channel partners.

Service providers typically require long sales cycles, which generally range between one and three years, but can be longer. The sale to a large service provider usually begins with an evaluation, followed by one or more network trials, followed by vendor selection and finally deployment and testing. A large service provider will frequently issue a request for proposals to shortlist competitive suppliers prior to the network trials. Completion of several of these steps is substantially outside of our control, which causes our revenue patterns from large service providers to vary widely from period to period. After initial deployment, subsequent purchases of our products depend on the time frame of the service provider.

We perform some warehousing and delivery of products sold within the United States from our headquarters in Sunnyvale, California. We also outsource the warehousing and delivery of our products to a third-party logistics provider for worldwide fulfillment. We perform quality assurance for our products at our facilities around the world.

We believe the market for our Smart WiFi solutions is growing rapidly and our intention is to continue to invest for long-term growth. We expect to continue to invest heavily in research and development to expand the capabilities of our solutions with respect to services providers and enterprises. We also plan to continue to make significant investments in our field sales and marketing activities, both by increasing our service provider focused direct sales force and by expanding our network of channel partners.

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Industry Trends and Approach

Enterprise WiFi

The number of WiFi enabled mobile devices is growing significantly. A multiplicity of new applications, devices, and vertical markets are all contributing to the growth of WiFi across practically all regions.

The consumerization of IT and the resulting proliferation of smart devices and mobility have led to a rise in the adoption and expansion of WiFi infrastructure and services. Mission-critical applications are now more easily available on smart mobile phones and tablets. Within the enterprise and across many industry sectors, users are increasingly bringing their own devices into the workplace, expecting the same level of access, security and service that they receive on corporate-issued devices. This “bring your own device” (“BYOD”) phenomenon is contributing to the requirement for added wireless capacity to support more concurrently connected devices. This increased reliance on the wireless infrastructure elevates its importance within the overall IT framework as network intelligence and reliable connectivity become strategic to the business rather than merely means to convenient Internet access. In addition, the introduction of new standards, such as 802.11ac, have caused organizations to consider a refresh of WiFi technology as part of their IT strategies.

Recent trends in mobility, consumerization, industry regulation, and vertical-specific use cases have led to sharp growth in WiFi network deployments in a vast array of public-facing environments, such as hospitality, education, healthcare, retail, and public venues, such as stadiums, convention centers, airports and major metropolitan areas. Moreover, the emergence of Hotspot 2.0 compliant networks allow users to seamlessly connect to and roam between different WiFi networks in a far simpler fashion. Consequently, the spread of smart mobile devices combined with an increasing appetite for wireless capacity anytime and anyplace with more sophisticated, latency-sensitive applications, such as streaming video and voice, is driving the market for more reliable, carrier-class WiFi infrastructure products and services.

Organizations are also considering migrating to cloud-based managed WiFi services as a way to further leverage investments in WiFi infrastructure. Managed WiFi services, such as the ability to use WiFi to gather detailed user analytics, demographics and user location information, allow companies to better understand network traffic and user interactions. Armed with this knowledge, businesses look to enable value-added services leveraging their WiFi networks to realize greater value from the cost and investment in WiFi technology.

With the rising popularity and pervasive use of WiFi, small businesses are beginning to desire better WiFi to support the multitude of new media-rich applications, devices, and clients using their WiFi networks. Like large enterprises, small businesses can benefit from greater usage of IT solutions in their business processes as well as to support growing customer demand. According to data published by the United States Small Business Administration, the United States alone had more than five million small businesses (those with 100 employees or less) in 2011. These smaller organizations have traditionally relied on consumer-grade WLAN solutions that are available at a lower cost than traditional enterprise-class systems. However, these consumer-grade solutions, also known as small-office/home-office (“SOHO”) solutions, generally lack the reliability, security and functionality that small businesses require to support their growing needs. Enterprise-class, controller-based systems (either on premises or in the cloud) that deliver better performance and business-class reliability are available, however, these systems have been designed for larger enterprises with IT support and are often too costly or complex for small businesses.

Service Provider WiFi

The growth in demand for WiFi connectivity and services in the last several years has led to new and broadened deployments of WiFi services by cable operators, mobile network operators and fixed-line service providers around the globe. This growth in demand for WiFi by service providers has been driven by a number of factors, including:

• the expansion in the market by fixed-line operators (including cable Multiple System Operators (“MSOs”)) expanding WiFi coverage to give these operators a wireless broadband service extension beyond their wired networks;

• mobile operators seeking a platform for augmenting data services over their mobile networks and integrating WiFi into their network to generate new services and offloading portions of their mobile data traffic from their 3G/4G networks to unlicensed spectrum;

• wireless Internet Service Providers (“ISPs”) deploying WiFi hotspots in public areas;

• service providers beginning to offer voice services (WiFi calling) over unlicensed spectrum;

• the development and deployment of Hotspot 2.0 technology as a means for achieving closer integration of WiFi with broadband networks; and

• the introduction of the 802.11ac WiFi standard with an anticipated growth in 802.11ac-capable client devices, which will drive network upgrade expenditure.

The broadening of these service provider deployments has created a need for solutions capable of managing tens of thousands of indoor and outdoor WiFi access points as a unified infrastructure system. Traditionally, many hardware-based controllers deployed in multiple

18

locations would be necessary to support large scale deployments, making unified management expensive and unwieldy. Service providers are looking for solutions that give them the ability to control and manage their large-scale networks in an elegant and cost-efficient manner without reliance on cloud-based management outside their own networks.

Ruckus Approach

We are addressing and taking advantage of these market and industry trends by focusing our product development and go-to-market efforts in the following ways:

Provide reliable, high-capacity RF technology - Even with the introduction of new industry standards, the increase in the variety and density of devices in the enterprise and in public areas, coupled with the high capacity demands on wireless networks, will drive customer demand for mobile access solutions that function with a wide variety of devices and provide high throughput and optimal performance in interference-rich, highly congested and user/device-dense environments.

Enable self-service models to support customer migration to the all-wireless workplace - IT organizations are typically staffed to support a traditional model in which a user is assigned a single PC that is owned and managed by the enterprise, with a defined set of enterprise applications. The BYOD phenomenon has disrupted this support model, but enterprises generally cannot afford to dramatically increase IT staff to support the unprecedented number and variety of mobile devices and user-selected applications. As a result, IT departments need network access solutions that address the challenges presented by these mobile devices and applications by enabling data analytics and remote network management, while allowing for self-support work flows to relieve the burden on IT organizations and empower users to securely provision and support themselves.

Deliver applications reliably in a mobile environment -As enterprise users evolve to an "all-wireless" access model, latency-sensitive applications (like voice and video) that were previously delivered over a fixed wired network must perform optimally in a wireless environment. New Smart WiFi access solutions must be “application aware” so they can identify, secure and prioritize traffic from these applications to ensure optimal performance.

Engage the public and public-facing enterprises - Municipalities, hotels, large public venues, and service providers with a diverse base of subscribers are increasingly looking to mobile devices and applications as critical touch points to improve overall customer engagement and loyalty. Platforms and applications that leverage advanced network infrastructure capabilities (with context on user, device, application and location) will become attractive to these public-facing enterprises.

Address the increasing WiFi needs of small business - Smaller organizations often cannot justify the high cost of enterprise-class WiFi systems but still desire best-in-class WiFi connectivity, coverage and performance and need simple and easy management that does not require sophisticated IT support. This market needs a simple way for IT-challenged small businesses to quickly install, configure and monitor a WiFi network through the use of innovative and intuitive management applications. While these organizations do not require all of the features and management capabilities of traditional enterprise-class systems, WiFi products for this market must be cost-effective while addressing common enterprise wireless environments supporting a diversity of smart mobile devices, BYOD and multimedia intensive business and customer applications, each clamoring for bandwidth.

Scale network management and deployment options to meet the growing demands of large carrier and enterprise WiFi networks. As service providers broaden WiFi access service, rapid service innovation, improved operational efficiencies, greater flexibility and improved capital efficiencies become paramount. By providing options of in-network, cost-effective hardware and virtualized network WLAN functions through flexible software that runs on standard commercial services within a virtual machine, operators can streamline the delivery of customer-specific managed WiFi services. Additionally, should they desire greater control and management of their wireless networks, carriers and large, distributed enterprises can use such systems to elegantly self-manage their growing networks.

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Components of Our Results of Operations and Financial Condition

Revenue

We generate revenue from sales of our products and services. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured.

Our revenue is comprised of the following:

Product Revenue. The majority of our product revenue is generated from sales of our access points, controllers and gateways as well as corresponding controller and gateway licenses, which are sold in conjunction with one another. Our product revenue also includes revenue from the sale of stand-alone software products. We recognize revenue when all the revenue recognition criteria have been met. For hardware products, we generally recognize revenue following the sale of products to our distributors’ customers and at the time of shipment for all other customers. For software products, we generally recognize revenue when licenses are delivered to our customers.

Service Revenue. Service revenue is generated primarily from post-contract support, or PCS, and includes software updates on an “if and when available” basis, expedited replacement for defective access points, controllers or gateways, telephone and internet access to technical support personnel and hardware support. PCS is typically sold in one, three or five year terms and we recognize service revenue ratably over the contractual service period. Our service revenue also includes SaaS, such as our cloud services. Revenue from SaaS is recognized ratably over the contractual service period.

Cost of Revenue

Our cost of revenue is comprised of the following:

Cost of Product Revenue. Cost of product revenue includes manufacturing costs of our products payable to third-party contract manufacturers. Our cost of product revenue also includes shipping costs, third-party logistics costs, provisions for excess and obsolete inventory, warranty, amortization of intangible assets, personnel costs, including stock-based compensation, certain allocated costs for facilities and other expenses associated with logistics and quality control.

Cost of Service Revenue. Cost of service revenue primarily includes personnel costs, including stock-based compensation, costs associated with fulfilling support obligations, data center costs, amortization of intangible assets and certain allocated costs for facilities and other expenses associated with service revenue.

Gross Margin

Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the average selling price of our products, manufacturing costs, the mix of products sold, the mix of revenue by region, the mix of revenue between products and services, as well as the size of orders from customers. These factors will cause gross margin to fluctuate over time, but we believe gross margin has stabilized and we expect it to remain stable in the near term, as margin benefits from further economies of scale from manufacturing and operations are expected to be less significant.

Operating Expenses

Research and Development. Research and development expenses consist primarily of personnel costs, including stock-based compensation, for employees and contractors engaged in research, design and development activities, as well as costs for prototype-related expenses, product certification, travel, depreciation, recruiting and certain facilities and benefits costs allocated based on headcount. We believe that continued investment in research and development of our products is important to attaining our strategic objectives. We expect research and development expenses to increase in absolute dollars and, in the near term, as a percentage of total revenue, as we plan to accelerate investment in our future products and services.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, commission costs and stock-based compensation for employees and contractors engaged in sales and marketing activities. Commission costs are calculated on sale and expensed in the same period. Sales and marketing expenses also include the costs of trade shows, marketing programs, promotional materials, demonstration equipment, travel, depreciation, recruiting and certain facilities and benefits costs allocated based on headcount. We expect sales and marketing expenses to increase in absolute dollars, as we increase the size of our sales and marketing organizations to support revenue growth opportunities, but we expect sales and marketing expenses to remain consistent as a percentage of total revenue for the near term.

General and Administrative. General and administrative expenses consist primarily of personnel costs and stock-based compensation for our executive, finance, legal, human resources and other administrative employees. In addition, general and administrative expenses include outside consulting, legal, audit and accounting services, depreciation and facilities and other supporting overhead costs not allocated to other departments. We expect that our general and administrative expenses will fluctuate in the near term in absolute dollars and as a percentage of total revenue, as we continue to incur expenses associated with being a publicly traded company and incur legal fees associated with patent litigation matters.

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Interest Income

Interest income consists of interest from our cash, cash equivalents and short-term investments and accretion of the discount or amortization of the premium related to our short-term investments.

Other Expense, net

Other expense, net consists primarily of losses from fluctuations in foreign currency exchange rates.

Income Tax Expense (Benefit)

Income tax expense (benefit) consists primarily of federal and state income taxes in the United States and income taxes in foreign jurisdictions in which we conduct business. We are required to consider all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income amongst other items, in determining whether a full or partial release of our valuation allowance is required. We are also required to schedule future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment. As a result, there can be no assurance that an increase in our valuation allowance may not be required in the future. As of June 30, 2015 and December 31, 2014, no valuation allowance has been provided against the Company’s deferred tax assets.

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Results of Operations

The following table sets forth our results of operations for the periods presented as a percentage of total revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

Consolidated Statements of Operations

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenue:
Product	92.2	%	93.0	%	92.0	%	93.2	%
Service	7.8		7.0		8.0		6.8
Total revenue	100.0		100.0		100.0		100.0
Cost of revenue:
Product	29.0		27.4		28.7		28.0
Service	4.0		3.6		4.1		3.6
Total cost of revenue	33.0		31.0		32.8		31.6
Gross profit	67.0		69.0		67.2		68.4
Operating expenses:
Research and development	24.7		23.4		25.3		23.8
Sales and marketing	30.0		30.2		30.9		30.6
General and administrative	10.8		10.3		11.1		10.7
Total operating expenses	65.5		63.9		67.3		65.1
Operating income (loss)	1.5		5.1		(0.1	)	3.3
Interest income	0.1		0.1		0.2		0.1
Other expense, net	(0.1	)	(0.1	)	(0.1	)	(0.1	)
Income (loss) before income taxes	1.5		5.1		—		3.3
Income tax expense (benefit)	0.7		3.3		(0.1	)	2.2
Net income	0.8	%	1.8	%	0.1	%	1.1	%

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Revenues

	Three Months Ended June 30,							Six Months Ended June 30,
	2015		2014		Change in dollars		Change in percent	2015		2014		Change in dollars		Change in percent
	(dollars in thousands)
Revenue:
Product	$	85,040	$	75,352	$	9,688	12.9%	$	160,337	$	145,427	$	14,910	10.3%
Service	7,190		5,648		1,542		27.3%	13,971		10,625		3,346		31.5%
Total revenue	$	92,230	$	81,000	$	11,230	13.9%	$	174,308	$	156,052	$	18,256	11.7%

	Three Months Ended June 30,							Six Months Ended June 30,
	2015		2014		Change in dollars		Change in percent	2015		2014		Change in dollars		Change in percent
	(dollars in thousands)
Revenue by geographic region:
Americas	$	49,955	$	41,941	$	8,014	19.1%	$	90,694	$	82,428	$	8,266	10.0%
EMEA	22,334		21,419		915		4.3%	44,307		41,471		2,836		6.8%
APAC	19,941		17,640		2,301		13.0%	39,307		32,153		7,154		22.2%
Total revenue	$	92,230	$	81,000	$	11,230	13.9%	$	174,308	$	156,052	$	18,256	11.7%

Product revenue increased by $9.7 million, or 12.9%, and $14.9 million, or 10.3% for the three and six months ended June 30, 2015, compared to the three and six months ended June 30, 2014. The growth was driven by the expansion of our customer base, combined with incremental purchases from our existing customers, with total end-customers of 56,000 at June 30, 2015, compared to 40,000 at June 30, 2014.

The increase in demand for our products is driven by the continued introduction of WiFi enabled smart devices, data-rich mobile internet applications and the integration of WiFi technology into non-computing devices (known as the Internet of Things) that require robust WiFi capacity and reliability. These technology trends are fueling new infrastructure investment across almost every segment of the market.

Service revenue increased by $1.5 million, or 27.3%, and $3.3 million or 31.5% for the three and six months ended June 30, 2015, compared to the three and six months ended June 30, 2014. The increase was primarily related to the increase in post-contract sales, or PCS, in connection with the increased sales of our products and PCS renewals from our existing customers. Service revenue is recognized over the contractual service period.

Revenue in the Americas increased due to strong education spending associated with the Federal E-Rate program (also known as the Schools and Libraries Program of the Universal Service Fund). In addition, the summer months are typically the strongest periods for education spending during the year. The Company also experienced improved overall market conditions in our North American enterprise business following a slowdown in the first quarter of 2015.

Revenue from EMEA and APAC increased during the three months ended June 30, 2015, primarily due to the increased number of channel partners in each region focused on selling our products and the growth of our sales teams in new and existing industries and territories.

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Cost of Revenues and Gross Margin

	Three Months Ended June 30,							Six Months Ended June 30,
	2015		2014		Change in dollars		Change in percent	2015		2014		Change in dollars		Change in percent
	(dollars in thousands)
Cost of revenue
Product	$	26,720	$	22,209	$	4,511	20.3%	$	49,951	$	43,705	$	6,246	14.3%
Service	3,683		2,932		751		25.6%	7,225		5,691		1,534		27.0%
Total cost of revenue	$	30,403	$	25,141	$	5,262	20.9%	$	57,176	$	49,396	$	7,780	15.8%

	Three Months Ended June 30,								Six Months Ended June 30,
	2015		2014		Change in dollars		Change in percent	Change in margin	2015		2014		Change in dollars		Change in percent	Change in margin
	(dollars in thousands)
Gross profit
Product	$	58,320	$	53,143	$	5,177	9.7%		$	110,386	$	101,722	$	8,664	8.5%
Service	3,507		2,716		791		29.1%		6,746		4,934		1,812		36.7%
Total gross profit	$	61,827	$	55,859	$	5,968	10.7%		$	117,132	$	106,656	$	10,476	9.8%
Product gross margin	68.6%		70.5%					(1.9)	68.8%		69.9%					(1.1)
Service gross margin	48.8%		48.1%					0.7	48.3%		46.4%					1.9
Total gross margin	67.0%		69.0%					(2.0)	67.2%		68.4%					(1.2)

Total gross margin for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 decreased 2.0 and 1.2 percentage points, respectively.

For the three months ended June 30, 2015, product gross margin decreased by 1.9 percentage points, compared to the three months ended June 30, 2014. The decrease in product gross margin was primarily due to a 1.0 percentage point increase in product costs associated with the Company's newer generation 802.11ac products. Typically, newer generation products, such as 802.11ac products, have more costly bills of material as compared to mature products. Product gross margins also declined by 0.7 percentage point, due to increased inventory write downs related to the Company's older generation 802.11n products.

For the three months ended June 30, 2015, service gross margin increased by 0.7 percentage points, compared to the three months ended June 30, 2014. The increase was primarily the result of a 27.3% growth in service revenue offset, in part, by an increase in service costs of 25.6%, arising from the expansion of our service operations to manage growth.

For the six months ended June 30, 2015, product gross margin decreased by 1.1 percentage points, compared to the six months ended June 30, 2014. The decrease was primarily due to the higher product costs associated with the Company's newer generation 802.11ac products.

For the six months ended June 30, 2015, the increase of 1.9 percentage points in service gross margin was primarily the result of a 31.5% growth in service revenue offset, in part, by an increase in service costs of 27.0%, arising from the expansion of our service operations to manage growth.

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Research and Development

	Three Months Ended June 30,									Six Months Ended June 30,
	2015			2014			Change in dollars		Change in percent	2015			2014			Change in dollars		Change in percent
	(dollars in thousands)
Research and development	$	22,843		$	18,954		$	3,889	20.5%	$	44,139		$	37,093		$	7,046	19.0%
% of revenue	24.7		%	23.4		%				25.3		%	23.8		%

The $3.9 million increase in research and development expenses for the three months ended June 30, 2015 compared to the three months ended June 31, 2014 was primarily attributable to an increase in personnel and related expenses of $2.3 million, higher consulting and contractor expense of $1.5 million, primarily due to outsourced development work, and increased depreciation expense of $0.5 million.

The $7.0 million increase in research and development expenses for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 was primarily attributable to an increase in personnel and related costs of $4.5 million, which included an increase in stock-based compensation of $0.8 million. We also incurred higher consulting and contractor expense of $2.8 million, primarily due to outsourced development work, increased depreciation expense of $0.8 million, offset by lower product design and prototype and certification costs of $0.5 million.

Sales and Marketing

	Three Months Ended June 30,									Six Months Ended June 30,
	2015			2014			Change in dollars		Change in percent	2015			2014			Change in dollars		Change in percent
	(dollars in thousands)
Sales and marketing	$	27,696		$	24,412		$	3,284	13.5%	$	53,774		$	47,682		$	6,092	12.8%
% of revenue	30.0		%	30.2		%				30.9		%	30.6		%

The $3.3 million and $6.1 million increase in sales and marketing expenses for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014, was primarily attributable to an increase in personnel and related expenses, as we grew our sales organization as part of our strategy to expand our reach to new service providers and channel partners.

General and Administrative

	Three Months Ended June 30,									Six Months Ended June 30,
	2015			2014			Change in dollars		Change in percent	2015			2014			Change in dollars		Change in percent
	(dollars in thousands)
General and administrative	$	9,921		$	8,358		$	1,563	18.7%	$	19,355		$	16,795		$	2,560	15.2%
% of revenue	10.8		%	10.3		%				11.1		%	10.7		%

The $1.6 million increase in general and administrative expenses for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 was primarily attributable to an increase in personnel and related costs of $1.1 million and increased legal fees associated with patent litigation of $0.5 million.

The $2.6 million increase in general and administrative expenses for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 was attributable to an increase in personnel and related costs of $2.3 million, which included an increase in stock-based compensation of $0.6 million and a decreased net settlement gain of $0.8 million related to patent litigation matters settled in the first quarter of 2014.

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Interest Income

	Three Months Ended June 30,								Six Months Ended June 30,
	2015		2014		Change in dollars		Change in percent		2015		2014		Change in dollars		Change in percent
	(dollars in thousands)
Interest Income	$	156	$	46	$	110	239.1	%	$	297	$	92	$	205	222.8	%

Interest income consists of interest earned from our cash and cash equivalents and our short-term investments.

Other Expense, net

	Three Months Ended June 30,								Six Months Ended June 30,
	2015		2014		Change in dollars		Change in percent		2015		2014		Change in dollars		Change in percent
	(dollars in thousands)
Other expense, net	$	94	$	84	$	10	11.9	%	$	172	$	110	$	62	56.4	%

Other expense, net consists primarily of losses from fluctuations in foreign currency exchange rates.

Income Tax Expense (Benefit)

	Three Months Ended June 30,								Six Months Ended June 30,
	2015		2014		Change in dollars			Change in percent	2015			2014		Change in dollars			Change in percent
	(dollars in thousands)
Income tax expense (benefit)	$	670	$	2,658	$	(1,988	)	—	$	(197	)	$	3,356	$	(3,553	)	—

Income tax expense was $0.7 million and $2.7 million for the three months ended June 30, 2015 and 2014, respectively. The effective tax rate exceeded the statutory rate for the periods primarily due to certain non-deductible stock-based compensation expenses and certain foreign taxes. 

Income tax benefit was $0.2 million for the six months ended June 30, 2015 and income tax expense was $3.4 million for the six months ended June 30, 2014.The effective tax rate exceeded the statutory rate for the periods primarily due to certain non-deductible stock-based compensation expenses and certain foreign taxes. 

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Liquidity and Capital Resources

	June 30,		December 31,
	2015		2014
	(in thousands)
Cash and cash equivalents	$	63,379	$	56,083
Short-term investments	148,478		142,706
Total cash, cash equivalents and short-term investments	$	211,857	$	198,789

	Six Months Ended June 30,
	2015			2014
	(in thousands)
Net cash provided by operating activities	$	13,332		$	15,859
Net cash used in investing activities	(15,291		)	(21,552		)
Net cash provided by financing activities	9,255			7,428
Net increase in cash and cash equivalents	$	7,296		$	1,735

We had cash, cash equivalents and short-term investments of $211.9 million at June 30, 2015. Our cash equivalents and short-term investments are comprised primarily of money market funds, corporate debt securities and U.S. government agency securities. As of June 30, 2015, $2.7 million of cash and cash equivalents were held outside of the United States and is not presently available to fund domestic operations and obligations. If we were to repatriate cash held outside the United States, it could be subject to U.S. income taxes, less any previously paid foreign income taxes.

We plan to continue to invest in long-term growth and we anticipate that these investments will continue to increase in absolute dollars. We believe that our existing cash and cash equivalents balance together with our investments and cash provided by operations will be sufficient to meet our working capital requirements for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services offerings, the costs to ensure access to adequate manufacturing capacity, and the continuing market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.

Operating Activities

We generated $13.3 million of cash from operating activities during the six months ended June 30, 2015 resulting from our net income of $0.2 million, adjusted for non-cash net charges of $17.9 million and offset by changes in our net operating assets and liabilities of $4.8 million. The non-cash net charges consisted mainly of stock-based compensation of $14.4 million and depreciation and amortization of $5.9 million, partially offset by excess tax benefit from employee stock incentive plans of $2.5 million. Changes in our operating assets and liabilities were primarily due to an increase in accounts receivable, net of $8.1 million and increases in inventory of $3.0 million due to timing of shipments to channel partners, offset by an increase in accounts payable of $4.3 million and an increase in accrued liabilities of $2.4 million, primarily due to timing of payments.

We generated $15.9 million of cash from operating activities during the six months ended June 30, 2014 resulting from our net income of $1.7 million, adjusted for non-cash net charges of $18.5 million and offset by changes in our net operating assets and liabilities of $4.3 million. The non-cash net charges consisted mainly of stock-based compensation of $12.7 million and depreciation and amortization of $4.3 million. Changes in our operating assets and liabilities were primarily due to the increase in our accounts receivable, net of $14.5 million due to timing of shipments to channel partners, offset by increased accrued compensation of $2.3 million primarily due to the higher attainment of commission and bonus targets, higher accrued liabilities of $1.2 million, primarily due to timing of payments and deferred revenue of $7.3 million related to support renewals and timing of inventory sold through the channel.

Investing Activities

Our primary investing activities consist of purchases, maturities, and sales of short-term investments and purchases of property and equipment. Purchases of property and equipment may vary from period to period due to the timing of the expansion of our operations.

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Cash used in investing activities during the six months ended June 30, 2015 was $15.3 million, of which $62.7 million related to the purchase of investments and $8.5 million related to the purchase of property and equipment, offset by $56.0 million in proceeds from the maturity of investments.

Cash used in investing activities during the six months ended June 30, 2014 was $21.6 million, of which $66.3 million related to the purchase of investments, $4.5 million related to the purchase of property and equipment, offset by $49.3 million in proceeds from the maturity of investments.

Financing Activities

Our primary financing activities consist of proceeds from sales of shares through employee equity award plans.

Cash generated from financing activities during the six months ended June 30, 2015 was $9.3 million, of which $4.4 million related to the exercise of stock options, $2.4 million related to proceeds from the employee stock purchase plan, or ESPP, and $2.5 million related to excess tax benefit from employee stock incentive plans.

Cash generated from financing activities during the three months ended June 30, 2014 was $7.4 million, of which $3.2 million related to the exercise of stock options, $2.0 million related to proceeds from ESPP and $2.2 million related to excess income tax benefit from employee stock incentive plans.

Contractual Obligations & Commitments

We lease our headquarters in Sunnyvale, California and office space in other locations worldwide under non-cancelable operating leases that expire at various dates through 2022. The following table summarizes our contractual obligations at June 30, 2015, including leases (in thousands):

	Payment Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating leases	$	22,980	$	4,050	$	7,325	$	5,361	$	6,244
Purchase commitments (1)	13,375		13,375		—		—		—
Total	$	36,355	$	17,425	$	7,325	$	5,361	$	6,244

(1) Consists of minimum purchase commitments with our contract manufacturers for inventory and specific contracted services.

The table above excludes liabilities for uncertain tax positions and related interest and penalties. We have not provided a detailed estimate of the payment timing of uncertain tax positions due to the uncertainty of when the related tax settlements will become due.

Off-Balance Sheet Arrangements

Through June 30, 2015, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe the critical accounting policies and estimates discussed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2014, reflect our more significant judgments and estimates used in the preparation of the condensed consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates as filed in such report.

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ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity

We had cash, cash equivalents and short-term investments of $211.9 million and $198.8 million as of June 30, 2015 and December 31, 2014, respectively. These amounts were invested primarily in money market funds and highly liquid investment grade fixed income securities. The cash, cash equivalents and short-term investments are held for working capital purposes. Our investment policy and strategy is focused on the preservation of capital and supporting our liquidity requirements. We do not invest for trading or speculative purposes. At June 30, 2015, the weighted-average duration of our investment portfolio was less than one year. The fair value of our cash and cash equivalents would not be significantly affected by either an increase or decrease in interest rates mainly due to the short-term nature of these instruments.

Based on a sensitivity analysis, we determined that a hypothetical 100 basis point increase in interest rates would have resulted in a decrease in the fair values of our investments of approximately $1.0 million as of June 30, 2015. Such losses would only be realized if we sold the investments prior to maturity.

Foreign Currency Risk

Most of our sales are denominated in U.S. dollars, and therefore, our revenues are not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, and may be subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound, Chinese Yuan, Taiwan Dollar, Singapore Dollar and Indian Rupee. Fluctuation in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.

ITEM 4.         CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2015, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

The information set forth under the “Litigation” subheading in Note 6 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

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ITEM 1A.    RISK FACTORS

In evaluating Ruckus and our business, you should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including our condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. If any of the following risks occur, our business, financial condition, operating results, and prospects could be materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

We have marked with an asterisk (*) those risks described below that reflect substantive changes from, or additions to, the risks described in our Annual Report on Form 10-K for the year ended December 31, 2014.

Risks Related to Our Business and Industry

If the market for our products does not develop as we expect, demand for our products may not grow as we expect.

We develop and provide WiFi products and services for service providers and enterprises. The success of our business depends on the continued growth and reliance on WiFi in these markets. The recent growth of the market for WiFi networks is being driven by the increased use of WiFi-enabled mobile devices and the use of WiFi as a preferred connectivity option to support video, voice and other higher-bandwidth uses. As a result, mobile service providers and enterprises are struggling to address the capacity gap, including increased demands on their networks and the significant investment required to upgrade network capacity and provide ubiquitous wireless connectivity.

    A number of barriers may prevent service providers or their subscribers from adopting WiFi technology to address the capacity gap in wireless networks. For example, WiFi operates over an unlicensed radio spectrum, and if the WiFi spectrum becomes crowded, WiFi solutions will be a less attractive option for service providers. In addition, in order for WiFi solutions to adequately address the potential future capacity gap, mobile devices should automatically switch from a cellular data network to the service provider’s WiFi network, when available and appropriate. Generally, mobile devices do not switch to unauthenticated WiFi networks without input from the device user, and often require the user to log in when a new WiFi network is accessed, which may tend to limit a subscriber’s use of WiFi. These and other factors could limit or slow the adoption of WiFi technologies by service providers as a means to address this potential future capacity gap.

There is no guarantee that service providers and enterprises will continue to utilize WiFi technology, that use of WiFi-enabled mobile devices will continue to increase or that WiFi will continue to be the preferred connectivity option for the uses described above. There is also no guarantee that service providers and enterprises will understand the benefits we believe that our Smart WiFi solutions provide. If another technology were found to be superior to WiFi by service providers or enterprises, it would have a material adverse effect on our business, operating results and financial condition. As a result, demand for our products and services may not continue to develop as we anticipate, or at all.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.

Our quarterly and annual operating results have fluctuated in the past and may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. The timing and size of sales of our products are highly variable and difficult to predict and can result in significant fluctuations in our revenue from period to period. This is particularly true of our sales to service providers, whose purchases are generally larger than those of our enterprise customers, causing greater variation in our results based on when service providers take delivery of our products.

    In general, our product revenue reflects orders shipped in the same quarter that orders are received. In addition, we receive a substantial portion of our orders for each quarter in the last month of that quarter, which is a trend we expect to continue. We face risks of both under-estimating and over-estimating the amount and timing of orders from our customers. On the one hand, even though we may have business indicators about customer demand during a quarter, if we are unable to ship enough product to fulfill the orders we receive in the last month of a quarter, we would be forced to delay recognition of the revenue associated with those orders. On the other hand, because our budgeted expense levels depend in part on our expectations of future revenue, if the orders we receive in the last month of each quarter do not meet our expectations, we may not be able to reduce our costs quickly enough to compensate for the unexpected revenue shortfall. A small shortfall in revenue could disproportionately and adversely affect our operating margin and operating results for a given quarter. In addition, we may incur unanticipated costs in connection with expediting orders which have exceeded our order forecasts. If any of these events were to occur, we would expect our results to be adversely affected, and we might fail to meet the expectations of analysts and investors, which could cause our stock price to decline.

Our operating results may also fluctuate due to a variety of other factors, many of which are outside of our control, including changing economic environments in the U.S., Europe, China and other regions, and any of which may cause our stock price to fluctuate. In addition to other risks listed in this “Risk Factors” section, factors that may affect our operating results include:

• fluctuations in demand for our products and services, including seasonal variations in certain enterprise sectors such as hospitality and education, where end-customers place orders most heavily in the second and third quarters; 

• the inherent complexity, length and associated unpredictability of our sales cycles for our products and services, particularly with respect to sales to service providers;

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• changes in customers’ budgets for technology purchases and delays in their purchasing cycles;

• technical challenges in service providers’ overall networks, unrelated to our products, which could delay adoption and installation of our products;

• changing market conditions, including current and potential service provider consolidation;

• any significant changes in the competitive dynamics of our markets, including new entrants, or further consolidation;

• variation in sales channels, product costs or mix of products sold;

• our contract manufacturers and component suppliers’ ability to meet our product demand forecasts at acceptable prices, or at all;

• the timing of product releases or upgrades by us or by our competitors;

• our ability to develop, introduce and ship in a timely manner new products and product enhancements and anticipate future market demands that meet our customers’ requirements;

• our ability to successfully expand the suite of products we sell to existing customers;

• the potential need to record incremental inventory reserves for products that may become obsolete due to our new product introductions;

• our ability to control costs, including our operating expenses and the costs of the components we purchase;

• any decision to increase or decrease operating expenses in response to changes in the marketplace or perceived marketplace opportunities;

• the timing of litigation matters or disputes and any resulting settlements or judgments;

• growth in our headcount and other related costs incurred in our customer support organization;

• volatility in our stock price, which may lead to higher stock compensation expenses;

• our ability to derive benefits from our investments in sales, marketing, engineering or other activities; and

• general economic or political conditions in our domestic and international markets, in particular the restricted credit environment impacting the credit of our customers.

The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue and/or earnings forecasts we may provide.

Our sales may be impacted as a result of changes in public funding of educational institutions.

In July 2014, the Federal Communications Commission, or FCC, issued the E-rate Modernization Order to approve an update to the E-rate program (also known as the Schools and Libraries Program of the Universal Service Fund), which resulted in a $2 billion increase over the next two years to E-rate’s existing budget to support WiFi within schools and libraries. As a result, in the education market, certain end-customers may delay purchasing decisions until the new rules are implemented or until these funds become available in future funding cycles.

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Our sales cycles can be long and unpredictable, particularly to service providers, and our sales efforts require considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our operating results to fluctuate significantly.

The timing of our revenues is difficult to predict. Our sales efforts involve educating our potential end-customers and channel partners about the applications and benefits of our products and services, including the technical capabilities of our products. Service providers typically require long sales cycles, which generally range between one and three years, but can be longer. Sales to large service providers usually begins with an evaluation, followed by one or more network trials, followed by vendor selection and contract negotiation and finally followed by installation, testing and deployment. In contrast, our sales cycles for enterprises are typically less than ninety days. For services providers, we spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales. For all our sales efforts, purchases of our products are frequently subject to budget constraints, multiple approvals, and unplanned administrative, processing and other delays. Moreover, the evolving nature of the market may lead prospective end-customers to postpone their purchasing decisions pending resolution of WiFi or other standards or adoption of technology by others. Even if an end-customer makes a decision to purchase our products, there may be circumstances or terms relating to the purchase that delay our ability to recognize revenue from that purchase, which makes our revenue difficult to forecast. As a result, it is difficult to predict whether a sale will be completed, the particular fiscal period in which a sale will be completed or the fiscal period in which revenue from a sale will be recognized. Our operating results may therefore vary significantly from quarter to quarter.

With respect to service providers, sales have been characterized by large and sporadic purchases, in addition to long sales cycles. Sales activity to service providers depends upon the stage of completion of expanding network infrastructures, the availability of funding, and the extent to which service providers are affected by regulatory, economic and business conditions in their country of operations. The nature of this sales activity to service providers can result in further fluctuations in our operating results from period to period. Orders from service providers could decline for many reasons unrelated to the competitiveness of our products and services within their respective markets, such as advances in competing technologies. Our service provider end-customers typically have long implementation cycles, require a broader range of services, and often require acceptance terms that can lead to a delay in revenue recognition. Some of our current or prospective service provider end-customers have canceled or delayed and may in the future cancel or delay spending on the development or roll-out of capital and technology projects with us due to continuing economic uncertainty and, consequently, our financial position, results of operations or cash flows may be adversely affected. Weakness in orders from service providers, including as a result of any slowdown in capital expenditures by service providers, which may be more prevalent during a global economic downturn or periods of economic uncertainty, could have a material adverse effect on our business, financial position, results of operations, cash flows and stock price.

The growth rate in recent periods of our revenue, net income and margin may not be indicative of our future performance.

You should not consider the growth rate in our revenue, net income or margin in recent periods as indicative of our future performance. We do not expect to achieve similar revenue, net income or margin growth rates in future periods. You should not rely on our revenue, net income or margin for any prior quarterly or annual periods as any indication of our future revenue, net income or margin, or their rate of growth. If we are unable to maintain consistent revenue, net income or margin, or growth of any of these financial measures, our stock price could be volatile, and it may be difficult to maintain profitability.

Our large end-customers, particularly service providers, have substantial negotiating leverage, which may require that we agree to terms and conditions that could result in lower revenues and gross margins from such end-customers. The loss of a single large end-customer could adversely affect our business.

Many of our end-customers are service providers or larger enterprises that have substantial purchasing power and leverage in negotiating contractual arrangements with us. These end-customers may require us to develop additional product features, may require penalties for non-performance of certain obligations, such as delivery, outages or response time, and may have multi-vendor strategies. The leverage held by these large end-customers could result in lower revenues and gross margins. The loss of a single large end-customer could materially harm our business and operating results.

Industry consolidation may lead to stronger competition and may harm our operating results.*

There has been a trend toward industry consolidation in our markets for several years. We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are unable to continue operations. For example, some of our current and potential competitors have made acquisitions, or announced new strategic alliances, designed to position them with the ability to better compete as sole-source vendors for customers. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, operating results, and financial condition. Furthermore, particularly in the service provider market, consolidation will lead to fewer customers, may delay purchasing decisions by existing customers, or may result in the loss of a major customer, with the effect that such consolidation could have a material impact on results not anticipated in a customer marketplace composed of more numerous participants.

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We compete in highly competitive markets, and competitive pressures from existing and new companies may harm our business, revenues, growth rates and market share. In addition, many of our current or potential competitors have longer operating histories, greater brand recognition, larger customer bases and significantly greater resources than we do, and we may lack sufficient financial or other resources to maintain or improve our competitive position.

The markets in which we compete are intensely competitive, and we expect competition to increase in the future from established competitors and new market entrants. The markets are influenced by, among others, the following competitive factors:

• brand awareness and reputation;

• price and total cost of ownership;

• strength and scale of sales and marketing efforts, professional services and customer support;

• product features, reliability and performance;

• incumbency of current provider, either for WiFi products or other products;

• scalability of products;

• ability to integrate with other technology infrastructures; and

• breadth of product offerings.

Our competitors include Cisco Systems, Ericsson, Hewlett-Packard and Aruba Networks. We expect competition to continue to intensify in the future as other companies introduce new products into our markets. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results or financial condition. If we do not keep pace with product and technology advances, there could be a material and adverse effect on our competitive position, revenues and prospects for growth.

A number of our current or potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than we do. Our competitors may be able to anticipate, influence or adapt more quickly to new or emerging technologies and changes in customer requirements, devote greater resources to the promotion and sale of their products and services, initiate or withstand substantial price competition, take advantage of acquisitions or other opportunities more readily and develop and expand their product and service offerings more quickly than we can. In addition, certain competitors may be able to leverage their relationships with customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages customers from purchasing our products, including through selling at zero or negative margins, product bundling or closed technology platforms. Potential end-customers may prefer to purchase all of their equipment from a single provider, or may prefer to purchase wireless networking products from an existing supplier rather than a new supplier, regardless of product performance or features.

    We expect increased competition from our current competitors, as well as other established and emerging companies, to the extent our markets continue to develop and expand. Conditions in our markets could change rapidly and significantly as a result of technological advancements or other factors. Some of our competitors have made acquisitions or entered into partnerships or other strategic relationships to offer a more comprehensive solution than they individually had offered. We expect this trend to continue as companies attempt to strengthen or maintain their market positions in an evolving industry and as companies enter into partnerships or are acquired. The companies resulting from these possible consolidations may create more compelling product offerings and be able to offer greater pricing flexibility, making it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology or product functionality. Continued industry consolidation may adversely impact customers’ perceptions of the viability of smaller and even medium-sized technology companies such as us and, consequently, customers’ willingness to purchase from such companies. These pressures could materially adversely affect our business, operating results and financial condition.

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We compete in rapidly evolving markets and depend upon the development of new products and enhancements to our existing products. If we fail to predict and respond to emerging technological trends and our customers’ changing needs, we may not be able to remain competitive.

The WiFi and wireless networking market is generally characterized by rapidly changing technology, changing end-customer needs, evolving industry standards and frequent introductions of new products and services. To succeed, we must effectively anticipate, and adapt in a timely manner to, end-customer requirements and continue to develop or acquire new products and features that meet market demands, technology trends and regulatory requirements. Likewise, if our competitors introduce new products and services that compete with ours, we may be required to reposition our product and service offerings or introduce new products and services in response to such competitive pressure. If we fail to develop new products or product enhancements, or our end-customers or potential end-customers do not perceive our products to have compelling technical advantages, our business could be adversely affected, particularly if our competitors are able to introduce solutions with such increased functionality earlier than we do. Developing our products is expensive, complex and involves uncertainties. Each phase in the development of our products presents serious risks of failure, rework or delay, any one of which could impact the timing and cost-effective development of such product and could jeopardize end-customer acceptance of the product. We have experienced in the past and may in the future experience design, manufacturing, marketing and other difficulties that could delay or prevent the development, introduction or marketing of new products and enhancements. In addition, the introduction of new or enhanced products requires that we carefully manage the transition from older products to minimize disruption in customer ordering practices and ensure that new products can be timely delivered to meet our customers’ demand. As a result, we may not be successful in modifying our current products or introducing new products in a timely or appropriately responsive manner, or at all. If we fail to address these changes successfully, our business and operating results could be materially harmed.

We base our inventory purchasing decisions on our forecasts of customers’ demand, and if our forecasts are inaccurate, our operating results could be materially harmed.

We place orders with our manufacturers based on our forecasts of our customers’ demand. Our forecasts are based on multiple assumptions, each of which may cause our estimates to be inaccurate, affecting our ability to provide products to our customers. When demand for our products increases significantly, we may not be able to meet demand on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited supply and maintain positive customer relations, or we may incur additional costs in order to rush the manufacture and delivery of additional products. If we underestimate customers’ demand, we may forego revenue opportunities, lose market share and damage our customer relationships. Conversely, if we overestimate customer demand, we may purchase more inventory than we are able to sell at any given time or at all. In addition, we grant our distributors stock rotation rights, which require us to accept stock back from a distributor’s inventory, including obsolete inventory. As a result of our failure to estimate demand for our products, and our distributor’s stock rotation rights, we could have excess or obsolete inventory, resulting in a decline in the value of our inventory, which would increase our costs of revenues and reduce our liquidity. Our failure to accurately manage inventory relative to demand would adversely affect our operating results.

If we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed and our reputation may be damaged.

We have expanded our operations significantly since inception and anticipate that further significant expansion will be required to achieve our business objectives. The growth and expansion of our business and product offerings places a continuous and significant strain on our management, operational and financial resources. Any such future growth would also add complexity to and require effective coordination throughout our organization.

To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability 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 or efficient manner, which could result in additional operating inefficiencies and could cause our costs to increase more than planned. If we do increase our operating expenses in anticipation of the growth of our business and this growth does not meet our expectations, our operating results may be negatively impacted. If we are unable to manage future expansion, our ability to provide high quality products and services could be harmed, which could damage our reputation and brand and may have a material adverse effect on our business, operating results and financial condition.

Some of the components and technologies used in our products are purchased from a single source or a limited number of sources. The loss of any of these suppliers may cause us to incur additional transition costs, result in delays in the manufacturing and delivery of our products, or cause us to carry excess or obsolete inventory and could cause us to redesign our products.

Although supplies of our components are generally available from a variety of sources, we currently depend on a single source or limited number of sources for several components for our products. We have also entered into license agreements with some of our suppliers for technologies that are used in our products, and the termination of these licenses, which can generally be done on relatively short notice, could have a material adverse effect on our business. For example, we purchase standard WiFi chipsets only from Qualcomm and our products incorporate certain technology that we license from Qualcomm. If that license agreement were terminated, we would be required to redesign some of our products in order to incorporate technology from alternative sources, and any such termination of the license agreement and redesign of certain of our products could require additional licenses and materially and adversely affect our business and operating results.

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Because there are no other sources identical to several of our components and technologies, if we lost any of these licenses or the ability to use any of these components from these suppliers, we could be required to transition to a new supplier or licensor, which could increase our costs, result in delays in the manufacturing and delivery of our products or cause us to carry excess or obsolete inventory. Additionally, poor quality in any of the sole-sourced components in our products could result in lost sales or lost sales opportunities. If the quality of the components does not meet our or our customers’ requirements, if we are unable to obtain components from our existing suppliers on commercially reasonable terms, or if any of our sole source providers cease to remain in business or continue to manufacture such components, we could be required to redesign our products in order to incorporate components or technologies from alternative sources. The resulting stoppage or delay in selling our products and the expense of redesigning our products could result in lost sales opportunities and damage to customer relationships, which would adversely affect our reputation, business and operating results.

In addition, for certain components for which there are multiple sources, we are subject to potential price increases and limited availability due to market demand for such components. In the past, unexpected demand for communication products caused worldwide shortages of certain electronic parts. If such shortages occur in the future and we are unable to pass component price increases along to our customers or maintain stable or competitive pricing, our gross margins and operating results could be negatively impacted.

Because we rely on third parties to manufacture our products, our ability to supply products to our customers may be disrupted.

We outsource the manufacturing of our products to third-party manufacturers. Our reliance on these third-party manufacturers reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, and product supply and timing. Any manufacturing disruption by these third-party manufacturers could severely impair our ability to fulfill orders. Our reliance on outsourced manufacturers also yields the potential for infringement or misappropriation of our intellectual property. If we are unable to manage our relationships with these third-party manufacturers effectively, or if these third-party manufacturers suffer delays or disruptions for any reason, experience increased manufacturing lead-times, capacity constraints or quality control problems in their manufacturing operations, or fail to meet our future requirements for timely delivery, our ability to ship products to our customers would be severely impaired, and our business and operating results would be seriously harmed.

These manufacturers typically fulfill our supply requirements on the basis of individual orders. We do not have long term contracts with our third-party manufacturers that guarantee capacity, the continuation of particular pricing terms or the extension of credit limits. Accordingly, our third-party manufacturers are not obligated to continue to fulfill our supply requirements, which could result in supply shortages, and the prices we are charged for manufacturing services could be increased on short notice. In addition, as a result of fluctuating global financial market conditions, natural disasters or other causes, it is possible that any of our manufacturers could experience interruptions in production, cease operations or alter our current arrangements. If our manufacturers are unable or unwilling to continue manufacturing our products in required volumes, we will be required to identify one or more acceptable alternative manufacturers. It is time-consuming and costly and could be impractical to begin to use new manufacturers, and changes in our third-party manufacturers may cause significant interruptions in supply if the new manufacturers have difficulty manufacturing products to our specification. As a result, our ability to meet our scheduled product deliveries to our customers could be adversely affected, which could cause the loss of sales to existing or potential customers, delayed revenue or an increase in our costs. Any production interruptions for any reason, such as a natural disaster, epidemic, capacity shortages or quality problems, at one of our manufacturers would negatively affect sales of our product lines manufactured by that manufacturer and adversely affect our business and operating results.

New regulations related to “conflict minerals” may force us to incur additional expenses, may result in damage to our business reputation and may adversely impact our ability to conduct our business.

Pursuant to the Dodd-Frank Act, we adhere to certain reporting and other requirements regarding the use of certain minerals and derivative metals (referred to as “conflict minerals,” regardless of their actual country of origin) in our products. Some of these metals are commonly used in electronic equipment and devices, including our products. These requirements require that we investigate, disclose and report whether or not any such metals in our products originated from the Democratic Republic of Congo or adjoining countries. We have an extremely complex supply chain, with numerous suppliers, many of whom may not be obligated to investigate their own supply chains, for the components and parts used in each of our products. As a result, we may incur significant costs to comply with the diligence and disclosure requirements, including costs related to determining the source of any of the relevant metals used in our products and other potential changes to products or sources of supply as a consequence of such verification activities. Because these regulations are new, we and the companies comprising our supply chain, both have a limited history of investigating, disclosing and reporting use of these minerals, and there is a limited history of regulatory guidance regarding compliance with these requirements. In addition, because our supply chain is so complex, we may not be able to sufficiently verify the origin of all relevant metals used in our products through the due diligence procedures that we implement, which may harm our business reputation. We may incur reputational challenges if we determine that any of our products contain minerals or derivative metals that are not conflict free or if we are unable to sufficiently verify the source for all conflict minerals used in our products through the procedures we may implement. Furthermore, key components and parts that can be shown to be “conflict free” may not be available to us in sufficient quantity, or at all, or may only be available at significantly higher cost to us. If we are not able to meet customer requirements, customers may choose to disqualify us as a supplier. Any of these outcomes could adversely affect our business, financial condition or operating results.

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We rely significantly on channel partners to sell and support our products, and the failure of this channel to be effective could materially reduce our revenue.

The majority of our sales are through channel partners. We believe that establishing and maintaining successful relationships with these channel partners is, and will continue to be, important to our financial success. Recruiting and retaining qualified channel partners and training them in our technology and product offerings require significant time and resources. To develop and expand our channel, we must continue to scale and improve our processes and procedures that support our channel partners, including investment in systems and training.

Existing and future channel partners will only work with us if we are able to provide them with competitive products on terms that are commercially reasonable to them. If we fail to maintain the quality of our products or to update and enhance them, existing and future channel partners may elect to work instead with one or more of our competitors. In addition, the terms of our arrangements with our channel partners must be commercially reasonable for both parties. If we are unable to reach agreements that are beneficial to both parties, then our channel partner relationships will not succeed.

We have no minimum purchase commitments with any of our channel partners, and our contracts with channel partners do not prohibit them from offering products or services that compete with ours, including products they currently offer or may develop in the future and incorporate into their own systems. Some of our competitors may have stronger relationships with our channel partners than we do and we have limited control, if any, as to whether those partners use our products, rather than our competitors’ products, or whether they devote resources to market and support our competitors’ products, rather than our offerings. We cannot be certain that any of our channel partners, including our major distributors, will continue to sell our products or services at the same volumes as they have in the past, or will not terminate their agreements with us, which are generally terminable with certain notice.

The reduction in or loss of sales by these channel partners could materially reduce our revenue. If we fail to maintain relationships with our channel partners, fail to develop new relationships with other channel partners in new markets, fail to manage, train or incentivize existing channel partners effectively, fail to provide channel partners with competitive products on terms acceptable to them, or if these channel partners are not successful in their sales efforts, our revenue may decrease and our operating results could suffer.

Our ability to sell our products is highly dependent on the quality of our support and services offerings, and our failure to offer high quality support and services would have a material adverse effect on our sales and results of operations.

Once our products are deployed, our channel partners and end-customers depend on our support organization to resolve any issues relating to our products. A high level of support is important for the successful marketing and sale of our products. In many cases, our channel partners provide support directly to our end-customers. We do not have complete control over the level or quality of support provided by our channel partners. These channel partners may also provide support for other third-party products, which may potentially distract resources from support for our products. If we and our channel partners do not effectively assist our end-customers in deploying our products, succeed in helping our end-customers quickly resolve post-deployment issues or provide effective ongoing support, it would adversely affect our ability to sell our products to existing end-customers and could harm our reputation with potential end-customers. In some cases, we guarantee a certain level of performance to our channel partners and end-customers, which could prove to be resource-intensive and expensive for us to fulfill if unforeseen technical problems were to arise.

Many of our service provider and large enterprise end-customers have more complex networks and require higher levels of support than our smaller end-customers. We have recently expanded our support organization for service provider and large enterprise end-customers, and continue to develop this organization. If we fail to build this organization quickly enough, or it fails to meet the requirements of our service provider or large enterprise end-customers, it may be more difficult to execute on our strategy to increase our sales to large end-customers. In addition, given the extent of our international operations, our support organization faces challenges, including those associated with delivering support, training and documentation in languages other than English. As a result of all of these factors, our failure to maintain high quality support and services would have a material adverse effect on our business, operating results and financial condition.

The loss of key personnel or an inability to attract, retain and motivate qualified personnel may impair our ability to expand our business.

Our success is substantially dependent upon the continued service and performance of our senior management team and key technical, marketing and production personnel, including Selina Lo, who is our President and Chief Executive Officer. Our employees, including our senior management team, are at-will employees, and therefore may terminate employment with us at any time with no advance notice. The replacement of any members of our senior management team or other key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives.

Our future success also depends, in part, on our ability to continue to attract, integrate and retain highly skilled personnel. Competition for highly skilled personnel is frequently intense, especially in the San Francisco Bay Area, where we have a substantial presence and need for highly skilled personnel. Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees. Our employees may be more likely to leave us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or if the exercise prices of the options that they hold are significantly above the market price of our common stock. Any failure to successfully attract, integrate or retain qualified personnel to fulfill our current or future needs may negatively impact our growth. Also, to the extent we hire personnel from our competitors, we may be subject to allegations that these new hires have been improperly solicited, or that they have divulged proprietary or other confidential information, or that their former employers own their inventions or other work product.

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Our products incorporate complex technology and may contain defects or errors. We may become subject to warranty claims, product returns, product liability and product recalls as a result, any of which could cause harm to our reputation and adversely affect our business.

Our products incorporate complex technology and must operate with cellular networks and a significant number and range of mobile devices using WiFi, while supporting new and complex applications in a variety of environments that utilize different WiFi communication industry standards. Our products have contained, and may contain in the future, undetected defects or errors. Some errors in our products have been and may in the future only be discovered after a product has been installed and used by end-customers. These issues are most prevalent when new products are introduced into the market. Defects or errors have delayed and may in the future delay the introduction of our new products. Since our products contain components that we purchase from third parties, we also expect our products to contain latent defects and errors from time to time related to those third-party components.

Additionally, defects and errors may cause our products to be vulnerable to security attacks, cause them to fail to help secure networks or temporarily interrupt end-customers’ networking traffic. Because the techniques used by computer hackers to access or sabotage networks are becoming increasingly sophisticated, change frequently and generally are not recognized until launched against a target, our products and third-party security products may be unable to anticipate these techniques and provide a solution in time to protect our end-customers’ networks. In addition, defects or errors in the mechanism by which we provide software updates for our products could result in an inability to update end-customers’ hardware products and thereby leave our end-customers vulnerable to attacks.

Real or perceived defects or errors in our products could result in claims by channel partners and end-customers for losses that they sustain, including potentially losses resulting from security breaches of our end-customers’ networks and/or downtime of those networks. If channel partners or end-customers make these types of claims, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem, including warranty and repair costs, process management costs and costs associated with remanufacturing our inventory. Liability provisions in our standard terms and conditions of sale may not be enforceable under some circumstances or may not fully or effectively protect us from claims and related liabilities and costs. In addition, regardless of the party at fault, errors of these kinds divert the attention of our engineering personnel from our product development efforts, damage our reputation and the reputation of our products, cause significant customer relations problems and can result in product liability claims. We maintain insurance to protect against certain types of claims associated with the use of our products, but our insurance coverage may not adequately cover any such claims. In addition, even claims that ultimately are unsuccessful could result in expenditures of funds in connection with litigation and divert management’s time and other resources. We also may incur costs and expenses relating to a recall of one or more of our products. The process of identifying recalled products that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs, contract damage claims from our customers and significant harm to our reputation. The occurrence of these problems could result in the delay or loss of market acceptance of our products and could adversely impact our business, operating results and financial condition.

If our products do not interoperate with cellular networks and mobile devices, future sales of our products could be negatively affected.

Our products are designed to interoperate with cellular networks and mobile devices using WiFi technology. These networks and devices have varied and complex specifications. As a result, we must attempt to ensure that our products interoperate effectively with these existing and planned networks and devices. To meet these requirements, we must continue to undertake development and testing efforts that require significant capital and employee resources. We may not accomplish these development efforts quickly or cost-effectively, or at all. If our products do not interoperate effectively, orders for our products could be delayed or cancelled, which would harm our revenue, operating results and our reputation, potentially resulting in the loss of existing and potential end-customers. The failure of our products to interoperate effectively with cellular networks or mobile devices may result in significant warranty, support and repair costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations problems. In addition, our end-customers may require our products to comply with new and rapidly evolving security or other certifications and standards. If our products are late in achieving or fail to achieve compliance with these certifications and standards, or our competitors achieve compliance with these certifications and standards, such end-customers may not purchase our products, which would harm our business, operating results and financial condition.

Although certain technical problems experienced by users may not be caused by our products, our business and reputation may be harmed if users perceive our solution as the cause of a slow or unreliable network connection, or a high profile network failure.

Our products have been deployed in many different locations and user environments and are capable of providing connectivity to many different types of WiFi-enabled devices operating a variety of applications. The ability of our products to operate effectively can be negatively impacted by many different elements unrelated to our products. For example, a user’s experience may suffer from an incorrect setting in a WiFi device. Although certain technical problems experienced by users may not be caused by our products, users often may perceive the underlying cause to be a result of poor performance of the wireless network. This perception, even if incorrect, could harm our business and reputation. Similarly, a high profile network failure may be caused by improper operation of the network or failure of a network component that we did not supply, but other service providers may perceive that our products were implicated, which, even if incorrect, could harm our business, operating results and financial condition.

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Our corporate culture has contributed to our success, and if we cannot maintain this culture, especially as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture, and our business may be harmed.

We believe that a critical contributor to our success has been our corporate culture, which we believe fosters innovation, teamwork, passion for customers, and focus on execution, as well as facilitating critical knowledge transfer and knowledge sharing. As we grow and change, we may find it difficult to maintain these important aspects of our corporate culture, which could limit our ability to innovate and operate effectively. Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, continue to perform at current levels or execute on our business strategy.

Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions.

Our business depends on the overall demand for wireless network technology and on the economic health and general willingness of our current and prospective end-customers to make those capital commitments necessary to purchase our products. If the conditions in the U.S. and global economies are uncertain or volatile, or if they deteriorate, our business, operating results and financial condition may be materially adversely affected. Economic weakness, end-customer financial difficulties, limited availability of credit and constrained capital spending have resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption of new technologies and increased price competition, and could negatively impact our ability to forecast future periods, which could result in an inability to satisfy demand for our products and a loss of market share.

In particular, we cannot be assured of the level of spending on wireless network technology, the deterioration of which would have a material adverse effect on our results of operations and growth rates. The purchase of our products or willingness to replace existing infrastructure is discretionary and highly dependent on a perception of continued rapid growth in consumer usage of mobile devices and in many cases involves a significant commitment of capital and other resources. Therefore, weak economic conditions or a reduction in capital spending would likely adversely impact our business, operating results and financial condition. A reduction in spending on wireless network technology could occur or persist even if economic conditions improve.

In addition, if interest rates rise or foreign exchange rates weaken for our international customers, overall demand for our products and services could decline and related capital spending may be reduced. Furthermore, any increase in worldwide commodity prices may result in higher component prices for us and increased shipping costs, both of which may negatively impact our financial results.

Our reported financial results may be adversely affected by changes in accounting principles applicable to us.

Generally accepted accounting principles in the United States, or U.S. GAAP, are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles. For example, in May 2014, the FASB issued accounting standards update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of any such change. Any difficulties in the implementation of these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline. In addition, the SEC has announced a multi-year plan that could ultimately lead to the use of International Financial Reporting Standards by U.S. issuers in their SEC filings. Any such change could have a significant effect on our reported financial results.

If our assumptions or judgments relating to our critical accounting policies change or prove to be incorrect, our operating results could fall below expectations of financial analysts and investors, resulting in a decline in our stock price.

The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of financial analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our financial statements include those related to revenue recognition, inventory, goodwill and intangible asset valuation, accounting for income taxes, stock-based compensation and warranty liability.

Our exposure to the credit risks of our customers may make it difficult to collect accounts receivable and could adversely affect our operating results and financial condition.

In the course of our sales to customers, we may encounter difficulty collecting accounts receivable and could be exposed to risks associated with uncollectible accounts receivable. Economic conditions or other factors may impact some of our customers' ability to pay their accounts payables, including customers who are unable to collect or experience delays in payment from their own customers. We derive a significant portion of our revenue through distributors and in many cases sales in one or more countries or regions are via a single distributor, which can result in a concentrated credit risk if such country or region has experienced active sales. While we monitor these situations carefully and take appropriate measures to collect accounts receivable balances, we have written down accounts receivable and written off doubtful accounts in prior periods and may be unable to avoid accounts receivable write-downs or write-offs of doubtful accounts in the future. Such write-downs or write-offs could negatively affect our operating results.

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U.S. and global political, credit and financial market conditions may negatively impact or impair the value of our current portfolio of cash, cash equivalents and short-term investments.

Our cash, cash equivalents and short-term investments are held in a variety of interest bearing instruments, including money market funds, corporate debt securities and U.S. government agency securities. As a result of the uncertain domestic and global political, credit and financial market conditions, investments in these types of financial instruments pose risks arising from liquidity and credit concerns. Given that future deterioration in the U.S. and global credit and financial markets is a possibility, no assurance can be made that losses or significant deterioration in the fair value of our cash, cash equivalents or short-term investments will not occur. These factors could impact the liquidity or valuation of our current portfolio of cash, cash equivalents and short-term investments. If any such losses or significant deteriorations occur, it may negatively impact or impair our current portfolio of cash, cash equivalents and short-term investments, which may affect our ability to fund future obligations. Further, if there is a U.S. and global political, credit and financial market crisis, it may be difficult for us to liquidate our investments prior to their maturity without incurring a loss, which would have a material adverse effect on our business, operating results and financial condition.

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by manmade problems such as network security breaches, computer software or system errors or viruses, or terrorism.

Our corporate headquarters are located in the San Francisco Bay Area, and many of our development centers and contract manufacturers are located in eastern Asia, both regions known for seismic activity. A significant natural disaster, such as an earthquake, a fire or a flood, occurring near our headquarters, or near the facilities of our contract manufacturers, could have a material adverse impact on our business, operating results and financial condition. In addition, our support operations are largely concentrated in a single location in India. A natural disaster in this location could have a material adverse impact on our support operations. In addition, natural disasters, acts of terrorism or war could cause disruptions in our or our customers’ businesses, our suppliers’ or manufacturers’ operations or the economy as a whole. We also rely on information technology systems to operate our business and to communicate among our workforce and with third parties. For example, we use business management and communication software products provided by third parties, such as Microsoft Online, SAP and salesforce.com, and security flaws or outages in such products would adversely affect our operations. Any disruption to these systems, whether caused by a natural disaster or by manmade problems, such as power disruptions, could adversely affect our business. To the extent that any such disruptions result in delays or cancellations of customer orders or impede our suppliers’ and/or our manufacturers’ ability to timely deliver our products and product components, or the deployment of our products, our business, operating results and financial condition would be adversely affected.

System security risks, data protection breaches, and cyber-attacks on our systems or solutions could compromise our proprietary information, or information of our customers, disrupt our internal operations and harm public perception of our solutions, which could cause our business and reputation to suffer, create additional liabilities and have a material adverse impact on our financial results and stock price.*

In the ordinary course of business, we store sensitive data on our internal systems, networks and servers, such as intellectual property, proprietary business information and customer and user data, which may include personally identifiable information. Additionally, we design and sell solutions that allow our customers to wirelessly access sensitive data on their own systems and to remotely manage and operate networks and applications that contain, transmit and store a variety of information. Our solutions incorporate complex technology and must operate and support a wide range of mobile devices that use WiFi as well as the complex applications that run on those devices, which use multiple communication industry standards. In addition, the amount of data we store for our users on our servers, including personal information, has been increasing.

The secure maintenance of sensitive information on our own networks and the intrusion protection features of our solutions are both important to our operations and business strategy. We use data encryption and other security measures to protect our systems and data, and we include various security mechanisms in our products and services, but these security measures cannot provide absolute protection against breaches and attacks. For example, we use encryption and authentication technologies to secure the transmission and storage of data and prevent third party access to data or accounts, but these security measures are subject to third-party security breaches, employee error, malfeasance, faulty password management, or other irregularities. Third parties may fraudulently induce an employee or customer into disclosing user names, passwords or other sensitive information, or otherwise illicitly obtain that type of information, which may in turn be used to access our IT systems and the data located there.

Companies are facing a wide variety of attacks from computer “hackers” who develop and deploy destructive software programs, such as viruses and worms, to attack networks. We are likely to face similar threats that target both our internal systems and our solutions, which, in turn, may threaten our customers' networks and data. Because the techniques used by hackers to access or sabotage networks are becoming increasingly sophisticated, change frequently and generally are not recognized until launched against a target, it is virtually impossible for us to entirely eliminate this risk despite deploying security measures.

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Any destructive or intrusive breach of our internal systems could compromise our networks, creating system disruptions or slowdowns, and the information stored on our networks could be accessed, publicly disclosed, lost or stolen. Additionally, an effective attack on our solutions could disrupt the proper functioning of our solutions, allow unauthorized access to sensitive, proprietary or confidential information of our customers, disrupt or temporarily interrupt customers' networking traffic, or cause other destructive outcomes, including the theft of information sufficient to engage in fraudulent financial transactions. If any of these types of security breaches were to occur, our relationships with our business partners and customers could be materially damaged, our reputation and brand could be materially harmed, use of our solutions could decrease, and we could be exposed to a risk of loss or litigation and possible liability. In addition, incidents involving unauthorized access to or improper use of user information could cause government authorities to initiate legal or regulatory actions against us in connection with such incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of cloud-based solutions we offer.

If an actual or perceived breach of security occurs in our network or cloud-based offerings, or in the network of a customer using our solutions, regardless of whether the breach is attributable to our solutions, the market perception of the effectiveness of our solutions could be harmed and could impact our business, operating results and financial condition. Such breach or perceived breach could result in claims by channel partners and end-customers for losses that they sustain, including potentially losses resulting from security breaches of our systems, our end-customers' networks and/or downtime of those networks. If channel partners or end-customers make these types of claims, we may expend significant additional resources in order to help correct the problem. The economic costs to us to eliminate or alleviate security vulnerabilities or breaches could be significant and may be difficult to anticipate or measure because the damage or resources may differ based on attacker, method of attack, network or solution that is or may be attacked.

Because of the nature of information that may pass through or be stored on our solutions or networks, we and our end-customers may be subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters and violations of these complex and dynamic laws, rules and regulations may result in claims, changes to our business practices, monetary penalties, increased costs of operations, and/or other harms to our business.*

There has been an increase in laws in Europe, the U.S. and elsewhere imposing requirements for the handling of personal data, including data of employees, consumers and business contacts as well as privacy-related matters. Foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the U.S. The European Commission is currently considering a data protection regulation that may include operational requirements for companies that receive personal data that are different than those currently in place in the European Union, and that may also include significant penalties for non-compliance. In addition, some countries are considering legislation requiring local storage and processing of data that, if enacted, could increase the cost and complexity of offering our solutions or maintaining our business operations in those jurisdictions. The introduction of new solutions or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. Our channel partners and end-customers also may be subject to such laws and regulations in the use of our products and services.

These U.S. federal and state and foreign laws and regulations, which often can be enforced by private parties or government entities, are constantly evolving. In addition, the application and interpretation of these laws and regulations are often uncertain, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices and may be contradictory with each other. For example, a government entity in one jurisdiction may demand the transfer of information forbidden from transfer by a government entity in another jurisdiction. If our actions were determined to be in violation of any of these disparate laws and regulations, in addition to the possibility of fines, we could be ordered to change our data practices, which could have an adverse effect on our business and results of operations and financial condition. There is also a risk that we, directly or as the result of a third-party service provider we use, could be found to have failed to comply with the laws or regulations applicable in a jurisdiction regarding the collection, consent, handling, transfer, or disposal of personal data, which could subject us to fines or other sanctions, as well as adverse reputational impact.

Compliance with these existing and proposed laws and regulations can be costly and can result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices. Channel partners and end-customers may demand or request additional functionality in our products or services that they believe are necessary or appropriate to comply with such laws and regulations, which can cause us to incur significant additional costs and can delay or impede the development of new solutions. In addition, there is a risk that failures in systems designed to protect private, personal or proprietary data held by us or our channel partners and end-customers using our solutions will allow such data to be disclosed to or seen by others, resulting in application of regulatory penalties, enforcement actions, remediation obligations, private litigation by parties whose data were improperly disclosed, or claims from our channel partners and end-customers for costs or damages they incur.

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New regulations or standards, or changes in existing regulations or standards, or newly issued interpretations or enforcement of such regulations or standards, in the United States or internationally related to our products may result in unanticipated costs or liabilities, which could have a material adverse effect on our business, results of operations and future sales, and could place additional burdens on the operations of our business.

Our products are subject to governmental regulations in a variety of jurisdictions. In order to achieve and maintain market acceptance, our products must continue to comply with these regulations as well as a significant number of industry standards. In the United States, our products must comply with various regulations defined by the FCC, Underwriters Laboratories and others. We must also comply with similar international regulations. For example, our wireless communication products operate through the transmission of radio signals, and radio emissions are subject to regulation in the United States and in other countries in which we do business. In the United States, various federal agencies including the Center for Devices and Radiological Health of the Food and Drug Administration, the FCC, the Occupational Safety and Health Administration and various state agencies have promulgated regulations that concern the use of radio/electromagnetic emissions standards. Member countries of the European Union have enacted similar standards concerning electrical safety and electromagnetic compatibility and emissions, and chemical substances and use standards.

As these regulations and standards evolve, and if new regulations or standards are implemented, we will be required to modify our products or develop and support new versions of our products, and our compliance with these regulations and standards may become more burdensome. The failure of our products to comply, or delays in compliance, with the various existing and evolving industry regulations and standards could prevent or delay introduction of our products, which could harm our business. End-customer uncertainty regarding future policies may also affect demand for communications products, including our products. If existing laws or regulations regarding the use of our products or services are enforced in a manner not contemplated by our end-customers, it could expose them or us to liability and could have a material adverse effect on our business, operating results and financial condition. Moreover, channel partners or end-customers may require us, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment. Our inability to alter our products to address these requirements and any regulatory changes may have a material adverse effect on our business, operating results and financial condition.

We are evaluating and may adopt a corporate structure more closely aligned with the international nature of our business activities, which will require us to incur expenses but could fail to achieve the intended benefits.

We are considering reorganizing our corporate structure and intercompany relationships to more closely align with the international nature of our business activities. This proposed corporate structure may result in a reduction in our overall effective tax rate through changes in how we use our intellectual property, international procurement, and sales operations. This proposed corporate structure may also allow us to achieve financial and operational efficiencies. These efforts will require us to incur expenses in the near term for which we may not realize related benefits. If the intended structure is not accepted by the applicable taxing authorities or changes in domestic and international tax laws negatively impact the proposed structure, including proposed legislation to reform U.S. taxation of international business activities, or we do not operate our business consistent with the proposed structure and applicable tax provisions, we may fail to achieve the financial and operational efficiencies that we anticipate as a result of the proposed structure and our future financial condition and results of operations may be negatively impacted.

Risks Related to Our International Operations

Our international operations expose us to additional business risks and failure to manage these risks may adversely affect our international revenue.

We derive a significant portion of our revenues from customers outside the United States. For the six months ended June 30, 2015 and years ended December 31, 2014 and 2013, 51%, 51% and 55% of our revenue, respectively, was attributable to our international customers. As of June 30, 2015, approximately 55% of our full-time employees were located abroad. We expect that our international activities will be dynamic over the foreseeable future as we continue to pursue opportunities in international markets, which will require significant management attention and financial resources. Therefore, we are subject to risks associated with having worldwide operations.

As we expand the marketing, selling, and supporting of our products and services internationally, we must hire and train experienced personnel to staff and manage our foreign operations. To the extent that we experience difficulties in recruiting, training, managing, and retaining an international staff, and specifically staff related to sales management and sales personnel, we may experience difficulties in sales productivity in foreign markets. In addition, business practices in the international markets that we serve may differ from those in the United States and may require us to include non-standard terms in customer contracts, such as extended payment or warranty terms. To the extent that we may enter into contracts with our international customers in the future that include non-standard terms related to payment, warranties or performance obligations, our operating results may be adversely impacted. International operations are subject to other inherent risks and our future results could be adversely affected by a number of factors, including:

• tariffs and trade barriers, export regulations and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;

• requirements or preferences for domestic products, which could reduce demand for our products;

• differing technical standards, existing or future regulatory and certification requirements and required product features and functionality;

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• management communication and integration problems related to entering new markets with different languages, cultures and political systems;

• difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging markets;

• heightened risks of unfair or corrupt business practices 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;

• improper or illegal activities of third party agents or consultants purporting to act on our behalf;

• difficulties and costs of staffing and managing foreign operations;

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

• potentially adverse tax consequences, including regulatory requirements regarding our ability to repatriate profits to the United States;

• added legal compliance obligations and complexity;

• the increased cost of terminating employees in some countries; and

• political and economic instability and terrorism.

To the extent we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and manage effectively these and other risks associated with our international operations. Our failure to manage any of these risks successfully could harm our international operations and reduce our international sales, adversely affecting our business, operating results and financial condition.

We may not successfully sell our products in certain geographic markets or develop and manage new sales channels in accordance with our business plan.

We expect to continue to sell our products to a broader end-customer base, including certain geographic markets where we do not have significant current business. To succeed in certain of these markets, we believe we will need to develop and manage new sales channels and distribution arrangements. We may not be successful in developing and managing such channels, in further penetrating certain geographic regions, or reaching a broader customer base. Failure to develop or manage additional sales channels effectively would limit our ability to succeed in these markets and could adversely affect our ability to grow our customer base and revenue.

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

To date, substantially all of our international sales have been denominated in U.S. dollars; however, most of our expenses associated with our international operations are denominated in local currencies. As a result, a decline in the value of the U.S. dollar relative to the value of these local currencies could have a material adverse effect on the gross margins and profitability of our international operations. Conversely, an increase in the value of the U.S. dollar relative to the value of these local currencies results in our products being more expensive to potential customers and could have an adverse impact on our pricing or our ability to sell our products internationally. To date, we have not used risk management techniques to hedge the risks associated with these fluctuations. Even if we were to implement hedging strategies, not every exposure can be hedged and, where hedges are put in place based on expected foreign currency exchange exposure, they are based on forecasts that may vary or that may later prove to have been inaccurate. As a result, fluctuations in foreign currency exchange rates or our failure to successfully hedge against these fluctuations could have a material adverse effect on our operating results and financial condition.

Failure to comply with the U.S. Foreign Corrupt Practices Act and similar laws associated with our activities outside the United States could subject us to penalties and other adverse consequences.

A significant portion of our revenues is and will be from jurisdictions outside of the United States. As a result, we are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits U.S. companies and their intermediaries from making corrupt payments to foreign officials for the purpose of directing, obtaining or keeping business, and requires companies to maintain reasonable books and records and a system of internal accounting controls. The FCPA applies to companies and individuals alike, including company directors, officers, employees and agents. Under the FCPA, U.S. companies may be held liable for the corrupt actions taken by employees, strategic or local partners or other representatives. In addition, the government may seek to rely on a theory of successor liability and hold us responsible for FCPA violations committed by companies or associated with assets which we acquire.

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In many foreign countries where we operate, particularly in countries with developing economies, it may be a local custom for businesses to engage in practices that are prohibited by the FCPA or other similar laws and regulations. In contrast, we have implemented a company policy requiring our employees and consultants to comply with the FCPA and similar laws. We have conducted mandatory formal FCPA compliance training for all of our full time employees. Nevertheless, there can be no assurance that our employees, partners and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of the FCPA or our policies for which we may be ultimately held responsible. As a result of our rapid growth, our infrastructure to identify FCPA matters and monitor compliance is developing. If we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation, governmental authorities in the U.S. and elsewhere could seek to impose civil and/or criminal fines and penalties which could have a material adverse effect on our business, operating results and financial conditions. We may also face collateral consequences such as debarment and the loss of our export privileges.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.

Our products and solutions are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and solutions must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers. In addition, if our channel partners, agents or consultants fail to obtain appropriate import, export or re-export licenses or authorizations, or make sales into restricted jurisdictions, we may also be adversely affected through reputational harm and penalties. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Changes in our products or solutions or changes in applicable export or import laws and regulations may also create delays in the introduction and sale of our products and solutions in international markets, prevent our end-customers with international operations from deploying our products and solutions or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our products and solutions, or in our decreased ability to export or sell our products and solutions to existing or potential end-customers with international operations. Any decreased use of our products and solutions or limitation on our ability to export or sell our products and solutions would likely adversely affect our business, financial condition and results of operations.

Furthermore, we incorporate encryption technology into certain of our products and solutions. Various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products and solutions or could limit our customers’ ability to implement our products and solutions in those countries. Encryption products and solutions and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export approval for our products and solutions, when applicable, could harm our international sales and adversely affect our revenues. Compliance with applicable regulatory laws and regulations regarding the export of our products and solutions, including with respect to new releases of our solutions, may create delays in the introduction of our products and solutions in international markets, prevent our end-customers with international operations from deploying our products and solutions throughout their globally-distributed systems or, in some cases, prevent the export of our products and solutions to some countries altogether. U.S. export control laws and economic sanctions programs also prohibit the shipment of certain products and services to countries, governments and persons that are subject to U.S. economic embargoes and trade sanctions. Even though we take precautions to prevent our products and solutions from being shipped or provided to U.S. sanctions targets, our products and solutions could be shipped to those targets or provided by third-parties despite such precautions. Any such shipment could have negative consequences, including government investigations, penalties and reputational harm. Furthermore, any new embargo or sanctions program, or any change in the countries, governments, persons or activities targeted by such programs, could result in decreased use of our products and solutions, or in our decreased ability to export or sell our products and solutions to existing or potential end-customers, which would likely adversely affect our business and our financial condition.

Risks Related to Our Intellectual Property

Claims by others that we infringe their intellectual property rights could harm our business.

Our industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in protracted and expensive litigation for many companies. We are subject to claims and litigation by third parties that we infringe their intellectual property rights and we expect claims and litigation with respect to infringement to occur in the future. As our business expands and the number of products and competitors in our market increases and overlaps occur, we expect that infringement claims may increase in number and significance. Any claims or proceedings against us, whether meritorious or not, could be time-consuming, result in costly litigation, require significant amounts of management time or result in the diversion of significant operational resources, any of which could materially and adversely affect our business and operating results.

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Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. In addition, we currently have a limited portfolio of issued patents compared to our larger competitors, and therefore may not be able to effectively utilize our intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties. Further, we are subject to claims and litigation brought by patent assertion companies and other non-practicing entities who have no relevant products or revenues and against whom our patents provide no deterrence. Such claims distract resources and require us to incur significant litigation expenses to defend or to pay significant sums in settlement to avoid the costs of litigation even when such claims are not meritorious. Furthermore, many potential litigants have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. In addition to incurring litigation and settlement costs, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain products or performing certain services. We might also be required to seek a license and pay royalties for the use of such intellectual property, which may not be available on commercially acceptable terms or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful.

If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

Our ability to compete effectively is dependent in part upon our ability to protect our proprietary technology. We protect our proprietary information and technology through licensing agreements, third-party nondisclosure agreements and other contractual provisions, as well as through patent, trademark, copyright and trade secret laws in the United States and similar laws in other countries. There can be no assurance that these protections will be available in all cases or will be adequate to prevent our competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or products. The laws of some foreign countries, including countries in which our products are sold or manufactured, are in many cases not as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. In addition, third parties may seek to challenge, invalidate or circumvent our patents, trademarks, copyrights and trade secrets, or applications for any of the foregoing. There can be no assurance that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology or design around our proprietary rights. We have focused patent, trademark, copyright and trade secret protection primarily in the United States, China, Taiwan and Europe. As a result, we may not have sufficient protection of our intellectual property in all countries where infringement may occur. In each case, our ability to compete could be significantly impaired.

To prevent substantial unauthorized use of our intellectual property rights, it may be necessary to prosecute actions for infringement and/or misappropriation of our proprietary rights against third parties, including previous employees that misappropriate our proprietary information upon departure from our company. Any such action could result in significant costs and diversion of our resources and management’s attention, and there can be no assurance that we will be successful in such action. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

We are generally obligated to indemnify our channel partners and end-customers for certain expenses and liabilities resulting from intellectual property infringement claims regarding our products and services, which could force us to incur substantial costs.

We have agreed, and expect to continue to agree, to indemnify our channel partners and end-customers for certain intellectual property infringement claims regarding our products and services. As a result, in the case of infringement claims against these channel partners and end-customers, we could be required to indemnify them for losses resulting from such claims or to refund amounts they have paid to us. Some of our channel partners and end-customers have sought, and we expect that certain of our channel partners and end-customers in the future may seek, indemnification from us in connection with infringement claims brought against them. In addition, some of our channel partners and end-customers have tendered to us the defense of claims brought against them for infringement. We evaluate each such request on a case-by-case basis and we may not succeed in refuting all such claims. If a channel partner or end-customer elects to invest resources in enforcing a claim for indemnification against us, we could incur significant costs disputing it. If we do not succeed in disputing it, we could face substantial liability.

We rely on the availability of third-party licenses. If these licenses are available to us only on less favorable terms or not at all in the future, our business and operating results would be harmed.

We have incorporated third-party licensed technology into our products. For example, our products incorporate certain technology that we license from Qualcomm. It may be necessary in the future to renew licenses relating to various aspects of these products or to seek additional licenses for existing or new products. There can be no assurance that the necessary licenses will be available on acceptable terms or at all. The inability to obtain certain licenses or other rights, or to obtain those licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could result in delays in product releases until such time, if ever, as equivalent technology could be identified, licensed or developed and integrated into our products and might have a material adverse effect on our business, operating results and financial condition. Moreover, the inclusion in our products of intellectual property licensed from third parties on a nonexclusive basis could limit our ability to protect our proprietary rights in our products.

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Our use of open source software could impose limitations on our ability to commercialize our products.

Our products contain software modules licensed for use from third-party authors under open source licenses, such as Linux and Cassandra. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use. If we combine our proprietary software with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software to the public. This could allow our competitors to create similar products with lower development effort and time, and ultimately could result in a loss of product sales for us.

Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. In such event, we could be required to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could materially and adversely affect our business and operating results.

Risks Related to Ownership of Our Common Stock

The price of our common stock has been and will likely continue to be volatile.

The trading price of our common stock has fluctuated, and is likely to continue to fluctuate, substantially. The trading price of our common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.

Since shares of our common stock were sold at our initial public offering in November 2012 at a price of $15.00 per share, our stock price has ranged as low as $8.65 and as high as $26.50 through June 30, 2015. Factors that may have and could cause fluctuations in the trading price of our common stock include the following:

• price and volume fluctuations in the overall stock market from time to time;

• volatility in the market prices and trading volumes of high technology stocks;

• changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

• sales of shares of our common stock by us or our stockholders, including our officers, directors and other holders of a significant percentage of our shares;

• failure of financial analysts to maintain coverage of us, changes in ratings or reports regarding our company issued by such analysts, including changes in the financial estimates published by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

• the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;

• announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;

• the public’s reaction to our press releases, other public announcements and filings with the SEC;

• rumors and market speculation involving us or other companies in our industry;

• actual or anticipated changes in our results of operations or fluctuations in our operating results;

• actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

• litigation involving us, our industry or both or investigations by regulators into our operations or those of our competitors;

• developments or disputes concerning our intellectual property or other proprietary rights;

• announced or completed acquisitions of businesses or technologies by us or our competitors;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidelines, interpretations or principles;

• any major change in our management;

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• general economic conditions and slow or negative growth of our markets; and

• other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Insiders continue to have substantial influence over us, which could limit a stockholder's ability to affect the outcome of key transactions, including a change of control.

As of June 30, 2015, our directors, executive officers and each of our stockholders who own greater than 5% of our outstanding common stock and their affiliates, in the aggregate, beneficially owned approximately 11.9% of the outstanding shares of our common stock. As a result, these stockholders, if acting together, will be able to influence matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified members of our board of directors.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Dodd-Frank Act, the listing requirements of the New York Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations may increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our 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. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Although we have hired additional employees to comply with these requirements, we may need to hire more employees in the future, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

These evolving laws, regulations and standards, and their interpretation, may cause increases in the cost of director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.

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We may acquire other businesses which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our operating results.

As part of our business strategy, we may continue to make investments in complementary companies, products or technologies. We may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms, if at all. If we do complete significant acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by our end-customers, investors and financial analysts. In addition, if we are unsuccessful at integrating such acquisitions, or the technologies associated with such acquisitions, into our company, the revenue and operating results of the combined company could be adversely affected. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could adversely affect our financial condition or the value of our common stock. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

Our future capital needs are uncertain, and we may need to raise additional funds in the future. If we require additional funds in the future, those funds may not be available on acceptable terms, or at all.

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to meet our anticipated cash requirements for at least the next 12 months. We may, however, need to raise substantial additional capital to:

• fund our operations;

• continue our research and development;

• develop and commercialize new products;

• acquire companies, in-licensed products or intellectual property; or

• expand sales and marketing activities.

Our future funding requirements will depend on many factors, including:

• market acceptance of our products and services;

• the cost of our research and development activities;

• the cost of defending, in litigation or otherwise, claims that we infringe third-party patents or violate other intellectual property rights;

• the cost and timing of establishing additional sales, marketing and distribution capabilities;

• the cost and timing of establishing additional technical support capabilities;

• the effect of competing technological and market developments; and

• the market for different types of funding and overall economic conditions.

We may require additional funds in the future, and we may not be able to obtain those funds on acceptable terms, or at all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders.

If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or to grant licenses on terms that are not favorable to us. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay, reduce the scope of or eliminate some or all of our development programs. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations. Any of these actions could harm our operating results.

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If we are unable to implement and maintain effective internal control over financial reporting in the future, investor confidence in our company may be adversely effected and, as a result, the value of our common stock may decline.

If we are unable to maintain adequate internal controls for financial reporting in the future, or if our auditors are unable to attest to management’s report on the effectiveness of our internal controls over financial reporting or determine we have a material weakness in our internal controls, as required by Section 404 of the Sarbanes-Oxley Act, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.

If financial or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.

The trading market for our common stock may be influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. We may not attract sufficient research coverage or maintain coverage of analysts that currently publish reports regarding our business. Additionally, the analysts who publish information about our common stock have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding our stock price, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Certain provisions in our charter documents and under Delaware law could limit attempts by our stockholders to replace or remove members of our board of directors or current management and may adversely affect the market price of our common stock.

Our restated certificate of incorporation and our restated bylaws may have the effect of delaying or preventing a change of control or changes in our board or directors or management. These provisions include the following:

• our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by the board of directors, the chairman of the board, the chief executive officer or the president;

• our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

• stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and

• our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.

Certain of our executive officers or directors may be entitled to accelerated vesting of their stock options pursuant to the terms of their employment arrangements or option grants upon a change of control of the Company. In addition to the arrangements currently in place with some of our executive officers, we may enter into similar arrangements in the future with other officers. Such arrangements could delay or discourage a potential acquisition of the Company.

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ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.         DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.        MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.        OTHER INFORMATION

None.

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PART IV

ITEM 6.        EXHIBITS

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

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.

	RUCKUS WIRELESS, INC.
Date: July 29, 2015	By:	/s/ Selina Y. Lo
		Selina Y. Lo
		President and Chief Executive Officer

Date: July 29, 2015	By:	/s/ Seamus Hennessy
		Seamus Hennessy
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number		Description of Document
3.1	(1)	Amended and Restated Certificate of Incorporation of the Company.
3.2	(2)	Bylaws of the Registrant.
4.1	(2)	Sixth Amended and Restated Investor Rights Agreement, dated February 3, 2012, between the Company and the investors named therein.
10.1		Offer Letter to Ian Whiting, dated April 2, 2015.
31.1		Certification of the Chief Executive Officer of the Company pursuant to rule 13a-14 under the Securities Exchange Act of 1934.
31.2		Certification of the Chief Financial Officer of the Company pursuant to rule 13a-14 under the Securities Exchange Act of 1934.
32.1	(3)	Certification of the Chief Executive Officer and Chief Financial Officer of the Company pursuant to18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Previously filed as the same numbered exhibit to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 20, 2012, and incorporated herein by reference.

(2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1, as amended (File No. 333-184309), filed with the Securities and Exchange Commission on October 5, 2012, and incorporated herein by reference.

(3) In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule; Management's Reports on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the Certification furnished in Exhibit 32.1 hereto is deemed to accompany this Form 10-Q and will not be filed for purposes of Section 18 of the Exchange Act. Such certification will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.