UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2016
OR
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-36331
Quotient Technology Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
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77-0485123 |
(State or Other Jurisdiction of |
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(I.R.S. Employer |
Incorporation or Organization) |
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Identification No.) |
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400 Logue Avenue, Mountain View, California |
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94043 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(650) 605-4600
(Registrant’s Telephone Number, Including Area Code)
(Former name, former address and former fiscal year, if changed since last report)
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 checkmark 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 during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
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¨ |
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Accelerated filer |
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x |
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Non-accelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 3, 2016, the registrant had 83,938,922 shares of common stock outstanding.
INDEX
REPORT ON
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2016
PART I FINANCIAL INFORMATION |
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3 |
Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015 |
|
3 |
|
|
4 |
|
|
5 |
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 |
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6 |
|
|
7 |
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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19 |
Item 3 Quantitative and Qualitative Disclosures About Market Risk |
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28 |
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29 |
PART II OTHER INFORMATION |
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|
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30 |
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30 |
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds |
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54 |
|
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55 |
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55 |
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55 |
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|
55 |
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56 |
2
PART I - FINANCIAL INFORMATION
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
|
June 30, 2016 |
|
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December 31, 2015 |
|
||
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
131,424 |
|
|
$ |
134,947 |
|
Short-term investments |
|
25,060 |
|
|
|
25,000 |
|
Accounts receivable, net of allowance for doubtful accounts of $883 and $833 at June 30, 2016 and December 31, 2015, respectively |
|
61,309 |
|
|
|
63,239 |
|
Prepaid expenses and other current assets |
|
7,826 |
|
|
|
5,297 |
|
Total current assets |
|
225,619 |
|
|
|
228,483 |
|
Property and equipment, net |
|
20,964 |
|
|
|
25,128 |
|
Intangible assets, net |
|
12,791 |
|
|
|
14,880 |
|
Goodwill |
|
43,895 |
|
|
|
43,895 |
|
Other assets |
|
7,731 |
|
|
|
8,685 |
|
Total assets |
$ |
311,000 |
|
|
$ |
321,071 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
|
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Accounts payable |
$ |
5,789 |
|
|
$ |
8,187 |
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Accrued compensation and benefits |
|
10,931 |
|
|
|
15,237 |
|
Other current liabilities |
|
15,943 |
|
|
|
20,170 |
|
Deferred revenues |
|
7,162 |
|
|
|
7,342 |
|
Total current liabilities |
|
39,825 |
|
|
|
50,936 |
|
Other non-current liabilities |
|
263 |
|
|
|
5 |
|
Deferred rent |
|
1,903 |
|
|
|
701 |
|
Contingent consideration related to acquisitions |
|
687 |
|
|
|
1,407 |
|
Deferred tax liabilities |
|
2,621 |
|
|
|
2,532 |
|
Total liabilities |
|
45,299 |
|
|
|
55,581 |
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Commitments and contingencies (Note 12) |
|
|
|
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Stockholders’ equity: |
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|
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|
|
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Preferred stock, $0.00001 par value—10,000,000 shares authorized and no shares issued or outstanding at June 30, 2016 and December 31, 2015 |
|
— |
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|
|
— |
|
Common stock, $0.00001 par value—250,000,000 shares authorized; 93,359,957 shares issued and 83,724,705 outstanding at June 30, 2016; 89,935,381 shares issued and 81,995,286 outstanding at December 31, 2015 |
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
593,516 |
|
|
|
570,588 |
|
Treasury stock, at cost |
|
(96,449 |
) |
|
|
(85,427 |
) |
Accumulated other comprehensive loss |
|
(741 |
) |
|
|
(747 |
) |
Accumulated deficit |
|
(230,626 |
) |
|
|
(218,925 |
) |
Total stockholders’ equity |
|
265,701 |
|
|
|
265,490 |
|
Total liabilities and stockholders’ equity |
$ |
311,000 |
|
|
$ |
321,071 |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
3
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Revenues |
$ |
67,247 |
|
|
$ |
55,867 |
|
|
$ |
133,298 |
|
|
$ |
111,429 |
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Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cost of revenues |
|
25,162 |
|
|
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22,122 |
|
|
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50,374 |
|
|
|
43,989 |
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Sales and marketing |
|
22,741 |
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|
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21,834 |
|
|
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47,241 |
|
|
|
42,918 |
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Research and development |
|
12,473 |
|
|
|
11,839 |
|
|
|
26,005 |
|
|
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24,781 |
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General and administrative |
|
11,103 |
|
|
|
7,867 |
|
|
|
22,353 |
|
|
|
16,358 |
|
Change in fair value of contingent consideration |
|
(966 |
) |
|
|
2,076 |
|
|
|
(1,068 |
) |
|
|
1,722 |
|
Total costs and expenses |
|
70,513 |
|
|
|
65,738 |
|
|
|
144,905 |
|
|
|
129,768 |
|
Loss from operations |
|
(3,266 |
) |
|
|
(9,871 |
) |
|
|
(11,607 |
) |
|
|
(18,339 |
) |
Interest expense |
|
— |
|
|
|
(82 |
) |
|
|
— |
|
|
|
(162 |
) |
Other income (expense), net |
|
(172 |
) |
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|
40 |
|
|
|
20 |
|
|
|
(21 |
) |
Gain on sale of a right to use a web domain name |
|
— |
|
|
|
— |
|
|
|
— |
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|
|
4,800 |
|
Loss before income taxes |
|
(3,438 |
) |
|
|
(9,913 |
) |
|
|
(11,587 |
) |
|
|
(13,722 |
) |
Provision for (benefit from) income taxes |
|
68 |
|
|
|
(571 |
) |
|
|
114 |
|
|
|
(379 |
) |
Net loss |
$ |
(3,506 |
) |
|
$ |
(9,342 |
) |
|
$ |
(11,701 |
) |
|
$ |
(13,343 |
) |
Net loss per share attributable to common stockholders, basic and diluted |
$ |
(0.04 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.16 |
) |
Weighted-average number of common shares used in computing net loss per share attributable to common stockholders, basic and diluted |
|
83,186 |
|
|
|
82,980 |
|
|
|
82,852 |
|
|
|
82,575 |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Net loss |
$ |
(3,506 |
) |
|
$ |
(9,342 |
) |
|
$ |
(11,701 |
) |
|
$ |
(13,343 |
) |
Other comprehensive (income) loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Foreign currency translation adjustments |
|
5 |
|
|
|
48 |
|
|
|
6 |
|
|
|
(17 |
) |
Comprehensive loss |
$ |
(3,501 |
) |
|
$ |
(9,294 |
) |
|
$ |
(11,695 |
) |
|
$ |
(13,360 |
) |
See Accompanying Notes to Condensed Consolidated Financial Statements
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Six Months Ended June 30, |
|
|||||
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2016 |
|
|
2015 |
|
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Cash flows from operating activities: |
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|
|
|
|
|
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Net loss |
$ |
(11,701 |
) |
|
$ |
(13,343 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
10,108 |
|
|
|
7,780 |
|
Stock-based compensation |
|
14,919 |
|
|
|
17,439 |
|
Amortization of debt issuance costs |
|
— |
|
|
|
38 |
|
Loss on disposal of property and equipment |
|
216 |
|
|
|
— |
|
Gain on sale of a right to use a web domain name |
|
— |
|
|
|
(4,800 |
) |
Allowance for doubtful accounts |
|
151 |
|
|
|
(34 |
) |
Deferred income taxes |
|
114 |
|
|
|
(525 |
) |
Change in fair value of contingent consideration |
|
(1,068 |
) |
|
|
1,722 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
1,779 |
|
|
|
2,255 |
|
Prepaid expenses and other current assets |
|
(1,645 |
) |
|
|
(1,213 |
) |
Accounts payable and other current liabilities |
|
(3,402 |
) |
|
|
1,358 |
|
Accrued compensation and benefits |
|
(4,306 |
) |
|
|
(5,391 |
) |
Deferred revenues |
|
(180 |
) |
|
|
764 |
|
Net cash provided by operating activities |
|
4,985 |
|
|
|
6,050 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
(3,469 |
) |
|
|
(3,961 |
) |
Purchase of intangible assets |
|
— |
|
|
|
(35 |
) |
Purchase of short-term investments |
|
(25,060 |
) |
|
|
— |
|
Proceeds from maturity of short-term investment |
|
25,000 |
|
|
|
— |
|
Proceeds from sale of a right to use a web domain name |
|
— |
|
|
|
4,800 |
|
Net cash provided by (used in) investing activities |
|
(3,529 |
) |
|
|
804 |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
6,066 |
|
|
|
4,218 |
|
Repurchases of common stock |
|
(11,022 |
) |
|
|
(2,082 |
) |
Principal payments on capital lease obligations |
|
(26 |
) |
|
|
(30 |
) |
Net cash provided by (used in) financing activities |
|
(4,982 |
) |
|
|
2,106 |
|
Effect of exchange rates on cash and cash equivalents |
|
3 |
|
|
|
— |
|
Net (decrease) increase in cash and cash equivalents |
|
(3,523 |
) |
|
|
8,960 |
|
Cash and cash equivalents at beginning of period |
|
134,947 |
|
|
|
201,075 |
|
Cash and cash equivalents at end of period |
$ |
131,424 |
|
|
$ |
210,035 |
|
See Accompanying Notes to Condensed Consolidated Financial Statements
6
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business
Quotient Technology Inc., formerly known as Coupons.com Incorporated, is a provider of digital promotions and media solutions driven by consumer-shopping data. The Company connects consumer packaged goods (CPG) brands and retailers with shoppers by delivering digital promotions and media to shoppers through mobile, web and social channels. Leading brands, as well as leading retailers in the grocery, drug, dollar, club and mass merchandise channels, use its platform to engage shoppers at the critical moments when they are choosing what products to buy and where to shop. The Company’s new corporate name, which became effective October 20, 2015, is designed to better reflect the breadth and sophistication of its business offerings, along with its deepening relationships with Fortune 500 CPGs and retailers.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. 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 financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2016 or for any other period.
There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on its condensed consolidated financial statements and related notes.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s condensed consolidated financial statements and accompanying notes. Such management estimates include, but are not limited to, revenue recognition, collectability of accounts receivable, stock-based compensation, the valuation and useful lives of intangible assets and property and equipment, goodwill, contingent consideration and income taxes. Actual results may differ from the Company’s estimates, and such differences may be material to the accompanying condensed consolidated financial statements.
Foreign Currency
Prior to the first quarter of 2016, the functional currency of each of the Company’s international subsidiaries was the local currency, as its international subsidiaries negotiated and managed business locally with minimal involvement from the U.S. parent entity.
Beginning the first quarter of 2016, the functional currency of certain international subsidiaries changed from its local currency to USD. The change in functional currency was the result of changes in the Company’s international strategy primarily resulting from the acquisition of Shopmium S.A. (a private company based in France). The Company acquired Shopmium S.A. as part of its strategy to broaden international operations and subsequently, the Company reviewed its international strategy, including management of its relationships with international Consumer Packaged Goods (CPGs) brands, evaluation of worldwide competition and international pricing strategy, its plan to manage future billings and collections for international customers and plan to further develop the acquired technology for its subsequent use by
7
various entities. Consequently, as part of the Company’s new international strategy and changes to the way the Company runs its business internationally, it modified its existing international structure and entered into various inter-company licensing agreements between its U.S. entity and certain international entities. As these changes were significant, the Company considered the economic factors outlined in ASC 830, Foreign Currency Matters, for the determination of the functional currency. The Company concluded that most of the factors pointed to the use of the parent’s currency (USD) as the functional currency, which resulted in a change in functional currency to USD for such international subsidiaries.
The change in functional currency is applied on a prospective basis beginning with our first quarter of 2016 and translation adjustments for prior periods will continue to remain as a component of accumulated other comprehensive loss.
Gains (losses) from foreign currency transactions are included in other income (expense), net in the accompanying condensed consolidated statements of operations. Foreign currency transaction gains (losses) were immaterial in the three and six months ended June 30, 2016.
Recently Issued Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09—Revenue from Contracts with Customers (Topic 606), and in August 2015, the FASB issued ASU 2015-14– Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date which defers the effective date of ASU 2014-09 amended the existing accounting standards to achieve consistent application of revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the standard requires reporting companies to also disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB agreed to delay the effective date of this amendment by one year, accordingly, the Company is required to adopt the amendments in the first quarter of 2018. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. Early adoption is permitted, but not before the original effective date of the amendment, which is the first quarter of 2017. The Company is currently evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842). The guidance requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s accounting. Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The standard is effective for public business entities for annual reporting periods beginning after December 15 2018, and interim periods within that reporting period, which would be the first quarter of 2019 for the Company. Early adoption is permitted. ASU 2016-02 is required to be adopted using a modified retrospective approach. The Company is currently evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09—Stock Compensation (Topic 718). The new guidance requires all of the tax effects related to share based payments to be recorded through the income statement. The new guidance also removes the present requirement to delay recognition of a windfall tax benefit until it reduces current taxes payable; instead it is recognized at the time of settlement, subject to normal valuation allowance consideration. While the simplification will eliminate some administrative complexities, it will increase the volatility of income tax expense. The standard is effective for public business entities for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.
8
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in thousands):
|
June 30, 2016 |
|
|||||||||||||
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1) |
$ |
19,990 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,990 |
|
Certificate of deposit (2) |
|
— |
|
|
|
25,060 |
|
|
|
— |
|
|
|
25,060 |
|
Total |
$ |
19,990 |
|
|
$ |
25,060 |
|
|
$ |
— |
|
|
$ |
45,050 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration related to Shopmium acquisition |
$ |
— |
|
|
$ |
— |
|
|
$ |
687 |
|
|
$ |
687 |
|
Total |
$ |
— |
|
|
$ |
— |
|
|
$ |
687 |
|
|
$ |
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
|||||||||||||
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (1) |
$ |
19,948 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,948 |
|
Certificate of deposit (2) |
|
— |
|
|
|
25,000 |
|
|
|
— |
|
|
|
25,000 |
|
Total |
$ |
19,948 |
|
|
$ |
25,000 |
|
|
$ |
— |
|
|
$ |
44,948 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration related to Eckim acquisition (3) |
$ |
2,291 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,291 |
|
Contingent consideration related to Shopmium acquisition |
|
— |
|
|
|
— |
|
|
|
1,407 |
|
|
|
1,407 |
|
Total |
$ |
2,291 |
|
|
$ |
— |
|
|
$ |
1,407 |
|
|
$ |
3,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Included in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Included in short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Included in other current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The valuation technique used to measure the fair value of money market funds included using quoted prices in active markets for identical assets or liabilities. The valuation technique used to measure the fair value of certificate of deposit included using quoted prices in active markets for similar assets.
The fair value of contingent consideration related to the acquisition of Shopmium S.A. (Shopmium) was estimated using a Monte Carlo simulation and was based on significant inputs not observable in the market, thus classified as a Level 3 instrument. The inputs include the expected achievement of certain revenue and profit milestones for the years ending December 31, 2016 and 2017, historical volatility and risk free interest rate.
The fair value of contingent consideration related to the asset purchase agreement with Eckim LLC (Eckim) was the result of the earnout period ending for measuring shares issuable on Eckim achieving certain revenue and profit milestones as of December 31, 2015. The inputs include the Company’s stock price and the number of shares issuable.
9
On January 26, 2016, the Company and the sellers of Eckim agreed on performance against the milestones and the shares to be issued. Accordingly, the Company reclassified the contingent liability of $1.9 million related to Eckim to stockholder’s equity in the first quarter of 2016. The shares were issued during the second quarter of 2016.
The following table represents the change in the contingent consideration (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, 2016 |
|
|
June 30, 2016 |
|
||||||||||
|
Eckim |
|
|
Shopmium |
|
|
Eckim |
|
|
Shopmium |
|
||||
|
Level 1 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 3 |
|
||||
Balance at the beginning of period |
$ |
— |
|
|
$ |
1,653 |
|
|
$ |
2,291 |
|
|
$ |
1,407 |
|
Change in fair value |
|
— |
|
|
|
(966 |
) |
|
|
(348 |
) |
|
|
(720 |
) |
Settlement |
|
— |
|
|
|
— |
|
|
|
(1,943 |
) |
|
|
— |
|
Balance as of June 30, 2016 |
$ |
— |
|
|
$ |
687 |
|
|
$ |
— |
|
|
$ |
687 |
|
|
For the three and six months ended June 30, 2016, the Company recorded gains of $1.0 million and $1.1 million, respectively, related to the changes in fair value of contingent consideration. The change in fair value of Shopmium contingent consideration is due to a decline in expected revenue and profit milestones for the years ending December 31, 2016 and 2017. The change in fair value of Eckim contingent consideration is due to changes in the Company’s stock price at the valuation dates. The changes in the fair value of the contingent consideration is included as a component of operations in the accompanying condensed consolidated statements of operations.
There were no transfers between fair value hierarchies during the three and six months ended June 30, 2016 and 2015.
4. Allowance for Doubtful Accounts
The summary of activity in the allowance for doubtful accounts is as follows (in thousands):
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Balance at the beginning of period |
$ |
711 |
|
|
$ |
407 |
|
|
$ |
833 |
|
|
$ |
408 |
|
Bad debt expense (reversal) |
|
210 |
|
|
|
(43 |
) |
|
|
151 |
|
|
|
(34 |
) |
Write-offs, net |
|
(38 |
) |
|
|
(119 |
) |
|
|
(101 |
) |
|
|
(129 |
) |
Balance as of June 30, 2016 |
$ |
883 |
|
|
$ |
245 |
|
|
$ |
883 |
|
|
$ |
245 |
|
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment consist of the following (in thousands):
|
June 30, 2016 |
|
|
December 31, 2015 |
|
||
Software |
$ |
32,478 |
|
|
$ |
33,139 |
|
Computer equipment |
|
23,032 |
|
|
|
21,186 |
|
Leasehold improvements |
|
6,475 |
|
|
|
4,721 |
|
Furniture and fixtures |
|
1,968 |
|
|
|
1,670 |
|
Total |
|
63,953 |
|
|
|
60,716 |
|
Accumulated depreciation and amortization |
|
(45,354 |
) |
|
|
(39,124 |
) |
Projects in process |
|
2,365 |
|
|
|
3,536 |
|
Property and equipment, net |
$ |
20,964 |
|
|
$ |
25,128 |
|
10
Depreciation and amortization expense related to property and equipment was $4.0 million and $3.2 million for the three months ended June 30, 2016 and 2015, respectively, and $7.9 million and $6.3 million for the six months ended June 30, 2016 and 2015, respectively.
The Company capitalized no internal use software development and enhancement costs primarily associated with the Company’s Retailer iQ platform during the three months ended June 30, 2016, while $0.1 million of costs were capitalized during the six months ended June 30, 2016, and $0.5 million and $0.9 million during the three and six months ended June 30, 2015, respectively. Amortization expense related to internal use software recorded as cost of revenues was $2.7 million and $2.3 million during the three months ended June 30, 2016 and 2015, respectively, and $5.3 million and $4.6 million during the six months ended June 30, 2016 and 2015, respectively. The unamortized capitalized development and enhancement costs were $5.8 million and $11.1 million as of June 30, 2016 and December 31, 2015, respectively.
Accrued Compensation and Benefits
Accrued compensation and benefits consist of the following (in thousands):
|
June 30, 2016 |
|
|
December 31, 2015 |
|
||
Bonus |
$ |
4,323 |
|
|
$ |
6,858 |
|
Commissions |
|
2,491 |
|
|
|
3,645 |
|
Vacation |
|
2,007 |
|
|
|
2,118 |
|
Payroll and related expenses |
|
2,110 |
|
|
|
2,616 |
|
Accrued compensation and benefits |
$ |
10,931 |
|
|
$ |
15,237 |
|
Other Current Liabilities
Other current liabilities consist of the following (in thousands):
|
June 30, 2016 |
|
|
December 31, 2015 |
|
||
Distribution fees |
$ |
8,714 |
|
|
$ |
8,349 |
|
Marketing expenses |
|
2,503 |
|
|
|
3,336 |
|
Deferred rent, current |
|
456 |
|
|
|
346 |
|
Legal and professional fees |
|
638 |
|
|
|
745 |
|
Accrued property and equipment |
|
139 |
|
|
|
929 |
|
Contingent consideration |
|
— |
|
|
|
2,291 |
|
Other |
|
3,493 |
|
|
|
4,174 |
|
Other current liabilities |
$ |
15,943 |
|
|
$ |
20,170 |
|
11
Intangible assets consist of the following (in thousands):
|
June 30, 2016 |
||||||||||||||||
|
Gross |
|
|
Accumulated Amortization |
|
|
Foreign Currency Translation |
|
|
Net |
|
|
Weighted Average Amortization Period (Years) |
||||
Customer relationships |
$ |
8,860 |
|
|
$ |
(4,159 |
) |
|
$ |
(36 |
) |
|
$ |
4,665 |
|
|
4 |
Developed technologies |
|
7,460 |
|
|
|
(2,408 |
) |
|
|
(89 |
) |
|
|
4,963 |
|
|
4 |
Domain names |
|
5,948 |
|
|
|
(3,739 |
) |
|
|
(9 |
) |
|
|
2,200 |
|
|
3 |
Patents |
|
975 |
|
|
|
(692 |
) |
|
|
— |
|
|
|
283 |
|
|
6 |
Vendor relationships |
|
890 |
|
|
|
(556 |
) |
|
|
— |
|
|
|
334 |
|
|
2 |
Registered users |
|
420 |
|
|
|
(69 |
) |
|
|
(11 |
) |
|
|
340 |
|
|
4 |
Trade names |
|
167 |
|
|
|
(162 |
) |
|
|
1 |
|
|
|
6 |
|
|
0.2 |
|
$ |
24,720 |
|
|
$ |
(11,785 |
) |
|
$ |
(144 |
) |
|
$ |
12,791 |
|
|
4 |
As of June 30, 2016, the Company has a domain name with a gross value of $0.4 million that has an indefinite useful life, hence is not subject to amortization.
|
December 31, 2015 |
||||||||||||||||
|
Gross |
|
|
Accumulated Amortization |
|
|
Foreign Currency Translation |
|
|
Net |
|
|
Weighted Average Amortization Period (Years) |
||||
Customer relationships |
$ |
8,860 |
|
|
$ |
(3,345 |
) |
|
$ |
(36 |
) |
|
$ |
5,479 |
|
|
4 |
Developed technologies |
|
7,460 |
|
|
|
(1,709 |
) |
|
|
(89 |
) |
|
|
5,662 |
|
|
4 |
Domain names |
|
5,948 |
|
|
|
(3,419 |
) |
|
|
(9 |
) |
|
|
2,520 |
|
|
3 |
Patents |
|
1,050 |
|
|
|
(686 |
) |
|
|
— |
|
|
|
364 |
|
|
6 |
Vendor relationships |
|
890 |
|
|
|
(445 |
) |
|
|
— |
|
|
|
445 |
|
|
2 |
Registered users |
|
420 |
|
|
|
(18 |
) |
|
|
(11 |
) |
|
|
391 |
|
|
4 |
Trade names |
|
167 |
|
|
|
(149 |
) |
|
|
1 |
|
|
|
19 |
|
|
1 |
|
$ |
24,795 |
|
|
$ |
(9,771 |
) |
|
$ |
(144 |
) |
|
$ |
14,880 |
|
|
4 |
Amortization expense related to intangible assets subject to amortization was $1.1 million and $0.7 million during the three months ended June 30, 2016 and 2015, respectively, and $2.2 million and $1.5 million during the six months ended June 30, 2016 and 2015, respectively. Estimated future amortization expense related to intangible assets as of June 30, 2016 is as follows (in thousands):
|
Total |
|
|
2016, remaining six months |
$ |
1,969 |
|
2017 |
|
3,712 |
|
2018 |
|
3,435 |
|
2019 |
|
2,346 |
|
2020 |
|
908 |
|
2021 and beyond |
|
68 |
|
Total estimated amortization expense |
$ |
12,438 |
|
7. Debt Obligation
In September 2013, the Company entered into an agreement with a commercial bank to establish an accounts receivable based revolving line of credit. During the year ended December 31, 2015, the Company terminated the line of credit and paid off the balance in full.
12
2013 Equity Incentive Plan
In October 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), which became effective in March 2014 and serves as the successor to the Company’s 2006 Stock Plan (the “2006 Plan”). Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares and units to employees, directors and consultants.
Stock Options
The fair value of each option was estimated on the date of grant for the period presented using the following assumptions:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||
|
2016 |
|
2015 |
|
|
2016 |
|
2015 |
|
||
Expected life (in years) |
2.75 – 5.50 |
|
5.50 – 6.08 |
|
|
2.75 – 6.08 |
|
5.50 – 6.08 |
|
||
Risk-free interest rate |
0.68% – 1.30% |
|
1.82% – 1.89% |
|
|
0.68% – 1.34% |
|
1.82% – 1.89% |
|
||
Volatility |
60% – 70% |
|
|
55% |
|
|
60% – 70% |
|
|
55% |
|
Dividend yield |
— |
|
— |
|
|
— |
|
— |
|
The weighted-average grant-date fair value of options granted was $12.57 and $6.72 per share during the three months ended June 30, 2016 and 2015, respectively, and $8.61 and $6.72 per share during the six months ended June 30, 2016 and 2015, respectively.
Restricted Stock Units
The fair value of RSUs equals the market value of the Company’s common stock on the date of the grant. The RSUs are excluded from issued and outstanding shares until they are vested.
A summary of the Company’s stock option and RSU award activity under the 2013 Plan is as follows:
|
|
|
|
|
RSUs Outstanding |
|
|
Options Outstanding |
|
||||||||||||||||||
|
Shares Available for Grant |
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Term (Years) |
|
|
Aggregate Intrinsic Value (in thousands) |
|
|||||||
Balance as of December 31, 2015 |
|
2,889,301 |
|
|
|
6,786,446 |
|
|
$ |
13.14 |
|
|
|
8,469,666 |
|
|
$ |
7.62 |
|
|
|
5.91 |
|
|
$ |
19,231 |
|
Increase in shares authorized |
|
3,279,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
(2,012,432 |
) |
|
|
|
|
|
|
|
|
|
|
2,012,432 |
|
|
$ |
8.61 |
|
|
|
|
|
|
|
|
|
Options exercised |
|
— |
|
|
|
|
|
|
|
|
|
|
|
(1,237,674 |
) |
|
$ |
4.47 |
|
|
|
|
|
|
$ |
6,536 |
|
Options canceled or expired |
|
225,075 |
|
|
|
|
|
|
|
|
|
|
|
(225,075 |
) |
|
$ |
8.81 |
|
|
|
|
|
|
|
|
|
RSUs granted |
|
(2,278,347 |
) |
|
|
2,278,347 |
|
|
$ |
9.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs vested |
|
— |
|
|
|
(1,761,995 |
) |
|
$ |
12.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs canceled or expired |
|
859,656 |
|
|
|
(859,656 |
) |
|
$ |
12.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2016 |
|
2,963,064 |
|
|
|
6,443,142 |
|
|
$ |
11.55 |
|
|
|
9,019,349 |
|
|
$ |
8.24 |
|
|
|
6.46 |
|
|
$ |
57,739 |
|
Vested and expected to vest as of June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
8,397,438 |
|
|
$ |
8.01 |
|
|
|
6.26 |
|
|
$ |
55,366 |
|