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EXCEL - IDEA: XBRL DOCUMENT - XOOM CorpFinancial_Report.xls

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


(Mark one)

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

 

For the quarterly period ended March 31, 2015

 

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 001-35801


Xoom Corporation

(Exact name of registrant as specified in its charter)


 

 

Delaware

(State or other jurisdiction of Incorporation or organization)

94-3401054

(I.R.S. Employer Identification No.)

425 Market Street, 12th Floor

San Francisco, CA 94105

(Address of principal executive offices) (Zip Code)

 

(415) 777-4800
(Registrant’s telephone number, including area code)

 

None

(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  No

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

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

 

 

 

 

Large accelerated filer

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  No 

On April 24, 2015,  39,018,409 shares of the registrant’s Common Stock, $0.0001 par value, were issued and outstanding.

 

 


 

Xoom Corporation and Subsidiaries

Table of Contents

 

 

 

Part I – Financial Information 

 

Item 1. 

Financial Statements:

3

 

Consolidated Balance Sheets at March 31, 2015 (unaudited) and December 31, 2014

3

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014 (unaudited)

4

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014 (unaudited)

5

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (unaudited)

6

 

Notes to Consolidated Financial Statements (unaudited)

7

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

27

Item 4. 

Controls and Procedures

27

Part II – Other Information 

 

Item 1. 

Legal Proceedings

29

Item 1A. 

Risk Factors

29

Item 6. 

Exhibits

62

 

Signatures

63

 

Exhibit Index

64

   

 

2


 

PART I – Financial Information

ITEM 1. Financial Statements

XOOM CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2015

 

2014

 

 

 

(unaudited)

 

(derived from audited financial statements)

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

115,684 

 

$

67,216 

Disbursement prefunding

 

 

30,365 

 

 

71,167 

Short-term investments

 

 

94,426 

 

 

111,777 

Customer funds receivable

 

 

25,779 

 

 

18,590 

Prepaid expenses and other current assets

 

 

5,964 

 

 

5,417 

Total current assets

 

 

272,218 

 

 

274,167 

Non-current assets:

 

 

 

 

 

 

Property, equipment and software, net

 

 

15,525 

 

 

15,670 

Goodwill

 

 

9,032 

 

 

9,032 

Intangibles, net

 

 

4,920 

 

 

5,129 

Restricted cash

 

 

10,973 

 

 

10,971 

Other assets

 

 

595 

 

 

755 

Total assets

 

$

313,263 

 

$

315,724 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

16,249 

 

$

14,533 

Customer liabilities

 

 

17,085 

 

 

11,540 

Line of credit

 

 

15,000 

 

 

28,000 

Total current liabilities

 

 

48,334 

 

 

54,073 

Non-current liabilities:

 

 

 

 

 

 

Other non-current liabilities

 

 

6,033 

 

 

5,885 

Total liabilities

 

 

54,367 

 

 

59,958 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value, 500,000,000 shares authorized; issued and outstanding 38,991,943 and 38,592,808 shares at March 31, 2015 and December 31, 2014, respectively

 

 

 

 

Additional paid-in capital

 

 

343,522 

 

 

339,169 

Accumulated other comprehensive loss

 

 

(15)

 

 

(55)

Accumulated deficit

 

 

(84,615)

 

 

(83,352)

Total stockholders’ equity

 

 

258,896 

 

 

255,766 

Total liabilities and stockholders’ equity

 

$

313,263 

 

$

315,724 

 

See accompanying notes to consolidated financial statements.

3


 

XOOM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2015

 

2014

 

 

(unaudited)

 

 

 

 

 

 

 

Revenue

 

$

44,418 

 

$

35,938 

Cost of revenue

 

 

12,033 

 

 

9,578 

Gross profit

 

 

32,385 

 

 

26,360 

Marketing

 

 

9,938 

 

 

8,782 

Technology and development

 

 

11,082 

 

 

7,850 

Customer service and operations

 

 

4,609 

 

 

3,974 

General and administrative

 

 

7,586 

 

 

5,158 

Total operating expense

 

 

33,215 

 

 

25,764 

Income (loss) from operations

 

 

(830)

 

 

596 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(369)

 

 

(328)

Interest income

 

 

76 

 

 

76 

Other income (expense)

 

 

(112)

 

 

20 

Income (loss) before income taxes

 

 

(1,235)

 

 

364 

Provision for income taxes

 

 

28 

 

 

12 

Net income (loss)

 

$

(1,263)

 

$

352 

Net income (loss) per share:

 

 

 

 

 

 

Basic

 

$

(0.03)

 

$

0.01 

Diluted

 

$

(0.03)

 

$

0.01 

Weighted-average shares used to compute net income (loss) per share:

 

 

 

 

 

 

Basic

 

 

38,804 

 

 

37,799 

Diluted

 

 

38,804 

 

 

41,710 

 

See accompanying notes to consolidated financial statements.

 

4


 

XOOM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

2015

 

2014

 

 

(unaudited)

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,263)

 

$

352 

Unrealized gain (loss) on marketable securities, net of taxes of $0

 

 

40 

 

 

(5)

Total comprehensive income (loss)

 

$

(1,223)

 

$

347 

 

See accompanying notes to consolidated financial statements.

 

 

5


 

XOOM CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

2015

 

2014

 

 

(unaudited)

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(1,263)

 

$

352 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

3,235 

 

 

1,924 

Depreciation and other amortization expense

 

 

1,207 

 

 

779 

Amortization of acquired intangible

 

 

204 

 

 

204 

Impairment charges related to long-lived assets

 

 

34 

 

 

 —

Amortization of net premium on investments

 

 

231 

 

 

384 

Amortization of warrant issuance costs

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Disbursement prefunding

 

 

40,802 

 

 

(4,835)

Customer funds receivable

 

 

(7,189)

 

 

(13,008)

Prepaid expenses and other current assets

 

 

(588)

 

 

(822)

Other assets

 

 

120 

 

 

127 

Customer liabilities

 

 

5,545 

 

 

14,837 

Accounts payable and accrued expenses

 

 

1,745 

 

 

627 

Other non-current liabilities

 

 

148 

 

 

710 

Net cash provided by operating activities

 

 

44,236 

 

 

1,284 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property, equipment, software and intangible assets

 

 

(1,081)

 

 

(929)

Purchase of short-term investments

 

 

(15,775)

 

 

(35,565)

Proceeds from sales and maturities of short-term investments

 

 

32,935 

 

 

33,087 

Cash paid in business combination, net of cash received

 

 

 —

 

 

(8,874)

Change in restricted cash

 

 

(2)

 

 

(3,152)

Net cash provided by (used in) investing activities

 

 

16,077 

 

 

(15,433)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

1,331 

 

 

1,176 

Excess tax benefit related to stock-based compensation

 

 

 —

 

 

Taxes paid related to net share settlement

 

 

(176)

 

 

 —

Net borrowings (repayments) under line of credit

 

 

(13,000)

 

 

 —

Net cash provided by (used in) financing activities

 

 

(11,845)

 

 

1,180 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

48,468 

 

 

(12,969)

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

67,216 

 

 

110,979 

Cash and cash equivalents, end of period

 

$

115,684 

 

$

98,010 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

 

$

43 

 

$

Cash paid for interest

 

$

284 

 

$

228 

Cash received from refund of income taxes

 

$

17 

 

$

 —

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Change in current liability in connection with acquisition of BlueKite, LTD

 

$

 —

 

$

1,500 

Issuance of common stock in connection with acquisition of BlueKite, LTD

 

$

 —

 

$

4,470 

Purchases of property and equipment in accounts payable and accrued expenses

 

$

211 

 

$

367 

 

See accompanying notes to consolidated financial statements.

 

 

6


 

Xoom Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)

(1)  Business and Basis of Presentation

(a)  Business Overview

Xoom Corporation and its subsidiaries (together, “Xoom” or the “Company”) is a leader in the digital consumer-to-consumer international money transfer industry. Xoom provides its customers with fast and convenient ways to send money to and pay bills for family and friends around the world using their bank account, credit card or debit card.  We offer money transfer services from the United States to 32 countries and our cross-border bill payment services from the United States to five countries.

Xoom was incorporated in California in June 2001 and reincorporated in Delaware in November 2012. The Company’s corporate headquarters is located in San Francisco, California.

(b)  Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements.

In the opinion of management, all adjustments consisting of normal and recurring entries considered necessary for a fair presentation of the results for the interim periods presented have been included. All intercompany balances and transactions have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. These estimates are based on information available as of the date of the unaudited consolidated financial statements. Therefore, actual results could differ from these estimates. Interim results are not necessarily indicative of the results for a full year.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2015 (the “Annual Report”).

Business events in 2015 required the Company to make an addition to the accounting policies for stock-based compensation, as more fully set forth below. There have been no other changes in the significant accounting policies as disclosed in the audited consolidated financial statements for 2014 included in the Annual Report.

Stock-based Compensation

The Company began granting performance-based restricted stock units (“PSUs”) to certain employees in February 2015. The fair value of PSUs is equal to the closing market price of the Company’s common stock on the date of grant. The performance condition will be evaluated quarterly to determine the probable level of achievement within specified performance bands as defined in the PSU agreement. The number of PSUs that will ultimately vest will range from 0% to 170% of the target amount depending on the actual level of achievement within the specified performance bands. The corresponding amount of stock-based compensation expense related to PSUs is amortized over a graded vesting period of three years.  Changes in the quarterly estimate of probable achievement impact the total amount of stock-based compensation expense on a cumulative basis.

7


 

 (c) Recently Issued Accounting Guidance

In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impact of this accounting guidance on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs be presented in the consolidated balance sheet as  a direct deduction from the carrying amount of debt liability, consistent with debt discounts. This new accounting guidance is effective for the Company on January 1, 2016. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

(2)  Short-term Investments

Marketable securities, classified as available‑for‑sale, are stated at fair value. There were no other-than-temporary losses during any of the periods presented.

As of March 31, 2015, the fair value of the Company’s short-term investments was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

   

Amortized cost

   

Unrealized gains

   

Unrealized loss

   

Fair value

 

 

(unaudited)

U.S. agency notes

 

$

34,684 

 

$

 

$

(2)

 

$

34,684 

Corporate bonds

 

 

29,570 

 

 

 

 

(19)

 

 

29,555 

Commercial paper

 

 

27,187 

 

 

 —

 

 

 —

 

 

27,187 

Marketable securities

 

 

91,441 

 

 

 

 

(21)

 

 

91,426 

Certificates of deposit

 

 

3,000 

 

 

 —

 

 

 —

 

 

3,000 

Total short-term investments

 

$

94,441 

 

$

 

$

(21)

 

$

94,426 

 

As of December 31, 2014, the fair value of the Company’s short-term investments was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

   

Amortized cost

   

Unrealized gains

   

Unrealized loss

   

Fair value

U.S. agency notes

 

$

33,489 

 

$

 —

 

$

(13)

 

$

33,476 

Corporate bonds

 

 

44,025 

 

 

 

 

(44)

 

 

43,984 

Commercial paper

 

 

31,318 

 

 

 —

 

 

(1)

 

 

31,317 

Marketable securities

 

 

108,832 

 

 

 

 

(58)

 

 

108,777 

Certificates of deposit

 

 

3,000 

 

 

 —

 

 

 —

 

 

3,000 

Total short-term investments

 

$

111,832 

 

$

 

$

(58)

 

$

111,777 

 

 

(3)  Fair Value Measurements

Fair value is defined by authoritative guidance as the exit price, or the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when

8


 

available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1: Includes financial instruments for which quoted market prices for identical instruments are available in active markets. As of March 31, 2014 and 2015, the Company’s Level 1 financial instruments included money market funds with original maturities of three months or less.

Level 2: Includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instruments. The Company obtains the fair value of its Level 2 financial instruments from a professional pricing service, which uses nonbinding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques. There were no material changes in the valuation techniques during any of the periods presented. 

Level 3: Includes financial instruments for which fair value is derived from valuation techniques, including pricing models and discounted cash flow models, in which one or more significant inputs, including the Company’s own assumptions, are unobservable. As of March 31, 2015 and December 31, 2014, the Company did not hold any Level 3 investments.

The book value of the Company’s financial instruments not measured at fair value on a recurring basis approximates fair value due to the relatively short maturity, cash repayment terms or market interest rates of such instruments. These instruments include disbursement prefunding, customer funds receivables, line of credit, customer liabilities and the holdback liability in connection with the acquisition of BlueKite, LTD. The fair value of such financial instruments is determined using the income approach based on the present value of estimated future cash flows. The fair value of all of these instruments would be categorized as Level 2 of the fair value hierarchy.

The Company’s cash equivalents, marketable securities and certificates of deposit that are measured at fair value on a recurring basis are classified as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

 

    

Level 1

    

Level 2

    

Level 3

    

Level 1

    

Level 2

    

Level 3

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

39,468 

    

$

 —

    

$

 —

    

$

37,544 

 

$

 —

 

$

 —

U.S. agency notes

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

101 

 

 

 —

Corporate bonds

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

200 

 

 

 —

Commercial paper

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,000 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. agency notes

 

 

 —

 

 

34,684 

 

 

 —

 

 

 —

 

 

33,476 

 

 

 —

Corporate bonds

 

 

 —

 

 

29,555 

 

 

 —

 

 

 —

 

 

43,984 

 

 

 —

Commercial paper

 

 

 —

 

 

27,187 

 

 

 —

 

 

 —

 

 

31,317 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

 —

 

 

3,000 

 

 

 —

 

 

 —

 

 

3,000 

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

39,468 

 

$

94,426 

 

$

 —

 

$

37,544 

 

$

115,078 

 

$

 —

 

 

9


 

(4)  Property, Equipment and Software, Net

The following is a summary of property, equipment and software at cost, less accumulated depreciation and amortization (in thousands):

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2015

 

2014

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

Office furniture and equipment

 

$

9,389 

 

$

8,723 

Software

 

 

6,344 

 

 

6,004 

Leasehold improvements

 

 

9,077 

 

 

9,034 

Total

 

 

24,810 

 

 

23,761 

Less: accumulated depreciation

 

 

(9,285)

 

 

(8,091)

Property, equipment and software, net

 

$

15,525 

 

$

15,670 

 

Depreciation and amortization expense of $1.2 million and $0.8 million were recorded for the three months ended March 31, 2015 and 2014, respectively.

(5)  Goodwill and Other Intangible Assets

In connection with the acquisition of BlueKite, LTD (the “Acquisition”) on January 10, 2014, the Company recorded $9.0 million of goodwill and $5.7 million of developed technology. There were no changes in the carrying amount of goodwill during the three months ended March 31, 2015.  Developed technology is classified as an intangible asset and is being amortized on a straight-line basis over an estimated useful life of seven years.

As of March 31, 2015 and December 31, 2014, the gross accumulated amortization of the developed technology asset was $1.0 million and $0.8 million, respectively. 

Amortization expense related to the acquired intangible asset for both the three-month periods ended March 31, 2015 and 2014 was $0.2 million, and was included in technology and development expense in the consolidated statements of operations.

 

 

(6Accounts Payable and Accrued Expenses

The following is a summary of accounts payable and accrued expenses (in thousands):

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2015

 

2014

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,849 

 

$

979 

Accrued processing and disbursement costs

 

 

2,983 

 

 

2,793 

Accrued marketing expense

 

 

2,871 

 

 

3,421 

Acquisition holdback liability

 

 

1,500 

 

 

1,500 

Accrued professional services

 

 

2,310 

 

 

1,294 

Other accrued expenses

 

 

4,736 

 

 

4,546 

Total accounts payable and accrued expenses

 

$

16,249 

 

$

14,533 

 

Other accrued expenses in the table above include a reserve for transaction losses. The Company is exposed to transaction losses due to fraud, as well as nonperformance of third parties and customers. The Company establishes a reserve for such losses based on historical trends and any specific risks identified in

10


 

processing customer transactions. The following table summarizes the activities of the Company’s reserve for transaction losses during the period presented (in thousands):

 

 

 

 

 

 

(unaudited)

Balance as of December 31, 2014

$

189 

Additions to expense

 

2,934 

Losses incurred, net of recoveries

 

(2,781)

Balance as of March 31, 2015

$

342 

 

 

(7)  Line of Credit

In September 2013, the Company entered into an Amended and Restated Credit Agreement (the “Restated Loan Agreement”) with Silicon Valley Bank (“SVB”) and other lenders. The Restated Loan Agreement added additional lenders, increased the available borrowing amount to $150.0 million through September 2016 and changed certain of the financial provisions. The Company is required to repay the outstanding principal balance under the line of credit in full at least once every eight business days. Under the Restated Loan Agreement, the Company pays a fee of 0.50% per annum for the daily unused portions of the line of credit. The interest rate at March 31, 2015 and December 31, 2014 was 4.25%. In 2013, the Company paid SVB a one-time commitment fee of $430,000 and  a one-time arrangement fee of 0.30% of the amount available under the line of credit. These expenses are being amortized over the period of the Restated Loan Agreement.  In addition, the Company pays an annual administration fee of $45,000.  

SVB issued a standby letter of credit for $15.0 million which satisfied an additional collateral requirement to maintain the Company’s India operations. SVB issued a $3.9 million letter of credit in January 2014 as a security deposit for the Company’s office lease.

As of March 31, 2015, the Company had $116.1 million available under its $150.0 million line of credit, reflecting $15.0 million outstanding under the line of credit and $18.9 million reserved under the two letters of credit. As of December 31, 2014, the Company had $103.1 million available under its $150.0 million line of credit, reflecting $28.0 million outstanding under the line of credit and $18.9 million reserved under the two letters of credit.

(8)  Income Taxes

The Company’s income tax provisions for the three months ended March 31, 2015 and 2014 were $28,000 and $12,000, respectively, which were primarily attributable to U.S. state and foreign income taxes.

The Company’s effective income tax rates were (2.3%) and 3.3% for the three months ended March 31, 2015 and 2014, respectively. Calculation of the effective tax rate for both periods includes a non-cash valuation allowance recorded against the Company’s deferred tax assets, which partially offsets a tax benefit resulting from the operating loss generated in the period.

(9)  Stock-based Compensation

The Company may grant stock options to purchase shares of its common stocks, restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”) or common stock awards to its employees and

11


 

non-employee directors. Stock‑based compensation expense included in the Company’s consolidated statements of operations during the periods presented is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

2015

 

2014

 

 

(unaudited)

Stock-based compensation expense:

 

 

 

 

 

 

Marketing

 

$

351 

 

$

233 

Technology and development

 

 

1,059 

 

 

619 

Customer service and operations

 

 

308 

 

 

193 

General and administrative

 

 

1,517 

 

 

879 

Total stock-based compensation

 

$

3,235 

 

$

1,924 

 

(a)  Stock Options

The fair value of options granted was estimated at the date of the grant using a Black-Scholes option-pricing model. The following table presents the weighted-average assumptions used in estimating the fair value of options granted during the periods presented:

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

2015

 

2014

 

 

(unaudited)

Expected term (in years)

 

6.0

 

6.3

Risk-free interest rate

 

1.64%

 

2.06%

Dividend yield

 

None

 

None

Volatility rate

 

33%

 

44%

 

The following table presents the stock option activity and related information for the three months ended March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Weighted-

Aggregate

 

 

 

 

Average

 

 

Average

Intrinsic

 

 

Options

 

Exercise

 

 

Contractual Term

 

Value

 

 

Outstanding

 

Price

 

 

(In Years)

 

(in Millions)

 

 

(unaudited)

Outstanding as of December 31, 2014

 

6,132,641 

 

$

11.62 

 

 

6.17 

 

$

50.4 

Granted

 

573,000 

 

 

15.71 

 

 

 

 

 

 

Exercised (1)

 

(330,901)

 

 

4.08 

 

 

 

 

 

 

Forfeited or cancelled

 

(195,226)

 

 

14.73 

 

 

 

 

 

 

Outstanding as of March 31, 2015

 

6,179,514 

 

$

12.31 

 

 

6.42 

 

$

34.3 

Exercisable as of March 31, 2015

 

4,268,413 

 

$

8.29 

 

 

5.35 

 

$

33.8 

Vested and expected to vest as of March 31, 2015

 

6,139,769 

 

$

12.26 

 

 

6.41 

 

$

34.2 

 

(1) Exercised options in the table above included both settled and unsettled exercises during the three months ended March 31, 2015

The following table presents the total intrinsic value of stock options exercised and the weighted-average grant date fair value of stock options granted for the periods presented:

 

12


 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

(In millions except per share data)

    

2015

    

2014

 

 

(unaudited)

Total intrinsic value of stock options exercised

$

3.8 

 

$

7.8 

Weighted-average grant date fair value of stock options granted

$

5.54 

 

$

12.02 

 

As of March 31, 2015, there was $17.7 million of total unrecognized compensation expense related to option grants, which is expected to be recognized over a weighted-average remaining period of 2.7 years.

(b)  Restricted Stock Units and Performance-based Restricted Stock Units

The fair value of RSUs is equal to the closing market price of the Company’s common stock on the date of grant. Stock-based compensation expense is amortized on a straight-line basis over the requisite service period, which is generally four years.

In February 2015, the Company granted PSUs to certain employees, which contain both service and performance requirements. The performance condition will be evaluated quarterly to determine the probable level of achievement within specified performance bands as defined in the PSU agreement. The number of PSUs that will ultimately vest will range from 0% to 170% of the target amount depending on the actual level of achievement within the specified performance bands for the year ended December 31, 2015. These PSUs will vest annually over three years. Stock-based compensation expense related to PSUs is amortized over a graded vesting period of three years. Changes in the quarterly estimate of probable achievement impact the total amount of stock-based compensation expense on a cumulative basis.

The following table shows a summary of RSU and PSU activity for the three months ended March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs

 

 

PSUs

 

 

 

 

Weighted-

 

 

 

 

Weighted-

 

 

 

 

Average

 

 

 

 

Average

 

 

 

 

Grant Date

 

 

 

 

Grant Date

(unaudited)

    

Shares

    

Fair Value

 

 

Shares

    

Fair Value

Unvested as of December 31, 2014

 

497,020 

 

$

19.40 

 

 

 —

 

$

 —

Granted

 

183,500 

 

 

15.98 

 

 

236,340 

(1)

 

15.71 

Vested

 

(26,506)

 

 

18.70 

 

 

 —

 

 

 —

Forfeited

 

(47,375)

 

 

18.70 

 

 

 —

 

 

 —

Unvested as of March 31, 2015

 

606,639 

 

$

18.45 

 

 

236,340 

 

$

15.71 

 

(1) Estimated shares are based on the expectation of achievement within the specified performance bands as of March 31, 2015.

The following table presents the total fair value and the aggregate intrinsic value of RSUs and PSUs vested, and the weighted-average grant date fair value of RSUs and PSUs granted for the periods presented:

 

13


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs

 

 

PSUs

 

 

Three Months Ended  March 31,

 

 

Three Months Ended  March 31,

(In millions except per share data)

    

2015

    

2014

 

 

2015

    

2014

 

 

(unaudited)

 

 

(unaudited)

Total fair value of shares vested

$

0.4 

 

$

 —

 

$

 —

 

$

 —

Total aggregate intrinsic value of shares vested

$

0.4 

 

$

 —

 

$

 —

 

$

 —

Weighted-average grant date fair value of shares granted

$

15.98 

 

$

26.52 

 

$

15.71 

 

$

 —

 

As of March 31, 2015, there was $9.0 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average remaining period of 3.0 years. Based on estimated level of achievement as of March 31, 2015, there was $3.4 million of total unrecognized compensation expense related to PSUs, which is expected to be recognized over a weighted-average remaining period of 1.9 years.

(10Earnings Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period.  Diluted EPS is computed using the weighted-average number of shares of common stock outstanding during the period and, when dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental shares issuable upon the assumed exercise of stock options, preferred stock, unvested RSUs and PSUs, and contingent consideration related to the Acquisition. For the three months ended March 31, 2015, shares of the PSUs are excluded in the diluted EPS calculation as the performance conditions were not met by the end of this period. 

The following table presents the calculation of earnings (loss) per share (in thousands, except per share data):

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

    

2015

 

2014

 

(unaudited)

Basic earnings (loss) per share:

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

(1,263)

 

$

352 

Denominator:

 

 

 

 

 

 

Weighted-average common shares

 

 

38,804 

 

 

37,799 

Basic earnings (loss) per share

 

$

(0.03)

 

$

0.01 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

(1,263)

 

$

352 

Denominator:

 

 

 

 

 

 

Weighted-average common shares

 

 

38,804 

 

 

37,799 

Weighted-average dilutive stock options and RSUs

 

 

 —

 

 

3,832 

Contingent stock due to acquisition

 

 

 —

 

 

79 

Weighted-average common shares and equivalents

 

 

38,804 

 

 

41,710 

Diluted earnings (loss) per share

 

$

(0.03)

 

$

0.01 

 

14


 

The following securities have been excluded from the calculation of diluted earnings (loss) per share of common stock for the periods presented because their effect would have been anti-dilutive (in thousands):

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

2015

    

2014

 

 

(unaudited)

Stock options outstanding

 

 

6,187 

 

 

1,875 

Unvested RSUs

 

 

607 

 

 

38 

Contingent stock due to acquisition

 

 

44 

 

 

 —

Total common stock equivalents

 

6,838 

 

1,913 

 

 

 

 

(11Commitments and Contingencies

(a)  Operating Leases

Pursuant to the terms of the lease agreement for the Company’s corporate headquarters, the Company took possession of additional office space in the same building in February 2015. The term of the lease for the additional space will expire in 2024.

 (b)  Litigation

The Company is involved from time to time in various legal proceedings in the normal course of business that individually or in the aggregate would not have a material effect on its results of operations or financial position. On January 6, 2015, the Company, John Kunze and Ryno Blignaut were sued in a putative class action lawsuit, captioned Alexander Liu v. Xoom Corporation, et al., Case No. CGC-15-543531, filed in San Francisco Superior Court by purported stockholders of the Company, in connection with its January 5, 2015 announcement that the Company was the victim of criminal fraud resulting in the transfer of $30.8 million in corporate cash to overseas accounts. On February 6, 2015, the lawsuit was removed to federal court in the Northern District of California, and assigned the case number 5:15-cv-00602-LHK. On March 11, 2015, the Company, John Kunze and Ryno Blignaut were sued in a putative class action lawsuit captioned Patrick Andrew Barrett v. Xoom Corp., et al., Case No. CGC-15-544655, also filed in San Francisco Superior Court by purported stockholders of the Company. On March 20, 2015, the lawsuit was removed to federal court in the Northern District of California, and assigned the case number 5:15-cv-01319. Plaintiffs in the Liu action have moved to remand the case to state court, and the Defendants have opposed that motion, which is pending.  The Court has ordered that its ruling on the remand motion will apply as well to the Barrett action. 

The Liu and Barrett lawsuits allege that the Company and Messrs. Kunze and Blignaut violated federal securities laws by misrepresenting and/or omitting information in the offering materials distributed in connection with the Company’s February 2013 initial public offering.  The lawsuits seek unspecified damages and attorneys’ fees and costs.  Although the ultimate outcome of litigation cannot be predicted with certainty, the Company believes that these lawsuits are without merit and intends to defend against the actions vigorously. The Company believes that any liability resulting from this lawsuit will not have a material adverse effect on its business, financial condition or results of operations.   

 

 

15


 

 

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

The following discussion and analysis is intended to provide greater details of our results of operations and financial condition and should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this document.  Certain statements in this Quarterly Report constitute forward-looking statements and as such, involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include any expectation of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements related to our ability to forecast demand for our services; statements related to competition; factors that may affect our operating results and business; statements related to security of our product offerings and customer information; statements related to enhancements of existing services and our growth; our anticipated cash needs and our estimates regarding our operating and capital requirements and our needs for additional financing; our disclosure controls and procedures; statements related to intellectual property; statements related to legal proceedings; statements related to recruiting and retaining employees; statements related to future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends; statements related to our and our disbursement partners’ ability to comply with current and future regulations; statements related to our stock; and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.  These statements are often identified by the use of words such as “anticipate”, “believe”, “consider”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan” or “will” and similar expressions or variations.   Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.  Factors that could cause or contribute to such differences include, but are not limited to those discussed in the section titled “Risk Factors” included in Item 1A of Part II of this Quarterly Report on Form 10-Q, and the risks discussed in our Annual Report and other filings with the SEC. We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q.  These statements are based on the beliefs and assumptions of our management based on information currently available to management.  The forward-looking statements included in this Quarterly Report are made only as of the date of this Quarterly Report.  All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

Overview

We are a leader in the digital consumer-to-consumer international money transfer industry. Our customers use Xoom to send money to and pay bills for family and friends around the world. We offer money transfer services from the United States to 32 countries and our cross-border bill payment services from the United States to five countries. Since January 1, 2010, our customers have used Xoom to send $19.9 billion, including $1.7 billion for the three months ended March 31, 2015. We believe we create significant value for our customers by providing a convenient, fast and cost-effective solution for international money transfers and cross-border bill payments.

Our ability to provide our customers with convenient, fast and cost-effective services is built on our proprietary technology which, combined with our risk management capabilities and global disbursement network, constitute our operating platform. Our technology enables easy-to-use online and mobile sender interfaces, effective risk management and seamless integration with our disbursement partners’ systems.

16


 

We believe our business model is characterized by predictable and recurring revenue from our large and growing base of new and repeat customers.  Revenue from our repeat customers continued to be over 90% of our total revenue for the three months ended March 31, 2015. During the three months ended March 31, 2015, we continued to experience growth as compared to the same period in 2014 as our customer base expanded.  Revenue increased to $44.4 million for the three months ended March 31, 2015 from $35.9 million for the three months ended March 31, 2014.

We launched our mobile strategy in November 2011 and our mobile application in mid-2013. Our mobile application, the “Xoom App,” is simple to use and allows customers to sign up and send money and track the status of their transactions from their mobile devices. Existing customers are able to send money in seconds with “one tap and one swipe.” We will continue to optimize our services for mobile devices to capitalize on the continued and growing trend in mobile usage.

During the three months ended March 31, 2015,  60% of our transactions were sent via mobile devices as compared to 45% in the same period in the prior year. During the three months ended March 31, 2015, 60% of our active customers sent a transaction from a mobile device, as compared to 50% in the same period in the prior year. During the three months ended March 31, 2015, more than $0.7 billion of our gross sending volume was sent from mobile devices which represented growth of approximately 47% compared to the same period in the prior year. 

During the three months ended March 31, 2015, we launched the following new initiatives to enhance our customer experience and expand our reach in new and existing markets:  

·

Expansion into China where transactions are processed through the UnionPay MoneyExpress service,  via Moneyswap, which enables Xoom customers to instantly transfer funds during bank processing hours to some of the most recognizable banking brands in China, including Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China.

·

Expansion into Pakistan through our partnership with Habib Bank Limited, or HBL, one of the largest banks in Pakistan, which enables Xoom customers to instantly deposit funds into HBL accounts and into accounts at most other banks in Pakistan,  including MCB Bank Limited, Allied Bank, Bank Alfalah, United Bank Limited and Standard Chartered Bank,  24 hours a day, seven days a week, 365 days a year, including bank holidays.

·

Expanded services in Vietnam through our partnership with Sacombank, including nationwide home delivery, cash pickup services at over 400 Sacombank branches and instant bank deposit services to Sacombank and other bank accounts in Vietnam.

·

Instant bank deposit service to all peso and U.S. dollar denominated accounts at LANDBANK, the fourth largest bank in the Philippines.

·

Instant bank deposit service to Banco Agrícola,  the largest bank in El Salvador, as well as a cash pickup service at more than 80 Banco Agricola locations throughout El Salvador.

17


 

Key Metrics

In addition to the line items in our financial statements, we regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, make strategic business decisions, and assess our marketing program efficacy, market share trends and working capital needs. 

As more fully described in our Annual Report, management views the number of gross additional customers as a key driver of business growth and revenue, and believes that providing the following information, including the number of gross additional customers in a given period, is useful for investors to understand the underlying trends in our business.  The following table presents our key operating and financial metrics for the periods presented (unaudited):

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

    

2015

    

2014

Gross Sending Volume (in thousands)

 

$

1,671,447 

 

$

1,576,691 

Transactions

 

 

3,552,277 

 

 

2,896,639 

Active Customers

 

 

1,343,885 

 

 

1,130,367 

Gross Additional Customers

 

 

156,119 

 

 

136,409 

Cost Per Acquisition of a Gross Additional Customer

 

$

50 

 

$

48 

Adjusted EBITDA (in thousands)

 

$

3,738 

 

$

3,523 

 

Gross Sending Volume.  We define gross sending volume, or GSV, as the total principal amount of funds sent by our customers in a given period for money transfers and bill payments, excluding our fees. A percentage of GSV does not ultimately get paid out to recipients due to a variety of reasons, most notably customer cancellations, our risk management decisions and customer error. In the periods presented, this percentage has ranged from 2.60% to 3.42%. Our GSV increased 6% for the three months ended March 31, 2015, compared to the same period in the prior year.  The amount sent by some of our customers depends in large part on the value of the local currency relative to the U.S. dollar.

Transactions.  This represents the total number of transactions sent by our customers in a given period.  A small percentage of transactions do not ultimately get paid out to recipients due to a variety of reasons, most notably customer cancellations, our risk management decisions and customer error.  Our transactions increased 23% for the three months ended March 31, 2015, as compared to the same period in the prior year. The increase in GSV in the three months ended March 31, 2015 was lower than the increase in the number of transactions due to a higher percentage of transactions to countries with a lower average transaction amount.

Active Customers.  We define active customers as the number of customers who have sent at least one transaction during a trailing twelve month period.  A gross additional customer with one transaction during a trailing twelve month period would also be included as an active customer in the same period.  Our active customers increased 19% for the three months ended March 31, 2015 compared to the same period in the prior year.

Gross Additional Customers. We define gross additional customers as customers who, during a given period, have sent their first transaction in a trailing twelve month period. As more fully described in our Annual Report, gross additional customers include both new customers and win-back customers. A gross additional customer can only be counted as a gross additional customer once in twelve months. Our gross additional customer growth increased 14% for the three months ended March 31, 2015 compared to the same period in the prior year.  

18


 

Cost Per Acquisition of a Gross Additional Customer. We calculate cost per acquisition of a gross additional customer in a reporting period as direct marketing cost, a portion of which is reflected in our cost of revenue, divided by gross additional customers added in a given period. Our direct marketing cost does not include certain indirect marketing costs that are included in our marketing expense line item in our consolidated statements of operations. Examples of our indirect marketing costs include personnel-related costs, including stock-based compensation and creative production costs.

Adjusted EBITDA.  Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss) adjusted for (benefit) provision for income taxes, interest expense, interest income, amortization of acquired intangible asset, depreciation and other amortization expense, and stock-based compensation. Depreciation and other amortization expense includes impairment charges related to long-lived assets during the first quarter of 2015. We believe that adjusted EBITDA provides useful information to investors in understanding and evaluating our business in the same manner as our management and board of directors. Non-GAAP financial measures should be considered supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP. The following table presents a reconciliation of adjusted EBITDA for each of the periods presented (unaudited):

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

    

2015

    

2014

 

 

(in thousands)

Reconciliation of Adjusted EBITDA:

 

 

 

 

 

 

Net income (loss)

 

$

(1,263)

 

$

352 

Provision for income taxes

 

 

28 

 

 

12 

Interest expense

 

 

369 

 

 

328 

Interest income

 

 

(76)

 

 

(76)

Amortization of acquired intangible

 

 

204 

 

 

204 

Depreciation and other amortization expense

 

 

1,241 

 

 

779 

Stock-based compensation

 

 

3,235 

 

 

1,924 

Adjusted EBITDA

 

$

3,738 

 

$

3,523 

 

Basis of Presentation

Revenue.  We generate revenue from transaction fees charged to customers, and foreign exchange spreads on transactions where the payout currency is other than U.S. dollars. Our revenue is derived from each transaction and may vary based on the size of the transaction, the funding method used, the currency to ultimately be disbursed and the country to which the funds are transferred. Revenue is recognized when we accept the transaction for processing, net of cancellations and refunds. Revenue growth will depend on our ability to retain existing active customers and grow our active customer base by attracting more gross additional customers.

Cost of Revenue.  Our cost of revenue includes fees paid to disbursement partners for paying funds to the recipient or for paying bills to utility providers, provision for transaction losses, fees paid to payment processors for funding transactions and the costs of certain promotional activities to acquire gross additional customers, including referees as described below under “—Marketing Expense.” We expect our cost of revenue to increase on an absolute basis for the foreseeable future as we continue to grow our business.

Marketing Expense.  Our marketing expense is comprised of business development, offline, online and promotional advertising costs to acquire and retain customers, employee compensation and related costs to support the marketing process and allocated facilities and other supporting overhead costs. We have a Refer-

19


 

A-Friend incentive program where the referrer receives either a cash-type or non-cash award and the referee receives a non-cash award. Cash-type awards are considered to be cash-type because the referrer may use them as cash and they are classified as marketing expense. The amount related to the referee is classified as cost of revenue for non-cash awards. Awards provided to the referrer are recorded in marketing expense as these payments are a reward for bringing a new customer to Xoom. We anticipate that our marketing expense will continue to increase and will vary from period to period due to the timing and nature of such programs.

Technology and Development Expense.  Our technology and development expense consists of employee compensation and related costs for our engineers and developers based in the United States and Guatemala, costs associated with professional services and consulting, development of new technologies, enhancements of existing technologies, amortization of capitalized internally-developed software and the intangible asset (developed technology) acquired in the acquisition of BlueKite, LTD, or the Acquisition,  and allocated facilities and other supporting overhead costs. Internally-developed software costs, which primarily relate to the development of new services such as Xoom Bill Pay and enhancements to products such as the Xoom App, are a combination of internal compensation costs of engineering time and costs of outside consultants. We intend to continue to invest in technology and development efforts to further improve our customer experience and to continue expanding our operating platform. As a result, we expect technology and development expense to increase on an absolute basis for the foreseeable future.

Customer Service and Operations Expense.  Our customer service and operations expense consists of costs incurred for outsourced support centers, employee compensation for our employees who support customer service calls, costs incurred for fraud detection, compliance operations, maintenance costs related to our outsourced support centers and allocated facilities and other supporting overhead costs. We expect customer service and operations expense to increase on an absolute basis for the foreseeable future to support the anticipated growth of our business.

General and Administrative Expense.  Our general and administrative expense consists of employee compensation and related costs for our executives, finance, legal, compliance policy, human resources and other administrative employees, outside consulting, legal and accounting services and facilities and other supporting overhead costs not allocated to other departments. We expect to incur additional expenses for the foreseeable future to support our continuing growth.

Interest Expense.  Interest expense represents interest incurred in connection with our line of credit and amortization of commitment and arrangement fees.

Interest Income.  Interest income represents interest earned on our cash and cash equivalents and short-term investments.

Other Income (Expense).    Other income (expense) consists of gains and/or losses on foreign currency balances due to fluctuations in exchange rates between the initiation of a transaction and the settlement of the transaction (usually no longer than 24 hours).

(Benefit) Provision for Income Taxes.    (Benefit) provision for income taxes consists of state income taxes in the United States and foreign taxes.  We have not been required to pay U.S. federal income taxes to date because of our current and accumulated net operating losses which totaled $94.9 million as of December 31, 2014.  Since inception, we have only been required to pay minimal state income taxes. As of March 31, 2015, we have a full valuation allowance against our deferred tax assets. We continue to assess the need for a valuation allowance on the deferred tax assets by evaluating all positive and negative evidence. Based on historical and projected operating performance, we believe that it is more likely than not that the deferred tax assets will not be realized in subsequent quarters. We may fully release the deferred tax valuation allowance in a future period to the extent we expect that our operations will generate sufficient taxable income in future periods. Significant judgment is required in making this assessment, and it is very difficult to predict when our assessment may conclude that the deferred tax assets are realizable. Any adjustment to the deferred tax asset

20


 

valuation allowance will be recorded in the income statement during the period in which the adjustment is determined to be required.

For the three months ended March 31, 2015, tax expense was $28,000, which consisted of $11,000 of U.S. state income taxes and $17,000 of foreign income taxes. For the three months ended March 31, 2014, tax expense was $12,000 which consisted of $7,000 of U.S. state income taxes and $5,000 of foreign income taxes.    

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these 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 that the assumptions and estimates associated with income taxes and stock-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Apart from the addition to the stock-based compensation accounting policy disclosed in the notes to consolidated financial statements, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report.

Recently Issued Accounting Guidance

On May 28, 2014, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the impact of this accounting guidance on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts.  This new accounting guidance is effective on January 1, 2016. We are evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.

21


 

Results of Operations

The following table sets forth our results of operations in dollars for the periods presented.  The period-to-period comparison of financial results is not necessarily indicative of future results.

 

 

 

 

 

 

 

 

 

   

Three Months Ended  March 31,

 

 

2015

    

2014

 

 

(unaudited)

 

 

(in thousands)

Consolidated Statements of Operations Data:

 

 

 

 

 

 

Revenue

 

$

44,418 

 

$

35,938 

Cost of revenue

 

 

12,033 

 

 

9,578 

Gross profit

 

 

32,385 

 

 

26,360 

Marketing

 

 

9,938 

 

 

8,782 

Technology and development

 

 

11,082 

 

 

7,850 

Customer service and operations

 

 

4,609 

 

 

3,974 

General and administrative

 

 

7,586 

 

 

5,158 

Total operating expense

 

 

33,215 

 

 

25,764 

Income (loss) from operations

 

 

(830)

 

 

596 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(369)

 

 

(328)

Interest income

 

 

76 

 

 

76 

Other income (expense)

 

 

(112)

 

 

20 

Income (loss) before income taxes

 

 

(1,235)

 

 

364 

Provision for income taxes

 

 

28 

 

 

12 

Net income (loss)

 

$

(1,263)

 

$

352 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

 

 

    

2015

    

2014

    

% Change

 

 

(dollars in thousands)

 

 

(unaudited)

Revenue

 

$

44,418 

 

$

35,938 

 

24 

%

 

Revenues for the three months ended March 31, 2015 increased $8.5 million, or 24%, compared to the three months ended March 31, 2014. The increase was primarily due to a  19% increase in active customers, which included 156,119 gross additional customers added during the three months ended March 31, 2015. 

Cost of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

 

 

    

2015

    

2014

    

% Change

 

 

(dollars in thousands)

 

 

(unaudited)

Cost of revenue

 

$

12,033 

 

$

9,578 

 

26 

%

Percentage of revenue

 

 

27 

 

27 

%

 

 

 

Cost of revenue for the three months ended March 31, 2015 increased $2.5 million, or 26%, compared to the three months ended March 31, 2014. The increase in cost of revenue was driven by a $2.0 million increase

22


 

in processing and disbursement costs to support the 23% increase in transactions, a $0.3 million increase in promotional advertising, which was classified as cost of revenue in the consolidated statements of operations and a $0.2 million increase in transaction losses due to the increase in our GSV. As a percentage of revenue, promotional advertising expense classified as cost of revenue fluctuates from period to period due to the nature and timing of marketing programs.

Marketing Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

 

 

    

2015

    

2014

    

% Change

 

 

(dollars in thousands)

 

 

(unaudited)

Marketing

 

$

9,938 

 

$

8,782 

 

13 

%

Percentage of revenue

 

 

22 

 

24 

 

 

 

Marketing expense for the three months ended March 31, 2015 increased $1.2 million, or 13%, compared to the three months ended March 31, 2014.  The increase was due to an additional $1.0 million in advertising spend, primarily in television advertising, to drive customer acquisition, $0.1 million in personnel-related costs, including stock-based compensation, and $0.1 million in marketing operational spend. Marketing expense as a percentage of revenue fluctuates from period to period due to the nature and timing of marketing programs, such as whether promotional advertising is being implemented.

Technology and Development Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

 

 

    

2015

    

2014

    

% Change

 

 

(dollars in thousands)

 

 

(unaudited)

Technology and development

 

$

11,082 

 

$

7,850 

 

41 

%

Percentage of revenue

 

 

25 

 

22 

 

 

 

Technology and development expense for the three months ended March 31, 2015 increased $3.2 million, or 41%, compared to the three months ended March 31, 2014. The increase was primarily the result of an increase in personnel-related costs of $1.9 million, including stock-based compensation, due to an increase in the U.S. employee headcount to expand and improve our service, and an increase in personnel-related costs of $0.3 million related to our development center in Guatemala. In addition,  there was an increase of $0.4 million in information technology and infrastructure costs, including increased spend on web hosting services, and an increase of $0.4 million in asset depreciation and amortization. The remaining $0.2 million was primarily due to an increase in operational spend, including increased travel spend.

Customer Service and Operations Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

 

 

    

2015

    

2014

    

% Change

 

 

(dollars in thousands)

 

 

(unaudited)

Customer service and operations

 

$

4,609 

 

$

3,974 

 

16 

%

Percentage of revenue

 

 

10 

%

 

11 

%

 

 

 

23


 

Customer service and operations expense for the three months ended March 31, 2015 increased $0.6 million, or 16%, compared to the three months ended March 31, 2014. The increase was primarily due to an increase in the volume of transactions we processed, resulting in an increase in costs of $0.4 million associated with our outsourced support centers, including consulting and other professional services, and an increase of $0.2 million in personnel-related costs including stock-based compensation. Various tasks are performed at our outsourced support centers, including customer support, customer verifications and collections.

General and Administrative Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

 

 

 

    

2015

    

2014

    

% Change

 

 

(dollars in thousands)

 

 

(unaudited)

General and administrative

 

$

7,586 

 

$

5,158 

 

47 

%

Percentage of revenue

 

 

17 

%

 

14 

%

 

 

 

General and administrative expense for the three months ended March 31, 2015 increased $2.4 million, or 47%, compared to the three months ended March 31, 2014. The increase was primarily the result of an increase of $1.3 million in legal, consulting and other professional services, in part due to the business e-mail compromise fraud loss, which is described more fully in our Annual Report. There was also an increase in personnel-related costs of $1.1 million, including stock-based compensation, due to an increase in headcount to support our overall growth.

Liquidity and Capital Resources

Since inception, we have financed our operations and capital expenditures primarily through the sale of preferred and common stock and borrowings and, to a lesser extent, cash flows generated by our operations and exercise of stock options to purchase common stock.  Our principal uses of cash are funding our operations and capital expenditures.

As of March 31, 2015, we had cash, cash equivalents, disbursement prefunding and short-term investments of $240.5 million, which consisted of cash, money market funds, U.S. government securities, commercial paper, certificates of deposit, corporate bonds and prefunded balances with some of our disbursement partners.  All of our cash equivalents and short-term investments are held at U.S. financial institutions.

If a period ends on a weekend or holiday, our cash, cash equivalents and disbursement prefunding is generally higher than if the period ends on a business day, because we will then prefund our disbursement partners for the entire weekend or through the holiday instead of for one business day. For example, as a result of a three-day banking holiday in India following the end of the first quarter of 2015, we utilized the line of credit to prefund disbursement partners for the holiday period.

We believe that our existing cash and cash equivalents and availability under our line of credit will be sufficient to meet our working capital needs and planned capital expenditures for at least the next 12 months. 

Our Indebtedness

Under our credit agreement with Silicon Valley Bank, or SVB, we are required to repay the outstanding principal balance under our line of credit in full at least once every eight business days. The interest rate is the greater of prime plus 1.00%, the federal funds effective rate plus 1.50%, or 4.25%, and we pay a fee of 0.50% per annum for the daily unused portion of the line of credit. 

24


 

We have $15.0 million reserved under a standby letter of credit which satisfies the additional collateral requirement to maintain our India operations and a $3.9 million letter of credit issued as a security deposit for our corporate headquarters’ office lease in January 2014. 

At March 31, 2015, we had $116.1 million available under our $150.0 million line of credit, reflecting $15.0 million outstanding under the line of credit and $18.9 million reserved under the two letters of credit. We were in compliance with all of our debt covenants as of March 31, 2015.

Cash Flows

We typically prefund our disbursement partners on each business day which allows the funds to be made available to our disbursement partners seconds or minutes after a customer’s transaction is processed.  Our prefunding estimates are based on historical experiences with our customers and disbursement partners which vary depending on factors such as seasonality, the timing of bank holidays, weekends and paydays.  These estimates incorporate assumptions surrounding the timing in which the customer funds receivables are settled and the customer liabilities are paid out.  We often utilize our line of credit to satisfy short-term capital requirements over weekends or during bank holiday periods.  We typically pay down the outstanding amount on the line of credit the first business day after the weekend or bank holiday period.  Given these factors, we believe it is useful to review our cash flow in the aggregate to better understand the short-term flow of funds which can vary greatly depending on the timing of a weekend or bank holiday.

The following table summarizes our cash flows for the periods presented (in thousands):

 

 

 

 

 

 

 

 

 

 

Three Months Ended  March 31,

 

    

2015

    

2014

 

 

(unaudited)

Net cash provided by operating activities

 

$

44,236 

 

$

1,284 

Net cash provided by (used in) investing activities

 

 

16,077 

 

 

(15,433)

Net cash provided by (used in) financing activities

 

 

(11,845)

 

 

1,180 

 

Operating Activities

Cash provided by operating activities of $44.2 million for the three months ended March 31, 2015 was attributable to changes in our operating assets and liabilities of $40.6 million and $4.9 million in adjustments for non-cash items, partially offset by $1.3 million of our net loss. Adjustments for non-cash items primarily consisted of stock-based compensation, depreciation and amortization (including acquired intangible) expense and accretion of net premiums on short-term investments. The cash resulting from changes in our working capital primarily consisted of a decrease in disbursement prefunding of $40.8 million relating to the timing of funding our partners and an increase in customer liabilities of $5.5 million related to money that had not yet been disbursed, partially offset by an increase in customer funds receivable of $7.2 million relating to the timing of transactions in process.

Cash provided by operating activities of $1.3 million for the three months ended March 31, 2014 was attributable to $0.4 million of our net income and $3.3 million in adjustments for non-cash items, partially offset by changes in our operating assets and liabilities of $2.4 million. Adjustments for non-cash items primarily consisted of stock-based compensation, depreciation and amortization (including acquired intangible) expense and accretion of premiums on short-term investments. The use of cash resulting from changes in our working capital primarily consisted of an increase in disbursement prefunding of $4.8 million relating to the timing of funding our partners, an increase in customer funds receivable of $13.0 million relating to the timing of transactions in process, partially offset by an increase in customer liabilities of $14.8 million related to money that had not yet been disbursed. The significant increase in customer funds receivable and customer liabilities was due to the quarter ending on a bank holiday in India.

25


 

Investing Activities

Our primary investing activities generally consist of purchases, sales and maturities of short-term investments, purchases of property, equipment and software and changes in our restricted cash.  Purchases of property, equipment and software may vary from period to period due to the timing of the expansion of our operations, website and internal-use software development. We expect to continue to invest in property, equipment and development of software during 2015 and thereafter.

Cash provided by investing activities was $16.1 million for the three months ended March 31, 2015 primarily due to $17.2 million of net proceeds from the net sale and maturities of short-term investments. We used $1.1 million for purchases of property, equipment and development of software in the three months ended March 31, 2015.  

Cash used in investing activities was $15.4 million for the three months ended March 31, 2014, including a cash outflow of $8.9 million for the acquisition of BlueKite, LTD. In addition, we used $2.5 million in the three months ended March 31, 2014 in net purchases of short-term investments. We used $0.9 million for purchases of property, equipment and development of software in the three months ended March 31, 2014. We also had an increase in our restricted cash of $3.2 million during the three months ended March 31, 2014, due to higher collateral requirements of our existing payment processors as a result of an increase in our processing limits.

Financing Activities

Our financing activities primarily consist of net proceeds from the exercise of common stock options and repayments and borrowings under our line of credit.

Cash used in financing activities was $11.8 million for the three months ended March 31, 2015 primarily due to $13.0 million of net repayments under our line of credit, partially offset by $1.3 million of proceeds from the exercise of options to purchase common stock.  

Cash provided by financing activities was $1.2 million for the three months ended March 31, 2014 primarily due to the proceeds from exercise of options to purchase common stock.

Off-Balance Sheet Arrangements

As described in “—Our Indebtedness” above, SVB issued a standby letter of credit for $15.0 million which satisfies the additional collateral requirement to maintain our India operations.  SVB issued a $3.9 million letter of credit in January 2014 as a security deposit for our office lease. As of March 31, 2015 and December 31, 2014, we had $18.9 million reserved under our letters of credit.

Contractual Obligations and Commitments

The following table describes our contractual obligations as of March 31, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments Due by Period

 

 

    

 

Less Than

 

1-3

 

4-5

 

    

 

    

Total

    

1 Year

    

Years

    

Years

    

Thereafter

 

 

(unaudited)

Operating lease obligations

 

$

45,854 

 

$

5,513 

 

$

9,827 

 

$

9,334 

 

$

21,180 

 

The contractual obligations in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.  The operating lease obligations, presented in the above table, have not been reduced by minimum sublease rentals of $2.1 million in the future under our existing non-cancelable sublease agreements.

26


 

Pursuant to the terms of the lease agreement for our corporate headquarters, we took possession of additional office space in the same building in February 2015 and plan to make certain leasehold improvements. 

We do not have any material capital lease obligations and all of our property, equipment and software have been purchased with cash. We have no material long-term purchase obligations outstanding with any vendors or third parties.

For a description of our line of credit, see “—Our Indebtedness” above.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Fluctuation Risk

Our cash and cash equivalents and short-term investments consist of cash, money market funds, U.S. government securities, commercial paper, certificates of deposit and corporate bonds.

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash and cash equivalents and short-term investments have a relatively short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes. We determined that the nominal difference in basis points from potentially investing our cash and cash equivalents and short-term investments in longer-term investments did not warrant a change in our investment strategy. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.

Any borrowings under our line of credit with SVB are at a variable rate and, as a result, increases in market interest rates would generally result in increased interest expense on our outstanding borrowings. We believe a hypothetical 10% increase in interest rates as of March 31, 2015 would have an immaterial impact on our investment portfolio, results of operations and cash flows.

Foreign Exchange Risk

We are exposed to foreign exchange risk as we offer our services in 32 countries and disburse our transactions in multiple foreign currencies. However, we believe that this risk is somewhat limited due to the fact that these transactions are usually disbursed in less than three business days. As of March 31, 2015 and December 31, 2014, we had not entered into any foreign exchange hedging contracts.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through fee increases.

 

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's Principal Executive Officer and the Company's Principal Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act as a result of the material weakness in the Company’s internal control over financial reporting previously

27


 

disclosed under Item 9A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, or Annual Report.

 

The material weakness in our internal control over financial reporting, which is described more fully in our Annual Report, continued to exist as of the end of the period covered by this Quarterly Report on Form 10-Q.  The Company is actively engaged in implementing the remediation efforts described in the Company’s Annual Report which are designed to address this material weakness, and subsequent to the filing of its Annual Report has specifically: (i) added additional qualified and experienced personnel to the finance organization and continued its efforts to further strengthen the organization; (ii) further strengthened its e-mail systems to enhance protections against systems attacks, which protections are being monitored to ensure effectiveness; and (iii) continued its process of augmenting and refining its written policies and procedures regarding bank transactions and payment functions. While progress has been made, additional time is needed to fully implement and demonstrate the effectiveness of the remediation efforts. The Company is committed to designing, implementing and operating effective controls, and management continues to regularly assess the progress and sufficiency of the ongoing initiatives and make adjustments as and when necessary.   

 

Notwithstanding the ineffectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q and the material weakness in our internal control over financial reporting that existed as of that date, management believes that (i) this Quarterly Report on Form 10-Q does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this Quarterly Report on Form 10-Q and (ii) the unaudited consolidated financial statements, and other financial information, included in this Quarterly Report on Form 10-Q fairly present in all material respects in accordance with GAAP our financial condition, results of operations and cash flows as of, and for, the dates and periods presented.

 

Changes in Internal Control over Financial Reporting

The Company is taking actions to remediate the material weakness related to its internal control over financial reporting, as described above. Other than the changes disclosed above, there were no material changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

Inherent Limitations of Internal Controls

The Company’s management, including the Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

28


 

 

 

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

On January 6, 2015, we, John Kunze and Ryno Blignaut were sued in a putative class action lawsuit, captioned Alexander Liu v. Xoom Corporation, et al., Case No. CGC-15-543531, filed in San Francisco Superior Court by purported stockholders of the Company, in connection with our January 5, 2015 announcement that we were the victim of criminal fraud resulting in the transfer of $30.8 million in corporate cash to overseas accounts. On February 6, 2015, the lawsuit was removed to federal court in the Northern District of California, and assigned the case number 5:15-cv-00602-LHK. On March 11, 2015, we, John Kunze and Ryno Blignaut were sued in a putative class action lawsuit captioned Patrick Andrew Barrett v. Xoom Corp., et al., Case No. CGC-15-544655, also filed in San Francisco Superior Court by purported stockholders of the Company. On March 20, 2015 the lawsuit was removed to federal court in the Northern District of California, and assigned the case number 5:15-cv-01319. Plaintiffs in the Liu action have moved to remand the case to state court, and the Defendants have opposed that motion, which is pending.  The Court has ordered that its ruling on the remand motion will apply as well to the Barrett action. 

 

The Liu and Barrett lawsuits allege that we and Messrs. Kunze and Blignaut violated federal securities laws by misrepresenting and/or omitting information in the offering materials distributed in connection with our February 2013 initial public offering.  The lawsuits seek unspecified damages and attorneys’ fees and costs.  Although the ultimate outcome of litigation cannot be predicted with certainty, we believe that these lawsuits are without merit and intend to defend against the actions vigorously. We believe that any liability resulting from these lawsuits will not have a material adverse effect on our business, financial condition or results of operations.

 

We are not a party to any other material pending legal proceedings. We may be involved from time to time in various other legal proceedings in the normal course of business.

ITEM 1A. Risk Factors

A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider such risks and uncertainties, together with the other information contained in this report, and in our other public filings. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings. In addition, if any of the following risks and uncertainties, or if any other risks and uncertainties, actually occurs, our business, financial condition or operating results could be harmed substantially, which could cause the market price of our stock to decline, perhaps significantly.

Risks Related to Our Business

We have incurred significant operating losses in the past, and we may not be able to sustain our recent revenue growth and generate sufficient revenue to maintain profitability.

Since our inception, we have incurred significant operating losses and, as of December 31, 2014, we had an accumulated deficit of $83.4 million. Although our revenue has grown rapidly, increasing from $32.8 million in 2010 to $159.1 million in 2014, we expect that our revenue growth rate will decline in the future as a result of a variety of factors, including the maturation of our business, increased competition and the gradual decline in the year-over-year percentage growth of gross additional customers. You should not rely on the revenue

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growth of any prior quarterly or annual period as an indication of our future performance. We also expect our costs to increase in future periods as we continue to expend substantial financial resources on, among other things:

·

business development and marketing;

·

technology infrastructure;

·

service and feature development and enhancement;

·

international expansion efforts; and

·

general administration, including legal and accounting expenses related to being a public company.

These investments may not result in increased revenue or growth in our business. If we are unable to maintain adequate revenue growth and to manage our expenses, we may incur significant losses in the future and may not be able to maintain profitability.

We have a limited operating history in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have a limited operating history in an evolving market that may not grow as expected. This limited operating history makes it difficult to effectively assess our future prospects. You should consider our business and prospects in light of the risks and difficulties we encounter in this evolving market. These risks and difficulties include our ability to, among other things:

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retain an active customer base and attract new customers;

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avoid interruptions or disruptions in our service or slower-than-expected website or mobile application load times;

·

improve the quality of the customer experience on our website and through mobile devices;

·

earn and preserve our customers’ trust with respect to the security of their transactions and personal financial information;

·

process, store and use personal customer data in compliance with governmental regulation and other legal obligations related to privacy;

·

comply with extensive existing and new laws and regulations;

·

effectively maintain a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased transactions globally;

·

successfully deploy new or enhanced features and services;

·

compete with other companies that are currently in, or may in the future enter, the digital money transfer or cross-border bill payment business;

·

hire, integrate and retain world-class talent; and

·

expand our business into new sending and receiving countries.

If the market for our services does not develop as we expect, or if we fail to address the needs of this market, our business will be harmed. We may not be able to successfully address these risks and challenges, including those described elsewhere in these risk factors. In the event that demand for our services weakens, including due to declines in customer transactions or the amount of money sent by customers per transaction, our business and results of operations may be harmed. Failure to adequately address these risks and challenges could harm our business and results of operations.

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If we fail to attract new customers or retain our existing customers, our business and revenue will be harmed.

We must continually attract new customers and retain existing customers in order to grow our business. Our ability to do so depends in large part on the success of our marketing efforts, our ability to enhance our services and our overall customer experience, to keep pace with changes in technology and our competitors and to expand our marketing partnerships and disbursement network. If we are unable to continue to adapt our services in ways that improve customer experience, meet our customers’ expectations and attract new customers, our revenue and business may be negatively impacted.

We believe that continuing to strengthen the XOOM brand is critical to achieving and maintaining widespread acceptance of our services, and will require a continued focus on active marketing efforts. We will continue to spend substantial amounts of money on, and devote substantial resources to, advertising, marketing and other efforts to create and maintain brand loyalty among users. Brand promotion activities may not yield increased revenues immediately or at all, and even if they do, any increased revenues may not offset the expenses incurred in building our brand. If we fail to promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, our business would be harmed.

We spent $32.7 million on marketing and $37.0 million on technology and development in 2014, and we expect to continue to spend significant amounts to acquire new customers and to keep existing customers loyal to our service. We cannot assure you that the revenue from customers we acquire will ultimately exceed the marketing and technology and development costs associated with acquiring these customers. We may not be able to acquire new customers in sufficient numbers to continue to grow our business due to macroeconomic factors including exchange rate fluctuations, increased competition, new regulations or other factors, or we may be required to incur significantly higher marketing expenses in order to acquire new customers. The effectiveness of our marketing depends in large part on our ability to access major online and offline channels, such as online social networks and television. If we were unable to advertise through any given major marketing channel or if a major advertising partner were to elect not to do business with us or if the costs to do such business were to materially increase, our ability to attract and retain customers would be harmed. In the event that we reduce our marketing in any given period, whether in response to higher marketing expenses or otherwise, we may suffer a decline in new customer growth in that period or subsequent periods. For example, we reduced our television advertising during the 2014 World Cup due to increased advertising costs during that time, which reduction may have impacted new customer growth in the third quarter of 2014.  If the level of usage by our existing customers declines or does not continue as expected, we may suffer a decline in customer growth or revenue. In addition, our marketing efforts may fail to attract or retain customers. As we continue to work with endorsers to promote our business, negative publicity about our endorsers or a failure to enter into cost-effective endorsement arrangements could harm our reputation. A decrease in the level of usage or customer growth would harm our business and revenue.

Inaccurate forecasts of our customer growth could result in our expenses exceeding our revenue and ultimately harm our business.

Our customer growth forecast is a key driver in our business plan which affects our ability to accurately forecast revenue. If we overestimate customer growth, our revenue will not grow as we forecast, our costs and expenses may exceed our revenue and our profitability will be harmed. In addition, we plan our operating expenses, including marketing expenses, and our hiring needs in part on our forecasts of customer growth and future revenue. If customer growth or revenue for a particular period is lower than expected, we may not be able to proportionately reduce our operating expenses for that period, which would harm our results of operations for that period.

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If the revenue generated by customers differs significantly from our expectations, or if our customer acquisition costs or costs associated with servicing our customers increase, we may not be able to recover our customer acquisition costs or generate profits from this investment.

We spent $32.7 million on marketing in 2014 and expect to continue to spend significant amounts to acquire additional customers and keep existing customers loyal to our service, primarily through offline and online advertising and marketing promotions. Our decisions regarding investments in customer acquisition are based upon our analysis of the revenue we have historically generated per customer over the expected lifetime value of the customer. Our analysis of the revenue that we expect a customer to generate over his or her lifetime depends upon several estimates and assumptions, including whether a customer will send a second transaction, whether a customer will send multiple transactions in a month, the amount of money that a customer sends in a transaction and the predictability of a customer’s sending pattern. Our experience in markets in which we presently have low penetration rates may differ from our more established markets.

If our estimates and assumptions regarding the revenue we can generate from customers prove incorrect, or if the revenue generated from new customers differs significantly from that of prior customers, we may be unable to recover our customer acquisition costs or generate profits from our investment in acquiring new customers. Our marketing promotions, for example, are susceptible to abuse and may attract new customers who do not send subsequent transactions. Moreover, if our customer acquisition costs or our operating costs increase, as they historically have, the return on our investment may be lower than we anticipate irrespective of the revenue generated from new customers. If we cannot generate profits from this investment, we may need to alter our growth strategy, and our growth rate and results of operations may be harmed.

Our quarterly operating results fluctuate and may not predict our future performance accurately. Variability in our future performance could cause our stock price to fluctuate or decline.

Although we have grown quickly in recent years, our quarterly operating results will fluctuate in the future as a result of a variety of factors, many of which are beyond our control. These factors include:

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changes in our costs, including transaction fees charged by our payment processors and disbursement partners;

·

relative rates of customer acquisition;

·

the digital money transfer sending behavior of our customers, including seasonal patterns;

·

exchange rate fluctuations;

·

changes in our pricing policies or those of our competitors;

·

the introduction of new or enhanced services and related features by us or our competitors and any delays in the introduction of such services or market acceptance of these features and services;

·

the number of customer transaction refunds in a given period;

·

the number of fraudulent transactions in a given period;

·

the success rate of recovering failed or insufficient transaction funding;

·

bank holidays in foreign markets;

·

draw downs on our line of credit; and

·

other changes in our operating expenses, personnel and general economic conditions.

As a result, period-to-period comparisons of our operating results may not be meaningful, and you should not rely on them as an indication of our future performance.

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Our revenue and profitability could be harmed and fluctuate period-to-period due to changes in foreign exchange rates and other risks related to foreign exchange.

We have seen increased money transfer volume if the U.S. dollar strengthens against certain currencies. Conversely, we have seen decreased money transfer volume if the U.S. dollar weakens against certain currencies. In particular, we experience abrupt changes in money transfer volume to India when the U.S. dollar strengthens or weakens against the Indian Rupee. As foreign exchange rates vary, revenue and other results of operations may differ materially from expectations. We have in the past and may in the future experience significant volatility in foreign exchange rates which we believe has resulted in short-term increases in transactions and gross sending volume. We may not be able to predict how perceptions of foreign exchange rates will influence customer behavior. It is possible that customers may choose not to send transactions, or not to send as much money per transaction, after a period of particularly high sending activity. This uncertainty may make it more difficult to forecast revenue and results of operations.

We generate a substantial portion of our revenue from foreign exchange spreads on transactions where the payout currency is other than U.S. dollars. We typically purchase foreign currency each business day on an as-needed basis and evaluate and reset our foreign exchange spread as necessary. Our revenue may be reduced if we incorrectly set our foreign exchange spread. Our revenue also could be reduced in certain instances when customers initiate transactions in a foreign currency that we have not yet purchased. In such instances, if the foreign exchange rate changes materially between the time that a customer initiates a transaction and the time that we purchase the foreign currency, then our revenue could be reduced and our profitability harmed. Our revenue also could be reduced and our profitability harmed if the foreign exchange rate changes between when we purchase our foreign currency and when we sell the foreign currency. In that case, we may reduce our spread to remain competitive or keep our spread the same but lose transaction volume because our exchange rates are viewed as uncompetitive. In addition, foreign exchange rates could become regulated by either U.S. or foreign governments and such governments could implement new laws or regulations that limit our right to set foreign exchange spreads. We may not be able to comply with such regulations and such regulations could harm our business. For example, regulations implemented in 2014 by the Central Bank of Honduras, or the CBH, require that purchases of foreign exchange be made at the rates established by the CBH, thereby restricting our ability to generate revenue from foreign exchange spreads on money transfers sent to Honduras. We do not currently hedge our foreign currency exposure but may in the future.

Our business is subject to seasonal fluctuations which could result in volatility or have an adverse effect on the market price of our common stock.

Our business is subject to some degree of seasonality. Historically, we have experienced increased money transfer volume during holiday periods such as Mother’s Day and Christmas and decreased money transfer volume during the first and third quarters. As the growth of our business stabilizes, these seasonal fluctuations may become more evident as our current growth may mask seasonality to some degree. Seasonality may cause our working capital cash flow requirements to vary from quarter to quarter depending on the variability in the volume and timing of money transfers. These factors, among other things, make forecasting our future business results and needs more difficult and may adversely affect our ability to manage working capital and to predict financial results accurately, which could adversely affect the market price of our common stock.

Our cash balances are significantly affected by the day of the week on which a quarter ends. As a result, you should not rely on quarter-to-quarter comparisons of our cash balances.

Our cash balances may be affected by the day of the week on which each quarter ends which may affect our quarterly operating results. There is a delay between when we release funds for disbursement and when we receive customer funds from our payment processors. For example, if a quarter closes on a Saturday, our analysis of cash flow statements will show a decreased cash balance because we will have wired out funds on

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Friday which will be available for disbursement on Saturday, Sunday and Monday but we will not receive customer funds from our payment processors until Monday. In addition, due to time zone differences, an additional day’s worth of funding is required for disbursements to certain markets. As a result, period-to-period comparisons of our statements of cash flows may not be meaningful, and you should not rely on them as an indication of our liquidity or capital resources.

Failure to maintain sufficient capital could harm our business, financial condition and results of operations.

We have significant working capital requirements driven by:

·

the delay between when we release funds for disbursement and when we receive customer funds from our payment processors, exacerbated by time zone differences, bank holidays and weekends;

·

regulatory requirements;

·

collateral requirements imposed on us by our Indian regulator;

·

collateral requirements imposed on us by our payment processors; and

·

collateral requirements imposed on us by our disbursement partners.

This requires us to have access to significant amounts of capital, particularly at high volume sending times which we may not be able to forecast accurately. Our need to access capital will increase as our number of customers, transactions processed and gross sending volume increases. Increases in our transactions processed, even if short term in nature, can cause increases in our capital requirements. Our ability to meet our capital requirements could be affected by various factors, including any inability to collect funds from customers, inability to maintain fraud losses at acceptable rates, or incurring unanticipated losses. If we do not have sufficient capital, we may not be able to access or raise additional capital, pursue our growth strategy, fund key strategic initiatives, such as feature development, or continue to transfer money to recipients before we receive the funds from our customers, which we refer to as instant ACH transactions. In addition, we may not be able to meet new capital requirements introduced or required by our regulators and payment processors. We currently have a line of credit but there can be no assurance that the line of credit will be sufficient or that we will have access to additional capital. Failure to meet capital requirements or to have access to sufficient capital could harm our business, financial condition and results of operations.

We may not be able to secure additional financing in a timely manner, or at all, to meet our future capital needs, which could impair our ability to execute on our business plan.

We believe that our existing cash, cash equivalents and short-term investments, available borrowing under our existing line of credit and expected cash flow from operations will be sufficient to meet our operating and capital requirements for at least the next 12 months. However, we may require additional capital to respond to business opportunities (including increasing the number of customers acquired or during high volume sending periods), challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings for other reasons. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to secure additional debt or equity financing in a timely manner, or at all, which could require us to scale back our business plan and operations.

We have debt obligations that could restrict our operations.

As of March 31, 2015, we had $116.1 million available borrowing capacity under our $150 million line of credit, reflecting $15.0 million outstanding under the line of credit and $18.9 million reserved under two standby letters of credit, and we may incur additional indebtedness in the future.

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Our indebtedness could have adverse consequences on our business, including:

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limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industry;

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limiting our ability to borrow additional funds because our line of credit agreement contains financial and restrictive covenants that could significantly impact our ability to operate our business, and any failure to comply with them may result in an event of default, which could harm our business;

·

requiring us to dedicate a substantial portion of our cash flows from operations to repay our debt, thereby reducing funds available for working capital and other purposes;

·

increasing our vulnerability to changing economic, regulatory and industry conditions; and

·

limiting our ability to pay dividends to our stockholders.

Actions by regulators could interfere with our business or require us to limit or cease transactions, which could harm our business and results of operations.

Our transactions are regulated by state, federal and foreign governments. We, along with our payment processors and disbursement partners, are subject to an extensive set of legal and regulatory requirements, including licensing and reporting requirements in many U.S. states and in India. If federal, state or foreign regulators were to take actions that interfered with our ability to transfer money reliably, attempt to seize transaction funds, or limit or prohibit us, our payment processors or our disbursement partners from transferring money in certain countries, whether by imposing sanctions or otherwise, this could harm our business. For example, we have in the past ceased to do business in South Korea and South Africa as a result of regulatory scrutiny of our disbursement partner’s business in those countries. If we are prevented from sending transactions from or to particular states or jurisdictions that are significant to our business, it could harm our business and results of operations. For more information, see “— Regulatory Risks Faced by Our Business.”

We generate a substantial portion of our revenue from money transfers to India, the Philippines and Mexico, and the failure to continue to generate such revenue due to economic, political or regulatory factors beyond our control could harm our business, financial position and results of operations.

More than 70% of our total revenue in 2014 was derived from money transfers to India, the Philippines and Mexico. As a result, any limitations (regulatory or otherwise) on our ability to send money to these jurisdictions, or any economic or political instability, civil unrest, natural disasters or other similar circumstances localized in these countries could have a disproportionately harmful impact on our business, financial position and results of operations.

We face intense competition and, if we are unable to continue to compete effectively, our business, financial condition and results of operations would be harmed.

The markets in which we compete are highly competitive and are highly fragmented. Our largest competitors are The Western Union Company and MoneyGram Payment Systems, Inc. We also compete against smaller, country-specific competitors, banks and informal person-to-person money transfer service providers that evade regulation. In the future, new competitors, alliances, or consolidation among established companies may emerge, or competitors may leave the market, resulting in a changed competitive environment. Some of our competitors have longer operating histories, significantly greater financial, technical, marketing, customer service and other resources, greater name recognition, exclusive agreements or a larger base of customers in affiliated businesses than us. Our competitors may respond to new or emerging technologies, legal or regulatory changes and changes in customer requirements faster and more effectively than we do, and they could be perceived to effectively improve their products and services relative to ours. If we fail to successfully develop and timely introduce new or enhanced products and services or if we make substantial investments in

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an unsuccessful new product, service or infrastructure change, our business, prospects, financial condition and results of operations could be harmed. Our competitors may devote greater financial and other resources to acquire customers and to the development, promotion and sale of money transfer services, including greater marketing and advertising spend,  offering more attractive promotions to customers, or offering lower prices or better exchange rates and may negotiate exclusive deals which would reduce our opportunities. For example, our competitors have offered coupons for free money transfers and, in India, have offered better exchange rates than we have in certain periods and established no fee services. As a result, we have experienced attrition of rate-sensitive customers, particularly those customers who send money transfers to India. Competing services tied to established banks and other financial institutions may offer greater liquidity or superior foreign exchange rates and engender greater consumer confidence in the safety and efficacy of their services than ours. We expect competition to continue to intensify. This competition could result in increased pricing pressure, increased customer acquisition costs, reduced profit margins, increased sales and marketing expenses, a failure to increase our market share, or a loss of our market share, any of which could harm our business, results of operations and financial condition. There can be no assurance that growth in the digital money transfer market will continue and that competitors would not decrease our market share. We also cannot assure you that new competitors will not emerge with cross-border bill payment services that are as competitive as or more competitive than our service. If we are unable to compete effectively and continue to grow our business, our business, financial condition and results of operations could be harmed.

We may not realize the anticipated benefits of pricing adjustments, which could harm our business.

We have made, and may continue to make, periodic fee or foreign exchange pricing adjustments in response to competition, in order to better meet our customers’ needs, maximize market opportunity or strengthen our overall competitive position. The anticipated benefits of such pricing adjustments may not be realized within a certain time period or at all. If we fail to realize the anticipated benefits of pricing adjustments, our business, financial condition and results of operations could be harmed.

New or existing technologies could gain wide adoption and supplant our services and features and harm our revenue and financial results.

The introduction of services embodying new technologies could render our existing services and features obsolete or less attractive to customers. Other similar technologies exist or could be developed in the future, and our business could be harmed if such technologies are widely adopted. For example, widespread adoption and acceptance of new payment services and/or digital currencies by consumers, retailers, banks and national governments could threaten the relevance of our services and features to our customers and have a significant negative impact on the growth of the digital money transfer industry as a whole and our ability to be successful. In addition, new competitors may emerge in the cross-border bill payment services market that render our service less attractive to customers. We may not be able to successfully anticipate or adapt to changing technology or customer requirements on a timely basis, or at all. If we fail to keep up with technological changes or to convince our customers and potential customers of the value of our services even in light of new technologies, our business, results of operations and financial condition could be harmed.

Many people use mobile phones and other mobile devices to access information on the Internet and if we are not successful in developing effective mobile solutions, or those solutions are not widely adopted, our business could be harmed.

The number of people who access the Internet through mobile devices, including mobile phones and tablets has increased significantly in the past few years and is expected to continue to increase. We believe that mobile devices provide some customers with their first sustained Internet connection, which gives them access to our digital services. Mobile devices provide us an additional channel to offer our services to new and existing customers and offer a convenient solution to send money at any time, from any Internet-enabled location. Customers can currently access our services on a mobile device through our mobile site or our mobile

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application. If we are not able to drive customers to our mobile solutions or acquire new customers via our mobile solutions at a rate commensurate with our historical acquisition rates on personal computers, our ability to grow our business could be harmed.

Additionally, as new mobile devices and platforms are released, it is difficult to predict the problems we may encounter in developing features for these alternative devices and platforms, and we may need to devote significant resources to the creation, support and maintenance of such features. In addition, if we experience difficulties in the future in integrating our mobile application into mobile devices or if problems arise with our relationships with providers of mobile operating systems or mobile application download stores or if we face increased costs to distribute our mobile application, our future growth and results of operations could suffer. In addition, we may face different fraud risks from transactions sent from mobile devices than we do from personal computers. If we are unable to effectively anticipate and manage these fraud risks, our business and results of operations may be harmed.

We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our services are accessible.

The ability to access our services at all times and at acceptable load times is important for our business. We have previously experienced, and may experience in the future, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failures, capacity constraints due to an overwhelming number of customers accessing our service simultaneously, denial of service, fraud or security attacks or failure of third-party service providers on whom we rely to perform data hosting and related services. In some instances, we may not be able to identify the cause of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve the availability and reliability of our services, especially during peak usage times, as our services become more complex and as our customer traffic increases. If our service is unavailable when customers attempt to access it or it does not load as quickly as they expect, customers may believe that our services are unreliable or too slow. New or existing customers may seek other services and may not return to our services as often in the future, or at all. This would harm our ability to attract customers and could decrease the frequency with which they use our website and mobile solutions. We expect to continue to make significant investments to maintain and improve the availability and reliability of our services and to enable rapid releases of new features. To the extent we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and results of operations may be harmed.

We have implemented a disaster recovery program, which allows us to transition our websites and data to a backup center in the event of a catastrophe. Although this program has been tested and is functional, it does not yet provide a real-time back-up data center, so if our primary data center shuts down, there will be a period of time that our websites will remain shut down while the transition to the back-up data center takes place. Further, some of our systems are not fully redundant, and our disaster recovery program is not sufficient for all eventualities.

Sustained financial market illiquidity, or illiquidity at our financial institutions, could harm our business, financial condition and results of operations.

We face risks in the event of a sustained deterioration of financial market liquidity, as well as in the event of sustained deterioration in the liquidity or failure of financial institutions where we deposit money, including financial institutions that hold prefunding accounts for our disbursement partners. In particular:

·

We may be unable to access funds in our investment portfolio, deposit accounts and clearing accounts on a timely basis to pay transactions and receive settlement funds. Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs. Any delay or inability to pay transactions could harm our business, financial condition and results of operations;

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·

Our funds are held by banks in the United States and abroad. During high volume sending periods, a significant portion of our available cash may be held in an account or accounts outside of the United States. Our payment processors, the commercial banks that hold our funds, our disbursement partners and the financial institutions that hold prefunding accounts for our disbursement partners or our disbursement collateral could fail or experience sustained deterioration in liquidity. This could lead to our inability to move funds on a global and timely basis as required to pay transactions and receive settlement funds, loss of prefunded balances or a breach in our regulatory capital requirements if we are unable to recover our funds;

·

Our line of credit is one source of funding for our liquidity needs. If our lenders were unable or unwilling to fulfill their lending commitments to us, our short-term liquidity and ability to operate our business could be harmed;

·

We may be unable to borrow from financial institutions or engage in equity or debt financings on favorable terms, or at all, which could harm our ability to operate our business and pursue our growth strategy; and

·

We maintain cash at commercial banks in the United States in amounts in excess of the FDIC limit of $250,000. In the event of a failure at a commercial bank where we maintain our deposits, we may incur a loss to the extent such loss exceeds the insurance limitation.

If financial liquidity deteriorates, our business, financial condition and our ability to access capital may be harmed and we could become insolvent.

Weakness in economic conditions, in both the United States and global markets, could harm our business.

Our business relies in part on the overall strength of global economic conditions as well as international migration patterns. Money transfer transactions and international migration patterns are affected by, among other things, employment opportunities and overall economic conditions. Poor economic conditions may result in reduced job opportunities for our customers, or other countries that may become important to our business, which could harm our results of operations.

If general market conditions in the United States were to deteriorate, our business could be harmed. Any uncertainty with regard to U.S. financial stability could result in credit and financial market disruptions, adversely affect our ability to access capital markets on favorable terms and harm our business and our financial results and condition. Additionally, macroeconomic or market concerns may diminish the demand for our products and services compared to historical growth rates, including due to low consumer confidence, high unemployment, or reduced global trade. If the volume of our transactions declines or international migration patterns shift due to deteriorating economic conditions, we may be unable to timely and effectively reduce our operating costs or take other actions in response, which could harm our results of operations.

We face payment and fraud risks from our prospective customers and service providers that could harm our business, financial condition and results of operations.

More than 90% of the volume of amounts sent through Xoom in the aggregate, which we refer to as gross sending volume, is funded by bank accounts through the Automated Clearinghouse system, or ACH. Over 95% of our ACH-funded transactions are released for disbursement prior to our receiving funds from our customers, which exposes us to repayment risk. If customers have insufficient funds in their bank accounts or have closed their bank accounts and we are unable to collect the funds from customers, our revenue will decline and our business may be harmed. Our ability to collect funds from our customers in these instances contributes to acceptable transaction loss expenses and any such expenses will increase if our collection efforts lose effectiveness. We also offer our customers the ability to fund transactions utilizing their credit or debit card. Because these are card-not-present transactions, they involve a greater risk of fraud. If we are unable to effectively manage our payment and fraud risks, our business may be harmed.

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To minimize payment and fraud risk, several requirements must be satisfied in order for a prospective customer to use our services. A prospective customer must provide us with certain personal information, recipient information and a U.S.-based payment source which may be a bank account, credit card or debit card. All of the transaction data is then evaluated by our proprietary risk management system, which assesses the transaction for regulatory compliance, anti-money laundering, acceptable use, anti-fraud and funding risk. If the transaction is deemed to be high risk by our risk management system, then we will either hold the transaction for further screening or cancel the transaction.

Criminals are using increasingly sophisticated methods to engage in illegal or fraudulent activities. Such activity may take many forms, including unauthorized use of credit or debit cards and bank account information, check fraud, electronic fraud, wire fraud, phishing, social engineering and other illicit acts. Information security breaches may include fraudulent or unauthorized access to systems used by us or our customers, denial or degradation of service attacks, and malware or other cyber-attacks. Because we are a digital service provider, requirements relating to customer authentication and fraud detection are more complex. We may ultimately be held liable for the unauthorized use of a cardholder’s card number in an illegal activity and be required by card issuers to pay a charge-back fee. Charge-backs result not only in our loss of fees earned with respect to the payment, but also leave us liable for the underlying transaction amount. If our charge-back rate becomes excessive, card associations also may require us to pay fines. In addition, we may be subject to additional fraud risk if third-party service providers or our employees fraudulently use customer information for their own gain or facilitate the fraudulent use of such information. In general, we have little recourse if we process a criminally fraudulent transaction.

We have been in the past, and may be again in the future, the target of fraudulent activity. For the year ended December 31, 2014, our transaction loss expense totaled $13.3 million, representing 0.19% of our gross sending volume. Our transaction loss expense may increase in future quarters if our fraud systems lose effectiveness. We have taken measures to detect and reduce the risk of fraud and will continue to do so. However, as the methods and schemes utilized by perpetrators of fraud are constantly evolving or, in some cases, are not immediately detectable, we cannot assure you of these measures’ continuing effectiveness or our ability to update these measures to address future fraud risks. If these measures do not succeed, our business will be harmed.

The money transfer industry is under increasing scrutiny from federal, state and foreign regulators in connection with the potential for consumer fraud. Negative economic conditions may result in increased disbursement partner or consumer fraud. If consumer fraud levels involving our services were to rise, it could lead to regulatory intervention and reputational and financial damage to us. This, in turn, could lead to government enforcement actions and investigations, a reduction in the use and acceptance of our services or an increase in our compliance costs which may harm our business, financial condition and results of operations.

There has also been increased public attention regarding the use and disclosure of personal information, and regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection and consumer privacy and other matters that may be applicable to our business. Our ability to prevent fraudulent transactions may conflict with the goal of protecting individual privacy. If federal, state or foreign governments or our disbursement partners changed the parameters regarding the customer or recipient information we are allowed to monitor and/or collect, our ability to prevent fraud might be negatively impacted, and our business could be harmed.

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A failure in or breach of our operational or security systems, including cyber attacks, or those of our disbursement partners and other service providers, could harm our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

We obtain, transmit and store confidential customer and company information in connection with our services. These activities are subject to laws and regulations in the United States and other jurisdictions. The requirements imposed by these laws and regulations, which often differ materially among the many jurisdictions to which we are subject, are designed to protect the privacy of personal information and to prevent that information from being inappropriately disclosed. We accordingly rely heavily on our information systems for the secure processing, storage and transmission of confidential customer and company information. Although we have developed and continue to invest in technologies, systems and processes that are designed to protect customer and company information and detect and prevent security breaches and cyber attacks, and periodically test our security, those processes may not be sufficient to prevent or remedy the effects of any failure or breach. Threats to our operational and security systems may originate externally from third parties, such as foreign governments, organized crime and other hackers, outsourced or infrastructure-support providers, application developers, or the threats may originate from within our company. If a third party or an employee were to misappropriate, misplace or lose corporate information, including our financial and account information, our customers’ personal information, remittance information or our source code, our business may be harmed.

Despite any defensive measures we take to manage threats to our system, our risk and exposure to these matters remain heightened because of, among other things, the evolving nature of such threats in light of advances in computer capabilities, new discoveries in the field of cryptography, new and sophisticated methods used by criminals including phishing, social engineering or other illicit acts, or other events or developments that we may be unable to anticipate or fail to adequately mitigate. In December 2014, we determined that we were the victim of a criminal fraud known to law enforcement authorities as business e-mail compromise fraud which involved employee impersonation and fraudulent requests targeting our finance department, which resulted in the transfer of $30.8 million in corporate cash to overseas accounts. While we do not expect the fraud to have a material impact on our business, we have also borne additional expenses in connection with the remediation and investigation of the fraud. In addition, following our announcement of the fraud in January 2015, we and certain of our officers were sued in a putative class action lawsuit alleging that we violated federal securities laws by misrepresenting and/or omitting information in the offering materials distributed in connection with our initial public offering.

Threats to our systems may also increase as we expand our products and services, including our mobile services. Given the increasingly high volume of our transactions, certain errors or fraudulent transactions may be repeated or compounded before they are discovered and rectified. We may be required to expend significant capital and other resources to protect against any future security breaches or losses or to alleviate problems caused by these breaches or losses. Our disbursement partners and third-party contractors also may experience security breaches involving the storage and transmission of our data. If third parties gain improper access to our systems or databases or those of our disbursement partners or contractors, they may be able to steal, publish, delete or modify confidential customer information. A security breach could result in monetary losses to us or our customers, our inability to expand our business, additional scrutiny and fines or penalties from regulatory or governmental authorities, damage to our reputation, loss of customers and customer confidence in our services, exposure to civil litigation, including as discussed above, a breach of our contracts with lenders or other third parties, a decline in our stock price, loss of investors, or may subject us to liquidity risks, or jeopardize our relationships with our financial services providers including payment processors and disbursement partners, and other third parties, all which could harm our business, financial condition and results of operations.

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We are exposed to the risk of loss or insolvency if our disbursement partners fail to disburse funds according to our instructions.

We are exposed to the risk of loss in the event our disbursement partners fail, for any reason, to disburse funds to recipients according to our instructions. Such reasons could include mistakes by our disbursement partners, or insolvency or fraud by our disbursement partners. To the extent such funds are not disbursed correctly and cannot be recovered, we could be exposed to significant losses, which could harm our results of operations, cash flows and financial condition or potentially cause insolvency. Our funds held by our disbursement partners are not insured by any government or other insurance programs. We have in the past and may in the future suffer such losses. In the event such losses occur, they are not covered by our provision for transaction losses, but are instead characterized in our statements of operations as bad debt.

Our ability to continue to offer our services in the manner we currently offer them depends, in part, on our ability to contract with third-party vendors on commercially reasonable terms.

We currently contract with and obtain certain services from a number of third-party vendors. If these vendors’ services are interrupted, we may experience a disruption in our services. Further, if these agreements are terminated or we are unable to renegotiate acceptable arrangements with these vendors or find alternative sources of such services, we may experience a disruption in our services and our business may be harmed.

If we are unable to maintain our payment network under terms consistent with those currently in place, or if our disbursement partners encounter business difficulties, our business could be harmed.

Our payment network consists of payment processors and disbursement partners. Payment processors clear and process the funds from the customer to us. We rely on U.S. banks and card processors to provide clearing, processing and settlement functions for the funding of all of our transactions. Disbursement partners disburse funds to our customers’ recipients, and, in the case of our bill payment service, to utility providers. We also rely on a network of major banks and leading retailers to disburse funds to our customers’ recipients in 32 countries. In addition, our disbursement partners may operate their own network of disbursement partners, which we refer to as sub-disbursement partners, with which we may not have a direct relationship.

While we have entered into non-exclusive agreements with each of our payment processors and disbursement partners, our payment processors and disbursement partners could choose to terminate or not renew their agreements with us or disbursement partners could choose to terminate sub-disbursement partners. A sub-disbursement partner could also choose to terminate its relationship with our disbursement partner or with us. In addition, our payment processors and disbursement partners may require amendments to the terms of the agreements we currently have in place, which may decrease our services, increase our costs and affect our profitability. Payment processor, disbursement partner and sub-disbursement partner attrition or contractual amendments might occur for a number of reasons, including such payment processor’s, disbursement partner’s or sub-disbursement partner’s dissatisfaction with the relationship or the revenue derived from the relationship, changes in the law or changes or perceived changes in the regulatory environment. In the case of a disbursement partner, a competitor may engage a disbursement partner on an exclusive basis, offer greater financial incentives, or cause less attention to be provided to us. If we are unable to maintain our agreements with current payment processors and disbursement partners, or if our disbursement partners are unable to provide satisfactory hours of operation in their network or an adequate number of money transfer disbursement locations, our ability to disburse transactions and our revenue and business may be harmed. In India, for example, in the event that our or our disbursement partner’s use of the Immediate Payment Service, or IMPS, platform to process money transfer transactions were curtailed or hindered, for regulatory reasons or otherwise, our ability to process bank deposits to accounts in India at desired service levels may be negatively impacted and our business may be harmed.

Our payment processors and disbursement partners are critical components of our business. We have in the past experienced long business development periods before signing up both payment processors and

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disbursement partners. If we are unable to sign new payment processors and disbursement partners under terms consistent with, or better than, those currently in place, and if we are unable to sign new relationships or maintain our current relationships under terms consistent with those currently in place, our revenue and business may be harmed.

Payment processors and disbursement partners also engage in a variety of activities in addition to providing our services and may encounter business difficulties unrelated to our services. Such engagement could cause the affected payment processor or disbursement partner to reduce the services provided, cease to do business with us, or cease doing business altogether. This could lead to our inability to clear our payment instruments or move funds on a global and timely basis as required to settle our obligations. In addition, because we offer instant ACH transactions for the vast majority of our transactions, if a disbursement partner experienced insufficient liquidity or ceased to do business, we may not be able to recover funds held with that disbursement partner which could lead to a breach of our capital requirements, our insolvency or otherwise harm our business.

We may also be forced to either amend the terms under which we do business, or cease doing business with payment processors if card association operating rules, certification requirements and rules governing electronic funds transfers to which we are subject change or are reinterpreted to make it difficult or impossible for us to comply. Such amendments to the terms under which we currently do business may increase our costs and adversely affect our profitability. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from customers or facilitate other types of online payments, and our business and operating results could be harmed.

If we fail to manage our growth effectively, our brand, results of operations and business could be harmed.

We have experienced rapid growth in our headcount and transaction volume, which places substantial demands on our management and operational infrastructure. Our headcount grew from 150 employees at December 31, 2012 to 295 employees at December 31, 2014. Additionally, we may not be able to hire new employees quickly enough to meet our needs. As we continue to grow, we must effectively integrate, develop and motivate a large number of new employees, while maintaining the beneficial aspects of our company culture. If we fail, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business and operating results could be harmed.

Our gross sending volume increased over 302% from $1.7 billion in 2011 to $6.9 billion in 2014. We will need to continue to improve our operational, financial and management controls, and our reporting systems and procedures in order to manage this growth. If we do not manage the growth of our business and operations effectively, the quality of our services and efficiency of our operations could suffer, which could harm our brand, results of operations and business.

If we fail to expand effectively into new markets abroad, our future growth rates may be harmed.

We are exploring opportunities to expand our operations into new markets abroad by both increasing the number of countries to which customers can send transactions and also increasing the number of countries where transactions can originate. As described elsewhere in these risk factors, we face intense and continuing competition. Our continued growth depends on our ability to expand into new origination and recipient markets. If we encounter difficulties or delays in doing so, but our competitors are successful early entrants into new markets, our competitors may obtain a competitive advantage that could lead to our inability to increase market share and/or preclude us from entering those markets at all, which could harm our business, financial condition and results of operations. In addition, any future expansion into new markets could place us in unfamiliar competitive environments and involve various risks, including incurring losses or failing to comply with applicable laws and regulations. Such expansion would also require significant resources and management time, and there is no guarantee that, after expending such resources and time, we will receive the necessary approvals to operate in such new markets. If we are ultimately granted authority to operate in such new markets, it is

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possible that returns on such investments will not be achieved for several years, if at all. There is no guarantee that our business model will be successful in a new market, that we could maintain profit margins in these new markets or that international expansion would help grow our business. For example, we recently launched money transfer services to China and may face unanticipated obstacles which may render our China services ineffective, unprofitable, or vulnerable to fraud and payment risks at levels that are unacceptable. As described elsewhere in these risk factors, we may also face unanticipated regulatory scrutiny, including scrutiny of our disbursement partners, which may thwart our success in China, or in any other new market. We have offered money transfer services to China in the past but ceased to do business there due to unanticipated challenges, and we cannot assure you of a successful re-entry into the market. If we are unable to successfully expand our operations into new markets, our future growth rates may be harmed.

Increases in transaction processing fees could increase our costs, affect our profitability, or otherwise limit our operations.

Our payment processors and disbursement partners charge us fees which may increase from time to time. Banks currently determine the fees charged for ACH transactions and may increase the fees with little prior notice. Our card processors have in the past and may in the future increase the fees charged for each transaction using credit and debit cards which may be passed on to us. Our card processors currently assign us merchant category codes which may change from time to time. Any changes to these codes may affect the fees our customers are charged if they use a credit card, which could increase the overall cost to use our service.

Our disbursement partners charge us disbursement fees which they have in the past and may in the future increase. Our disbursement partners may renegotiate disbursement fees for a variety of reasons including if they are dissatisfied with their revenue or if we are not providing them with enough transactions. U.S. federal, state or foreign governments could also mandate a payment processing or remittance tax, require additional taxes or fees to be imposed upon our customers, or otherwise impact the manner in which we provide our services. Any such taxes or increased fees could increase our operating costs, require us to provide additional disbursement collateral and reduce our profit margins.

Our services might be used for illegal or improper purposes, which could expose us to additional liability and harm our business.

Our services remain susceptible to potentially illegal or improper uses as criminals are using increasingly sophisticated methods to engage in illegal activities involving Internet services and payment providers. Because our customers send transactions using bank accounts or credit and debit cards via the Internet, and these are not face-to-face transactions, these transactions involve a greater risk of fraud. Other illegal or improper uses of our services may include money laundering, terrorist financing, drug trafficking, human trafficking, illegal online gaming, romance and other online scams, illegal sexually-oriented services, prohibited sales of pharmaceuticals, fraudulent sale of goods or services, piracy of software, movies, music and other copyrighted or trademarked goods, unauthorized uses of credit and debit cards or bank accounts and similar misconduct. Users of our services may also encourage, promote, facilitate or instruct others to engage in illegal activities. If the measures we have taken are too restrictive and inadvertently screen proper transactions, this could diminish our customer experience which could harm our business. Despite measures we have taken to detect and lessen the risk of this kind of conduct, we cannot assure you that these measures will stop all illegal or improper uses of our services. Our business could be harmed if customers use our system for illegal or improper purposes.

If our payment processors and disbursement partners experience an interruption in service, our business and revenue would be harmed.

Our payment processors and disbursement partners have experienced service outages or an inability to connect with our processing systems and this may reoccur in the future. If a payment processor experiences a service outage or service interruption that results in our being unable to collect funds from customers, our liquidity could be harmed and we may not meet our capital requirements. We do not directly access the ACH

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system or payment card networks such as Visa and MasterCard, which systems enable our acceptance of bank account-funded transactions, credit cards and debit cards. As a result, we rely on banks and other payment processors and disbursement partners to process transactions. In the event of service outages in the payment card or ACH networks, or if our payment processors or disbursement partners were unable to access the payment card or ACH networks, our business would be harmed.

In addition, we rely on our disbursement partners’ information systems to obtain transaction data. If a disbursement partner, or its sub-disbursement partner, experiences a significant disruption to its information system, is unable to synch its system to our system, or does not maintain the appropriate controls over its systems, we may lose our customers’ confidence and our reputation may be harmed. Specific problems that could arise include a disbursement partner could be unable to disburse funds in the time period that we communicated to our customers, we may be unable to confirm if a transaction has been disbursed or customer information could be compromised. We currently undergo an extensive integration process with each disbursement partner, but unforeseen bugs or service outages by either the disbursement partner or us could delay disbursement. Such outages have typically lasted from a couple of hours to a couple of days and may be unplanned. If we are unable to minimize service outages, our business and revenue would be harmed.

If our disbursement partners do not provide a positive recipient experience, our business would be harmed.

We rely on our disbursement partners to disburse funds to our customers’ money transfer recipients and pay outstanding bills owed by our customers’ family and friends to utility providers. If the experience delivered by our disbursement partners to a recipient is deemed unsatisfactory for any reason, including because our disbursement partners are not properly trained to disburse money or deliver poor customer service, if wait times at our disbursement partners’ pick up locations are too long, if cash pick-up locations are not located in convenient and safe locations and open for business at convenient times, or if our disbursement partners fail to timely apply funds to outstanding account balances, customers may choose to not use our services in the future and our business would be harmed.

Customer complaints or negative publicity could result in a decline in the use of our services and our business could suffer.

Customer complaints or negative publicity about our service could diminish consumer confidence in our services which could lead to a reduced use of our services. Breaches of our customers’ privacy and our security measures, and any failure to effectively monitor the acceptable use of our services, could have the same effect. Measures we take to combat risks of fraud and breaches of privacy and security, such as cancelling customer transactions, closing customer accounts, or restricting or decreasing the number or types of transactions certain customers are authorized to send, could damage relations with our customers. These measures heighten the need for prompt and accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and this expense, if not managed properly, could impact our profitability significantly. Any inability by us to manage or train our own or our outsourced customer service representatives properly could compromise our ability to handle customer complaints effectively. If we do not handle customer complaints effectively, our reputation may be harmed and we may lose our customers’ confidence.

If consumers’ confidence in our business or in money transfer providers generally deteriorates, our business could be harmed.

We rely on consumers’ confidence in our brand and our ability to provide a convenient, fast and cost-effective service to send money and pay bills online. Erosion in confidence in our business, or in money transfer providers as a means to transfer money, could adversely impact money transfer volumes, which would in turn harm our business, financial position and results of operations.

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A number of factors could adversely affect consumers’ confidence in our business, or in money transfer providers generally, many of which are beyond our control, and could have an adverse impact on our results of operations. These factors include:

·

changes or proposed changes in laws or regulations or system rules that make it more difficult for consumers to transfer money using traditional money transfer providers or require us to capture or handle data in a way that is more burdensome or expensive;

·

actions by federal, state or foreign regulators that interfere with our ability to transfer consumers’ money reliably, including, for example, attempts to seize money transfer funds;

·

federal, state or foreign legal requirements, including those that require us to provide consumer data to a greater extent than is currently required;

·

any significant interruption in our systems or our disbursement partners’ systems, including by fire, natural disaster, power loss, telecommunications failure, terrorism, vendor failure, unauthorized entry and computer viruses; and

·

any breach, or reported breach, of our security policies or legal requirements resulting in a compromise of consumer data.

The effectiveness of our marketing solutions depends in part on our relationships with media buying companies.

We rely, in part, on media buying companies to deliver our online and television marketing. We typically enter into short-term agreements with advertising companies for estimated levels of advertising. If we are not able to have our advertising orders fulfilled, if our agreements with these companies are not extended or renewed, or if we are not able to extend or renew our agreements on terms and conditions favorable to us and we are not able to enter into agreements with alternative companies on acceptable terms or on a timely basis, or both, our business could be harmed.

If Internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, our new customer growth could decline.

We depend in part on various Internet search engines, such as Google and Yahoo!, to direct a significant amount of traffic to our website. Our ability to maintain the number of visitors directed to our website is not entirely within our control. Our competitors’ search engine optimization efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking. As a result, links to our website may not be prominent enough to drive traffic to our website, and we may not be able to influence the results. If Internet search engines modify their search algorithms in ways that are detrimental to our new customer growth or in ways that make it harder for our customers to find or use our website, or if our competitors’ search engine optimization efforts are more successful than ours, overall growth in our customer base could slow, and we could lose existing customers. In addition, search engines that we use to advertise our brand, including Google, have frequently changing rules that govern the pricing, availability and placement of online advertisements (e.g., paid search and keywords) and changes to these rules or any other terms of our contractual relationships with such search engines which jeopardize our ability to use online advertising to promote our brands in a cost-effective manner, or at all, would harm our business. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of persons directed to our website would harm our business.

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We market certain levels of service to our customers, including advertisements regarding the speed of our service. If we fail to meet the advertised levels of service, our business could be harmed.

Our direct-to-consumer marketing may include certain claims, both direct and implied, regarding the quality of our services. For example, we have deployed advertising for our India business in which we say we are able, within certain timeframes, to deposit money into recipients’ accounts within four hours, and in some cases, instantly. If we are unable to meet the claims made in our advertisements and our marketing, or if those claims are found to be misleading, we may alienate or lose credibility with our customers, and we may attract legal or regulatory scrutiny, including under the Federal Trade Commission Act, and/or the CFPB Final Remittance Rule, as described elsewhere in these risk factors. New or existing customers may seek other services and may not return to our services as often in the future, or at all. This would harm our ability to attract new customers and could decrease the frequency with which current customers use our service, which would be harmful to our business and our revenue.

If we are unable to adequately protect our brand and the intellectual property rights related to our existing and any new services, or if we infringe on the rights of others, our business, prospects, financial condition and results of operations could be harmed.

The XOOM brand is important to our business. Our business could be harmed if we were unable to adequately protect our brand and the value of our brand decreased as a result.

We rely on a combination of patent and trademark laws, trade secret protection and confidentiality and license agreements to protect the intellectual property rights related to our services, all of which offer only limited protection. We have been granted one patent for a feature of our electronic payment processing system, and have four patent applications and one provisional patent application currently on file. The process of obtaining patent protection is expensive and time consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Furthermore, it is possible that our patent applications may not issue as granted patents, that the scope of our issued patents will be insufficient or not have the coverage originally sought, that our issued patents will not provide us with any competitive advantages, and that our patents and other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. In addition, issuance of a patent does not guarantee that we have an absolute right to practice the patented invention. As a result, we may not be able to obtain adequate patent protection or to enforce our issued patents effectively. We may be subject to claims by third parties alleging that we infringe their intellectual property rights or have misappropriated other proprietary rights.

We have in the past and may in the future bring a claim against third parties alleging infringement of our intellectual property rights. If any of our future claims are unsuccessful, and one or more infringing products are commercially successful, then this could diminish the value of our brand, adversely affect our ability to market our services, and our business could be harmed. We may be required to spend resources to defend such claims or to protect and police our own rights. Some of our intellectual property rights may not be protected by intellectual property laws, particularly in foreign jurisdictions. The loss of our intellectual property protection, the inability to secure or enforce intellectual property protection or to successfully defend against claims of intellectual property infringement could harm our business.

We also rely on our unpatented proprietary technology and trade secrets. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them. The contractual provisions that we enter into with employees, consultants, disbursement partners, vendors and customers may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Moreover,

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policing unauthorized use of our technologies, services and intellectual property is difficult, expensive and time consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States, and where mechanisms for enforcement of intellectual property rights may be weak. We may be unable to determine the extent of any unauthorized use or infringement of our services, technologies or intellectual property rights.

From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, results of operations and financial condition. If we are unable to protect our intellectual property rights, we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative services that have enabled us to be successful to date.

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

Patent and other intellectual property disputes are common in the payments and money transfer industries. Some companies in the money transfer industry, including some of our competitors, own large numbers of patents, copyrights, trademarks and trade secrets, which they may use to assert claims against us. Third parties have asserted and may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us. As the number of services and competitors in our market increase and overlaps occur, claims of infringement, misappropriation and other violations of intellectual property rights may increase. Any claim of infringement, misappropriation or other violation of intellectual property rights by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management.

The patent portfolios of our most significant competitors are larger than ours and this disparity may increase the risk that they may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses. In addition, future assertions of patent rights by third parties, and any resulting litigation, may involve patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may therefore provide little or no deterrence or protection. We cannot assure you that we are not infringing or otherwise violating any third-party intellectual property rights.

An adverse outcome of a dispute may require us to pay substantial damages, including treble damages, if we are found to have willfully infringed a third party’s patents or copyrights; cease making, licensing or using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to attempt to redesign our services or otherwise to develop non-infringing technology, which may not be successful; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights; and indemnify our disbursement partners and other third parties. Royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty payments and other expenditures. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. Any of these events could harm our business, financial condition and results of operations.

Our use of open source and third-party technology could impose limitations on our ability to commercialize our software.

We use open source software in our services and, although we monitor our use of open source software to avoid subjecting our services to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts. As a result, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide our services. In such an

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event, we could be required to seek licenses from third parties to continue offering our services, to make our proprietary code generally available in source code form, to re-engineer our services or to discontinue our services if re-engineering could not be accomplished on a timely basis, any of which could harm our business, results of operations and financial condition.

We may be unable to continue to use the domain names that we use in our business, or prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks.

We have registered domain names for our website that we use in our business, such as www.xoom.com. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market our services under a new domain name, which could diminish our brand or cause us to incur significant expenses in order to purchase rights to the domain name in question. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to ours. Domain names similar to ours have been registered in the United States and elsewhere. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks. Protecting and enforcing our rights in our domain names may require litigation, which could result in substantial costs and diversion of management’s attention, and we may not prevail.

There are a number of risks associated with our international operations that could harm our business.

We provide money transfer services to 32 countries and territories and cross-border bill payment services to five countries and may expand into additional sending and receiving countries. Our ability to grow in international markets could be harmed by a number of factors, including:

·

changes in political and economic conditions and potential instability in certain regions;

·

restrictions on transactions to or from certain countries;

·

currency control and repatriation issues;

·

changes in regulatory requirements or in foreign policy, including the adoption of domestic or foreign laws, regulations and interpretations detrimental to our business;

·

possible increased costs and additional regulatory burdens imposed on our business;

·

the implementation of U.S. sanctions, which could result in, among other things, prohibitions against doing business in certain countries or with certain financial institutions abroad, bank closures in certain countries and the freezing of our assets;

·

burdens of complying with a wide variety of laws and regulations;

·

failure to manage fraud or payment risks at acceptable levels;

·

fraud, theft or lack of compliance by disbursement partners in foreign legal jurisdictions where legal enforcement may be difficult or costly;

·

reduced protection of our intellectual property rights;

·

unfavorable tax rules, additional taxes to which we are or may become subject or trade barriers;

·

inability to secure, train or monitor disbursement partners; and

·

failure to successfully manage our exposure to foreign exchange rates, in particular with respect to the Indian Rupee.

In addition, we have employees and consultants outside the United States and we conduct certain functions, including customer operations, in regions outside of the United States. We are subject to both U.S.

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and local laws and regulations applicable to our offshore activities, and any factors which reduce the anticipated benefits associated with providing these functions outside of the United States, including cost efficiencies and productivity improvements, could harm our business.

The CFPB’s Final Remittance Rule became effective in the United States in October 2013 and it imposes additional disclosure and other responsibilities on us as described elsewhere in these risk factors.

A material slowdown or disruption in international migration patterns could harm our business.

Our business relies in part on international migration patterns. Our typical customers are immigrants who have moved from their home countries to the United States and use our service to send money back to their home countries to their family and friends. Migration is affected by, among other factors, overall economic conditions, the availability of job opportunities, changes in immigration laws and political or other events such as war, terrorism or health emergencies that would make it more difficult for workers to migrate or work abroad. Changes to these factors could harm our digital money transfer volume, our business, financial condition and results of operations.

Changes in U.S. immigration laws or changes in the emigration laws of other jurisdictions that discourage international migration, and political or other events, such as war, terrorism or health emergencies, that make it more difficult for individuals to immigrate to the United States or work in the United States, could adversely affect our gross sending volume or growth rate. Sustained weakness in U.S. or global economic conditions could reduce economic opportunities for immigrant workers and result in reduced or disrupted international migration patterns. Reduced or disrupted international migration patterns are likely to reduce money transfer volumes and harm our results of operations.

Our business is subject to the risks of earthquakes, fires, floods, other natural catastrophic events and to interruption by man-made problems such as computer viruses or terrorism which could result in system failures and interruptions which could harm our business.

Although our systems have been designed around industry-standard architectures to reduce downtime in the event of outages or catastrophic occurrences, they remain vulnerable to damage or interruption from earthquakes, floods, fires, power loss, California rolling blackouts, telecommunication failures, terrorist attacks, cyber attacks, computer viruses, computer denial-of-service attacks, human error, hardware or software defects or malfunctions (including defects or malfunctions of components of our systems that are supplied by third-party service providers), and similar events or disruptions. Our U.S. corporate offices and one of the facilities we lease to house our computer and telecommunications equipment are located in the San Francisco Bay Area, a region known for seismic activity. Our outsourced support centers, at which a variety of business activities are conducted including providing customer support, customer verification and collections, are located in the Philippines and El Salvador, which locations are also known for seismic activity and natural disasters. Despite any precautions we may take, system interruptions and delays could occur if there is a natural disaster, if a third-party provider closes a facility we use without adequate notice for financial or other reasons, or if there are other unanticipated problems at our leased facilities. As we rely heavily on our servers, computer and communications systems and the Internet to conduct our business and provide high-quality customer service, such disruptions could harm our ability to run our business, impede our employees’ ability to conduct business activities whether at our leased facilities or from a remote location, and cause lengthy delays which could harm our business, results of operations and financial condition. We currently are not able to switch instantly to our back-up center in the event of failure of the main server site. This means that an outage at one facility could result in our system being unavailable for a significant period of time. We do not carry business interruption insurance sufficient to compensate us for losses that may result from interruptions in our service as a result of system failures. A system outage or data loss could harm our business, financial condition and results of operations.

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We enable transactions through disbursement partners in some regions that are politically volatile.

We enable transactions in some regions that are politically volatile. If a country experiences political instability that affects its economy or financial systems, our business could be harmed. It also is possible that our services could be used by wrongdoers in contravention of U.S. or foreign law or regulations. Such circumstances could result in increased compliance costs, regulatory inquiries, suspension or revocation of required licenses or registrations, seizure or forfeiture of assets and the imposition of civil and criminal fees and penalties. In addition to monetary fines or penalties that we could incur, we could be subject to reputational harm that could harm our business.

The inability to integrate our recent acquisition and any future acquisitions, joint ventures or strategic investments successfully could disrupt our business and harm our financial condition and results of operations.

We have in the past, and may again in the future, seek to grow our business by acquiring complementary businesses, products, services and technologies. For example, in January 2014, we acquired all of the outstanding equity of BlueKite, LTD, a Guatemala-based developer of solutions and applications for cross-border bill payment and mobile phone reload services.  In addition, we may evaluate and consider a wide array of potential strategic transactions as part of our overall business strategy, including business combinations, strategic investments and joint ventures. Any of these transactions involve significant challenges and risks, and may harm our business, results of operations and financial condition. Acquisitions in particular could require significant capital infusions and could involve many risks, including potential negative impact on our results of operations due to debt or other liabilities and costs incurred in connection with an acquisition, difficulties assimilating and integrating the acquired business, disruption of our ongoing business by diverting resources and distracting management, not realizing the expected benefits of the acquisition, announcements of operating results, revenue or guidance that are lower than expected and potential dilution of stockholders’ ownership in the event we issue equity securities to complete an acquisition. Integration of our recently-acquired business may be complex and costly, including risks and costs associated with complying with additional regulatory requirements and combining operations and employees. In addition, we may begin operations in countries in which the application of laws and regulations in the online or mobile context is subject to greater uncertainty and where there may be a higher incidence of corruption and fraudulent or unethical business practices than countries in which we are historically accustomed to operating. We may also enter new markets where we have no or limited direct prior experience or where competitors may have stronger market positions. It may take us longer than expected to fully realize the anticipated benefits of our acquisition of BlueKite, LTD, or future acquisitions or strategic transactions, and it is possible that those benefits will be smaller than anticipated, may not be realized at all or that the financial markets or investors will view the transactions negatively. In addition, even if successful, we cannot be sure that we will continue to effectively grow our headcount and product development in order to continue to realize the benefits of any strategic transaction, including our acquisition of BlueKite, LTD. We cannot assure you that we will be able to identify or consummate any future acquisition or strategic transaction on favorable terms, or at all.

The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business.

We believe our success has depended, and continues to depend, on the efforts and talents of our employees, including our senior management team which includes John Kunze, our President and Chief Executive Officer, Ryno Blignaut, our Acting Chief Financial Officer and Chief Risk Officer, and Julian King, our Senior Vice President of Marketing and Corporate Development. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and keep them. Recent changes in our Chief Financial Officer position may adversely impact our ability to attract a suitable candidate to fill the role of a permanent Chief Financial Officer or retain our current key personnel. Any changes in our key

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employees could also adversely affect our ability to attract suitable candidates to join our Board of Directors. In addition, any future loss of any of our directors, senior management or key employees could harm our ability to execute our business plan, and we may not be able to find adequate replacements. All of our officers and other U.S. employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. We cannot ensure that we will be able to retain the services of any members of our Board of Directors, senior management or other key employees. If we do not succeed in attracting well-qualified directors or employees or retaining and motivating existing employees, our business could be harmed.

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.

The individuals who now constitute our management team have limited experience managing a publicly-traded company and limited experience complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations continue to require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business.

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

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the listing requirements of the NASDAQ Stock Market LLC and other applicable securities rules and regulations. Compliance with these rules and regulations have increased our legal and financial compliance costs, may make some activities more difficult, time consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. 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 results of operations. Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future or engage outside consultants, 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 continue 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 their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

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In addition, each of the various jurisdictions in which we are licensed impose reporting and other obligations on us, our management team and our Board of Directors. As a public company and licensed money transmitter subject to these rules and regulations, we may find it more expensive for us to obtain 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, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

As a result of disclosure of information in our filings with the SEC, our business and financial condition have become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and results of operations.

We are obligated to develop and maintain proper and effective internal control over financial reporting, but we cannot assure you that the systems we use to evaluate our internal control over financial reporting will withstand regulatory scrutiny, and the determination by management that our internal controls are not effective are both factors which may harm investor confidence in us and the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the year ended December 31, 2014. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

Although we have developed the systems and processes required to perform the evaluation needed to comply with Section 404, we cannot assure you that those systems and processes will withstand regulatory scrutiny.

In addition, because we identified a material weakness as of December 31, 2014 in our internal control over financial reporting during the evaluation and testing process, we are unable to assert that our internal control over financial reporting is effective. As a result, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.

We will be required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the date we are no longer an “emerging growth company.” We will remain an “emerging growth company” for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31. The aggregate market value of common stock held by non-affiliates will be computed by reference to the closing price at which the common stock was sold on the last business day of our most recently completed second fiscal quarter, as reported on the NASDAQ Global Select Market. Shares of common stock held by each executive officer, director and holder of 10% or more of the outstanding common stock will be excluded in that such persons may be deemed to be affiliates. To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff.

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We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company” and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act which require our auditor to attest to the effectiveness of our internal control over financial reporting, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Because we have chosen to rely on the exemptions from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, investors may become less comfortable with the effectiveness of our internal controls and the risk that material weaknesses or other deficiencies in our internal controls go undetected may increase. If we choose to continue to provide reduced disclosures in our periodic reports and proxy statements while we are an emerging growth company, investors would have access to less information and analysis about our executive compensation, which may make it difficult for investors to evaluate our executive compensation practices. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions and provide reduced disclosure. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Our revenue may be harmed if we are required to pay transaction taxes on all or a portion of our past and future transfers in jurisdictions where we are currently not collecting and reporting tax.

We currently only pay transaction taxes in certain jurisdictions in which we do business. We do not separately collect other transaction taxes. A successful assertion by any state, local jurisdiction or country in which we do not pay such taxes that we should be paying sales or other transaction taxes on our services, or the imposition of new laws requiring the payment of sales or other transaction taxes on our services, could result in substantial tax liabilities related to past transactions, create increased administrative burdens or costs, discourage consumers from using our services, decrease our ability to compete or otherwise harm our business and results of operations.

New tax treatment of companies engaged in online money transfer may harm the commercial use of our services and our financial results.

Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to regulate our transactions or levy sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in Internet commerce in general and remittances in particular. New or revised international, federal, state or local tax regulations may subject us or our customers to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet. New or revised taxes would likely increase the cost of doing business online and decrease the attractiveness of using our Internet services. New taxes could also create significant increases in internal costs necessary to capture data, and collect and remit taxes. Any of these events could harm our business and results of operations.

Changes or modifications in financial accounting standards may harm our results of operations.

From time to time, the Financial Accounting Standards Board, or FASB, either alone or jointly with the International Accounting Standards Board, or IASB, promulgates new accounting principles that could have a material adverse impact on our results of operations. For example, the FASB is currently working together with the IASB to converge certain accounting principles and facilitate more comparable financial reporting between companies who are required to follow generally accepted accounting principles, or GAAP, and those who are required to follow International Financial Reporting Standards, or IFRS. These efforts may result in different

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accounting principles under GAAP, which may have a material impact on the way in which we report financial results in areas including, among others, revenue recognition, estimating valuation allowances and financial statement presentation. We expect the SEC to make a determination in the future regarding the incorporation of IFRS into the financial reporting system for U.S. companies. A change in accounting principles from GAAP to IFRS would be costly to implement and may have a material impact on our financial statements and may retroactively harm previously reported transactions.

Regulatory Risks Faced by Our Business

Our business is subject to a wide range of laws and regulations intended to help detect and prevent illegal or illicit activity and our failure, or the failure of one of our disbursement partners or payment processors to comply with those laws and regulations could harm our business, financial condition and results of operations.

Our services are subject to an increasingly strict set of legal and regulatory requirements intended to help detect and prevent money laundering, terrorist financing, fraud and other illicit activity. The interpretation of those requirements by judges, regulatory bodies and enforcement agencies is changing, often quickly and with little notice. Economic and trade sanctions programs that are administered by OFAC prohibit or restrict transactions to or from or dealings with specified countries, their governments, and in certain circumstances, with individuals and entities that are specially-designated nationals of those countries, narcotics traffickers and terrorists or terrorist organizations. As federal, state and foreign legislative regulatory scrutiny and enforcement action in these areas increase, we expect our costs to comply with these requirements will increase, perhaps substantially. Failure to comply with any of these requirements by us or our disbursement partners could result in the suspension or revocation of a money transmitter license, the limitation, suspension or termination of our services, the seizure and/or forfeiture of our assets and/or the imposition of civil and criminal penalties, including fines.

We are subject to reporting, recordkeeping and anti-money laundering provisions of the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, or the Bank Secrecy Act, and to regulatory oversight. We are also subject to enforcement by FinCEN, the CFPB, and U.S. state regulators, and to economic sanctions imposed by the United States which are overseen by OFAC.

Indian regulations may require us to file reports relating to suspicious transactions. If we are unable to file these reports in the required timeframes or in the appropriate manner, we may face penalties. Additionally, our subsidiary, buyindiaonline.com Inc., is also subject to U.S. federal regulations and has been subject to U.S. state regulations and to regulation in India in the past. Our subsidiary, Xoom Money Transfer Corporation, is a licensed money services business in Canada and is subject to licensing and other regulatory requirements in Canada, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, or PCMLTFA, and legal and reporting obligations imposed by the Financial Transactions and Reports Analysis Center of Canada, or FINTRAC. We may also become subject to additional reporting, recordkeeping and anti-money laundering regulations as well as additional risks and obligations if we expand our business into new geographic regions.

We are also subject to regulations imposed by the FCPA in the United States and similar laws in other countries which generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Because our services are offered in 32 countries and we have non-U.S. employees, we face a higher risk associated with FCPA compliance and similar statutes than many other companies. Any determination that we have violated these laws could harm our business, financial condition and results of operations.

The foregoing laws and regulations are constantly evolving, unclear and inconsistent across various jurisdictions, making compliance challenging. If we fail to update our compliance system to reflect legislative or regulatory developments or if our risk management systems and processes fail to properly identify and prevent suspicious or sanctioned transactions, we could incur penalties. New legislation, changes in laws or

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regulations, implementing rules and regulations, litigation, court rulings, changes in industry practices or standards, changes in systems rules or requirements or other similar events could expose us to increased compliance costs, liability, reputational damage, and could reduce the market value of our services or render them less profitable or obsolete.

Our business is subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing, and many of which may contradict one another due to conflicting regulatory goals. Failure to comply with these laws could subject us to claims or otherwise harm our business.

Our service is subject to a variety of laws in the United States and abroad that are continuously evolving and developing, including laws regarding data retention, privacy, anti-spam, consumer protection, payment processing and money transfers. The scope and interpretation of the various laws that are or may be applicable to us are often uncertain and may be conflicting, particularly regarding laws outside the United States. For example, we are subject to regulatory requirements to assist in the prevention of money laundering and terrorist financing, such as the Bank Secrecy Act and, pursuant to these legal obligations and authorizations, we make information available to certain U.S. federal, state and local, as well as foreign, government agencies when required by law. As a result of particular concern with respect to terrorist financing, these agencies have increased their requests for such information from money service businesses in recent years. At the same time, there has been increased public attention regarding the use and disclosure of personal information, and regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection and consumer privacy and other matters that may be applicable to our business. The regulatory goals of preventing illegal activity, such as money laundering and terrorist financing, may conflict with the goal of protecting individual privacy. If federal, state or foreign governments or our disbursement partners changed requirements regarding the customer or recipient information we are required to collect, we may be unable to comply with such changes, or such changes could interfere with our ability to assess fraud or other risks, and our business could be harmed as a result. New laws and regulations may be enacted in connection with mobile transactions, including money transfers or bill payments that are performed via mobile phones. Further, as an employer, various U.S. federal, state and local, and foreign labor laws govern our relationship with our employees, contractors and other personnel, including employee classification and related withholding and other wage and benefit requirements for our employees in the U.S. and abroad.

Failure to comply with existing and future laws could result in fines, sanctions, penalties, litigation or other adverse consequences, loss of consumer confidence, and cause employee morale, productivity and retention to suffer, which could harm our results of operations, business and reputation. While we believe that we are compliant with our regulatory responsibilities, the legal, political and business environments in these areas are rapidly changing, and subsequent legislation, regulation, litigation, court rulings or other events could expose us to increased liability, increased operating costs to implement new measures to reduce our exposure to this liability and reputational damage.

Our business could be harmed if a local, state, federal or foreign government were to levy taxes on money transfers, as has occurred in the past, or on bill payments. The current budget shortfalls in many jurisdictions could lead other states and jurisdictions to impose similar fees and taxes, as well as increase unclaimed property obligations. Similar circumstances in foreign countries could invoke similar consequences. Such fees or taxes, and any related regulatory initiatives, may be implemented in a manner in which conflicts with other laws to which we are bound or in a manner with which we are unable to comply, and non-compliance could harm our business. A tax or fee exclusively on money transfer companies could put us at a competitive disadvantage to other means of remittance or payment transfers which may not be subject to the same fees or taxes. A change in the unclaimed property obligations could increase our regulatory burdens and costs related to our obligation to escheat unclaimed property to the states.

It is possible that governments of one or more countries may seek to censor content available on our website and mobile solutions or may even attempt to completely block access to our website or mobile

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solutions. Adverse legal or regulatory developments could harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be harmed and we may not be able to maintain or grow our revenue as anticipated.

Consumer advocacy groups or governmental agencies could also seek to change laws and regulations to seek greater protections for our customers, which could result in enhanced consumer disclosure, impact fees or exchange spreads, or require other different customer treatment. If consumer advocacy groups are able to generate widespread support for positions that are detrimental to our business, then our business, financial position and results of operations could be harmed.

We are subject to licensing and other requirements imposed by U.S. state regulators, the U.S. federal government, the Canadian government and the government of India. If we were found to be subject to or in violation of any laws or regulations governing money transmitters, we could lose our licenses, be subject to liability or be forced to change our business practices.

A number of states have enacted legislation regulating money transmitters. To date, we have obtained licenses to operate as a money transmitter in 46 U.S. states, the District of Columbia and Puerto Rico and have applied, or plan to apply, for money transmitter licenses in additional jurisdictions. Our subsidiary, Xoom Money Transfer Corporation, is a licensed money services business in Canada and is subject to licensing and other regulatory requirements in Canada, including the PCMLTFA and legal and reporting obligations imposed by FINTRAC. In addition, because our subsidiary, buyindiaonline.com Inc., was previously a regulated entity in both India and the State of Delaware, if regulators were to find buyindiaonline.com Inc. in violation of any applicable money services laws and regulations during the period in which it held such licenses, or find that it continues to be subject to and not compliant with applicable regulations, such liability would harm our business. We and buyindiaonline.com Inc. are also registered as money services businesses with FinCEN, although we do not expect to renew buyindiaonline.com Inc.’s FinCEN registration upon its expiration in 2015. As a licensed money transmitter, we are subject to bonding requirements, liquidity requirements, restrictions on our investment of customer funds, reporting requirements and inspection by state and foreign regulatory agencies. If our pending applications were denied or if additional states or jurisdictions require us to apply for a license, we could be forced to change our business practice or required to bear substantial cost to comply with the requirements of the additional states or jurisdictions. If we were found to be subject to and in violation of any banking or money services laws or regulations, we could be subject to liability or additional restrictions, such as increased liquidity requirements. In addition, our licenses could be revoked or we could be forced to cease doing business or change our practices in certain states or jurisdictions, or be required to obtain additional licenses or regulatory approvals that could impose a substantial cost on us. Regulators could also impose other regulatory orders and sanctions on us. Any change to our business practices that makes our service less attractive to customers or prohibits use of our services by residents of a particular jurisdiction could decrease our transaction volume and harm our business.

The Dodd-Frank Act, as well as the regulations required by the Dodd-Frank Act, and the creation of the Consumer Financial Protection Bureau could harm us and the scope of our activities, and could harm our operations, results of operations and financial condition.

The Dodd-Frank Act, which became law in the United States in July 2010, called for significant structural reforms and new substantive regulation across the financial services industry. In addition, the Dodd-Frank Act created the CFPB, whose purpose is to issue and enforce consumer protection initiatives governing financial products and services, including money transfer services. The Dodd-Frank Act and actions by the CFPB could have a significant impact on us by, for example, requiring us to limit or change our business practices, limiting our ability to pursue business opportunities, requiring us to invest valuable management time and resources in compliance efforts, imposing additional costs on us, including requiring us to process refunds in certain circumstances, limiting fees we can charge for services, requiring us to meet more stringent capital requirements, impacting the value of our assets, delaying our ability to respond to marketplace changes,

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requiring us to alter our services in a manner that would make them less attractive to consumers and impair our ability to offer them profitably, or requiring us to make other changes that could harm our business.

The CFPB’s adoption of the Final Remittance Rule, which became effective in October 2013, implemented the remittance provisions of the Dodd-Frank Act. These regulations have impacted our business in a variety of areas as described elsewhere in these risk factors. These requirements and other potential changes under CFPB regulations could harm our operations and financial results and change the way we operate our business.

We may also be subject to examination by the CFPB, which has broad authority to enforce consumer financial laws. In July 2011, many consumer financial protection functions formerly assigned to the federal banking agency and other agencies were transferred to the CFPB. The CFPB has a large budget and staff and has broad authority with respect to our services and related business. It is authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities. An examination by the CFPB may be time consuming and costly, and divert management’s attention from other business concerns, which could harm our business and results of operations. In addition, the CFPB may adopt other regulations governing consumer financial services, including regulations defining unfair, deceptive or abusive acts or practices, and new model disclosures. The CFPB’s authority to change regulations adopted in the past by other regulators, or to rescind or alter past regulatory guidance, could increase our compliance costs and litigation exposure.

The Dodd-Frank Act established a Financial Stability Oversight Counsel that is authorized to designate as “systemically important” non-bank financial companies and payment systems. Companies designated under either standard will become subject to new regulation and regulatory supervision. If we were designated under either standard, the additional regulatory and supervisory requirements could result in costly new compliance burdens or may require changes in the way we conduct business that could harm our business.

The effect of the Dodd-Frank Act and the CFPB on our business and operations has been and will continue to be significant, in part because the function and scope of the CFPB, the reactions of our competitors and the responses of consumers and other marketplace participants are uncertain.

Remittance rules adopted by the CFPB, which became effective in October 2013, could harm us and the scope of our activities, and could harm our operations, results of operations and financial condition.

The CFPB’s Final Remittance Rule, among other things, requires money transmitters to disclose to customers, at the time of their transaction, certain transaction details, such as any fees charged, the foreign exchange rate and the amount of money to be disbursed to the recipient. Money transmitters must also provide the customer with a receipt, and inform the customer as to the date on which the money will be available to the recipient. In addition, the regulations require money transmitters to provide refunds to customers in certain circumstances within certain timeframes, and to create a customer complaint process, according to which money transmitters must investigate certain notices of error according to certain timeframes. We believe we are in compliance with these new remittance regulations but if we were found to be in violation of any of the regulations, our business could be harmed. These regulations and other potential changes under CFPB regulations could harm our operations, results of operations and financial condition and change the way we operate our business.

Our disbursement partners generally are regulated institutions in their home jurisdiction, and our services are regulated by governments in both the United States and in the jurisdiction of the recipient. If our disbursement partners fail to comply with applicable laws, it could harm our business.

Our services are regulated by state, federal and foreign governments. Many of our disbursement partners are banks and are heavily regulated by their home jurisdictions. Our non-bank disbursement partners are also

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subject to various regulations, including money transfer regulations. We require regulatory compliance as a condition to our continued relationship, perform due diligence on our disbursement partners and monitor them periodically with the goal of meeting regulatory expectations. However, there are limits to the extent to which we can monitor their regulatory compliance. Any determination that our disbursement partners or their sub-disbursement partners have violated laws and regulations could seriously damage our reputation, resulting in diminished revenue and profit and increased operating costs. While our services are not directly regulated by governments outside the United States, it is possible that in some cases we could be liable for the failure of our disbursement partners or their sub-disbursement partners to comply with laws, which also could harm our business, financial condition and results of operations.

We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy. Our actual or perceived failure to comply with such obligations could harm our business.

We receive, store and process personal information and other customer and recipient data, including bank account numbers, credit and debit card information, identification numbers and images of government identification cards. As a result, we are required to comply with the privacy provisions of the Gramm-Leach-Bliley Act of 1999 and the Payment Card Industry Data Security Standard. There are also numerous other federal, state and local laws around the world regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other customer and recipient data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among different jurisdictions or conflict with other applicable rules. Any expansion of our products and services over time, including the growth of our international operations, our recently launched cross-border bill payment service or any future introduction of mobile phone reload services, may subject us to additional regulatory exposure, including but not limited to the application of foreign consumer privacy laws, as described elsewhere in these risk factors. It is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our business practices.

Additionally, with advances in computer capabilities and data protection requirements to address ongoing threats, we may be required to expend significant capital and other resources to protect against potential security breaches or to alleviate problems caused by security breaches.

Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer or recipient data, may result in governmental enforcement actions, fines or litigation. If there is a breach of credit or debit card information that we store, we could also be liable to the issuing banks for their cost of issuing new cards and related expenses. In addition, a significant breach could result in our being prohibited from processing transactions for any of the relevant network organizations, such as Visa or MasterCard, which would harm our business. If any third parties with whom we work, such as marketing partners, vendors or developers, violate applicable laws or our policies, such violations may put our customers’ information at risk and could harm our business. Any negative publicity arising out of a data breach or failure to comply with applicable privacy requirements could damage our reputation and cause our customers to lose trust in us, which could harm our business, results of operations, financial position and potential for growth.

Public scrutiny of Internet privacy issues may result in increased regulation and different industry standards, which could deter or prevent us from providing our current services to our customers, thereby harming our business.

The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet have recently come under increased public scrutiny. The

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U.S. government, including the Federal Trade Commission, or FTC, and the Department of Commerce, is reviewing the need for greater regulation for the collection of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain targeted advertising practices. Various government and consumer agencies have also called for new regulation and changes in industry practices. These data protection laws may be interpreted and applied inconsistently.

While we do not sell or share personally identifiable information with third parties for direct marketing purposes, we do have relationships with third parties that may allow them access to customer information for other purposes. For example, when we outsource functions such as customer support, tracking and reporting, fraud prevention, and payment processing to other companies, we make customer information available to those companies to the extent necessary for them to provide their services. We believe our policies and practices comply with the FTC privacy guidelines and other applicable laws and regulations. However, if our belief proves incorrect, if there are changes to the guidelines, laws or regulations or their interpretation, or if new regulations are enacted that are inconsistent with our current business practices, our business could be harmed. We may be required to change our business practices, services or privacy policy, reconsider any plans to expand internationally, or obtain additional consents from our customers before collecting or using their information, among other changes. Changes like these could increase our operating costs and make it more difficult for customers to use our services, resulting in less revenue. Additionally, data collection, privacy and security have become the subject of increasing public concern. If Internet users were to reduce their use of our services as a result, our business could be harmed.

Risks Related to Ownership of our Common Stock

If research analysts do not continue to publish research about our business or if they issue unfavorable commentary or downgrade our common stock, our stock price and trading volume could decline.

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

Our stock price has been and will likely continue to be volatile, which could result in the decline of the value of an investment in our common stock or class action litigation against us and our management which could cause us to incur substantial costs and divert management’s attention and resources.

An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock. The price of our common stock has been, and is likely to continue to be, volatile, which means that it could decline substantially within a short period of time. For example, since shares of our common stock were sold in our initial public offering in February 2013 at a price of $16.00 per share, our closing stock price has ranged from $13.79 to $35.27 through April 24, 2015. The trading price of our common stock may be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:

·

actual or anticipated fluctuations in our financial condition and results of operations;

·

our operating performance and the operating performance of similar companies;

·

our announcement of operating results, revenue or earnings guidance that is higher or lower than expected;

·

changes in laws or regulations relating to our services;

·

any major change in our Board of Directors or management;

·

loss of a significant amount of business from current customers;

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·

the overall performance of the equity markets;

·

the number of shares of our common stock publicly owned and available for trading;

·

fluctuations in the valuation of companies perceived by investors to be comparable to us;

·

publication of research reports about us or our industry or positive or negative recommendations   or withdrawal of research coverage by securities analysts;

·

large volumes of sales of our shares of common stock; and

·

general political and economic conditions in the United States or the countries in which we or our disbursement partners or service providers operate.

In addition, the stock market in general, and the market for Internet-related companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company's securities. Securities litigation against us, including as discussed elsewhere in these risk factors, could result in very substantial costs, divert our management's attention and resources and harm our business, operating results and financial condition.

Our business could be negatively affected as a result of actions of activist stockholders.

Campaigns by stockholders to effect changes at publicly traded companies are sometimes led by investors through various corporate actions, including proxy contests. We may become subject to one or more campaigns by stockholders who desire to increase stockholder value in the short term. We have recently seen some investors increase their ownership positions in our common stock and initiate communications with us. As a general matter, if we become engaged in a proxy contest with an activist stockholder in the future, our business could be adversely affected as responding to such contests or other activist stockholder actions could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees from executing our strategic plan. In addition, if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans. Any perceived uncertainties as to our future direction as a result of stockholder activism or changes to the composition of our Board of Directors may lead to the perception of a change in the direction of our business, instability or lack of continuity which may be exploited by our competitors, decline of our stock price, the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners.

Our executive officers, directors and significant stockholders own a significant percentage of our stock, have significant control of our management and affairs, and can take actions that may be against your best interests.

As of December 31, 2014, our executive officers, directors and holders of more than 10% of our voting securities beneficially owned a significant percentage of our outstanding common stock. This significant concentration of stock ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. Also, as a result, these stockholders, acting together, may be able to control our management and affairs and other matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change in control would benefit our other stockholders.

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We currently do not intend to pay dividends on our common stock and, consequently, an investor’s only opportunity to achieve a return on the investment is if the price of our common stock appreciates.

We currently do not plan to declare dividends on shares of our common stock in the foreseeable future. Consequently, an investor’s only opportunity to achieve a return on the investment in us will be if the market price of our common stock appreciates and the investor sells shares at a profit. There is no guarantee that the price of our common stock in the market will ever exceed the price that an investor paid.

Certain provisions of our certificate of incorporation and bylaws and of Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions may also prevent or delay attempts by stockholders to replace or remove our current management or members of our Board of Directors. These provisions include:

·

providing for a classified Board of Directors with staggered three-year terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors;

·

not providing for cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

·

authorizing our Board of Directors to issue, without stockholder approval, preferred stock rights senior to those of common stock, which could be used to significantly dilute the ownership of a hostile acquirer;

·

prohibiting stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

·

limiting the persons who may call special meetings of stockholders, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

·

requiring advance notification of stockholder nominations and proposals, 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 us.

The affirmative vote of the holders of at least 66 2/3% of our shares of capital stock entitled to vote is generally necessary to amend or repeal the above provisions that are contained in our amended and restated certificate of incorporation. Also, absent approval of our Board of Directors, our amended and restated by-laws may only be amended or repealed by the affirmative vote of the holders of at least 66 2/3% of our shares of capital stock entitled to vote.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding common stock, from engaging in certain business combinations without approval of substantially all of our stockholders for a certain period of time.

These and other provisions in our amended and restated certificate of incorporation, our amended and restated bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.

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ITEM 6. Exhibits

The exhibits listed below are filed or incorporated by reference as part of this report.

 

 

 

 

 

 

 

 

 

 

Exhibit
Number

  

Description of Exhibits

  

Incorporated by
Reference from
Form 

  

Incorporated by
Reference from
Exhibit
Number 

  

Date 

Filed

 

 10.1

 

Form of Restricted Stock Unit Award Agreement

 

Filed herewith

 

 

 

 

 

  31.1

 

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

 

Filed herewith

 

 

 

 

 

  31.2

 

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

 

Filed herewith

 

 

 

 

 

  32.1*

 

Certification of the Chief Executive Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

 

Furnished herewith

 

 

 

 

 

  32.2*

 

Certification of the Chief Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

 

Furnished herewith

 

 

 

 

 

101.INS

 

XBRL Instance Document

 

Filed herewith

 

 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

Filed herewith

 

 

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

Filed herewith

 

 

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

Filed herewith

 

 

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

Filed herewith

 

 

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

Filed herewith

 

 

 

 

 

 

*The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

 

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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 hereunto duly authorized.

 

 

 

 

 

 

 

 

Date: May 1, 2015

 

XOOM CORPORATION

 

 

 

 

 

 

By:

 /s/ Ryno Blignaut 

 

 

Ryno Blignaut

 

 

Acting Chief Financial Officer and Chief Risk Officer

(Principal Financial and Accounting Officer)

 

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Exhibit Index

 

 

 

 

 

 

 

 

 

 

Exhibit
Number

  

Description of Exhibits 

  

Incorporated by
Reference from
Form 

  

Incorporated by
Reference from
Exhibit 
Number 

  

Date 

Filed

 

 10.1

 

Form of Restricted Stock Unit Award Agreement

 

Filed herewith

 

 

 

 

 

  31.1

 

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

 

Filed herewith

 

 

 

 

 

  31.2

 

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

 

Filed herewith

 

 

 

 

 

  32.1*

 

Certification of the Chief Executive Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

 

Furnished herewith

 

 

 

 

 

  32.2*

 

Certification of the Chief Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

 

Furnished herewith

 

 

 

 

 

101.INS

 

XBRL Instance Document

 

Filed herewith

 

 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

Filed herewith

 

 

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

Filed herewith

 

 

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

Filed herewith

 

 

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

Filed herewith

 

 

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

Filed herewith

 

 

 

 

 

 

*The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

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