Attached files

file filename
EX-31.1 - EX-31.1 - Quotient Technology Inc.quot-ex311_8.htm
EX-10.1 - EX-10.1 - Quotient Technology Inc.quot-ex101_253.htm
EX-32.1 - EX-32.1 - Quotient Technology Inc.quot-ex321_6.htm
EX-32.2 - EX-32.2 - Quotient Technology Inc.quot-ex322_9.htm
EX-31.2 - EX-31.2 - Quotient Technology Inc.quot-ex312_7.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

x

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

For the quarterly period ended September 30, 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: 001-36331

 

Quotient Technology Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

77-0485123

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

 

 

400 Logue Avenue, Mountain View, California

 

94043

(Address of Principal Executive Offices)

 

(Zip Code)

(650) 605-4600

(Registrant’s Telephone Number, Including Area Code)

 

Coupons.com Incorporated

(Former name, former address and former fiscal year, if changed since last report)

 

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

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

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

 

Large accelerated filer

 

¨

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

x (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   x

As of November 6, 2015, the registrant had 89,452,684 shares of common stock outstanding.

 

 

 

 


QUOTIENT TECHNOLOGY INC.

INDEX

REPORT ON FORM 10-Q

FOR THE QUARTER ENDED September 30, 2015

 

PART I FINANCIAL INFORMATION

 

Item 1 Financial Statements (unaudited):

  

3

 

Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

  

3

 

Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2015 and 2014

  

4

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine months ended September 30, 2015 and 2014

  

5

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014

  

6

 

Notes to Condensed Consolidated Financial Statements

  

7

 

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

  

17

 

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 2—Unregistered Sales of Equity Securities and Use of Proceeds

  

51

 

Item 3—Defaults Upon Senior Securities

  

51

 

Item 4—Mine Safety Disclosures

  

51

 

Item 5—Other Information

  

51

 

Item 6—Exhibits

  

51

 

SIGNATURES

  

52

 

 

 

2


PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

September 30,

2015

 

 

December 31,

2014

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

189,988

 

 

$

201,075

 

Accounts receivable, net of allowance for doubtful accounts of $302 and $408

   at September 30, 2015 and December 31, 2014, respectively

 

53,299

 

 

 

51,061

 

Prefunded coupons cash deposits

 

626

 

 

 

740

 

Deferred tax assets

 

410

 

 

 

457

 

Prepaid expenses and other current assets

 

5,494

 

 

 

2,972

 

Total current assets

 

249,817

 

 

 

256,305

 

Property and equipment, net

 

26,451

 

 

 

25,399

 

Intangible assets, net

 

9,839

 

 

 

11,818

 

Goodwill

 

29,262

 

 

 

29,277

 

Other assets

 

8,876

 

 

 

9,008

 

Total assets

$

324,245

 

 

$

331,807

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

9,461

 

 

$

6,358

 

Accrued compensation and benefits

 

11,560

 

 

 

14,861

 

Other current liabilities

 

17,779

 

 

 

15,790

 

Prefunded coupons cash obligations

 

626

 

 

 

740

 

Deferred revenues

 

7,392

 

 

 

6,219

 

Debt obligation

 

 

 

 

7,500

 

Total current liabilities

 

46,818

 

 

 

51,468

 

Other non-current liabilities

 

18

 

 

 

89

 

Deferred rent

 

683

 

 

 

738

 

Deferred tax liabilities

 

2,121

 

 

 

2,624

 

Total liabilities

 

49,640

 

 

 

54,919

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $0.00001 par value—10,000,000 shares authorized and no shares

   issued or outstanding at September 30, 2015 and December 31, 2014

 

 

 

 

 

Common stock, $0.00001 par value—250,000,000 shares authorized; 89,042,758

   shares issued and 83,232,918 outstanding at September 30, 2015; 86,224,920

   shares issued and 81,380,014 outstanding at December 31, 2014

 

1

 

 

 

1

 

Additional paid-in capital

 

561,187

 

 

 

531,018

 

Treasury stock, at cost

 

(71,176

)

 

 

(61,935

)

Accumulated other comprehensive loss

 

(51

)

 

 

(1

)

Accumulated deficit

 

(215,356

)

 

 

(192,195

)

Total stockholders’ equity

 

274,605

 

 

 

276,888

 

Total liabilities and stockholders’ equity

$

324,245

 

 

$

331,807

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

3


 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenues

$

56,467

 

 

$

58,544

 

 

$

167,896

 

 

$

161,760

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

22,778

 

 

 

23,061

 

 

 

66,767

 

 

 

64,464

 

Sales and marketing

 

23,403

 

 

 

19,047

 

 

 

66,321

 

 

 

56,179

 

Research and development

 

11,890

 

 

 

11,351

 

 

 

36,671

 

 

 

38,599

 

General and administrative

 

8,382

 

 

 

7,400

 

 

 

24,740

 

 

 

25,307

 

Change in fair value of contingent consideration

 

(238

)

 

 

(2,806

)

 

 

1,484

 

 

 

(2,806

)

Total costs and expenses

 

66,215

 

 

 

58,053

 

 

 

195,983

 

 

 

181,743

 

Income (loss) from operations

 

(9,748

)

 

 

491

 

 

 

(28,087

)

 

 

(19,983

)

Interest expense

 

(126

)

 

 

(241

)

 

 

(288

)

 

 

(843

)

Gain on sale of a right to use a web domain name

 

 

 

 

 

 

 

4,800

 

 

 

 

Other income (expense), net

 

47

 

 

 

19

 

 

 

26

 

 

 

(88

)

Income (loss) before income taxes

 

(9,827

)

 

 

269

 

 

 

(23,549

)

 

 

(20,914

)

Provision for (benefit from) income taxes

 

(9

)

 

 

1,051

 

 

 

(388

)

 

 

807

 

Net loss

$

(9,818

)

 

$

(782

)

 

$

(23,161

)

 

$

(21,721

)

Net loss per share attributable to common stockholders, basic

   and diluted

$

(0.12

)

 

$

(0.01

)

 

$

(0.28

)

 

$

(0.34

)

Weighted-average number of common shares used in computing

   net loss per share attributable to common stockholders, basic

   and diluted

 

82,831

 

 

 

78,065

 

 

 

83,335

 

 

 

63,542

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

4


QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net loss

$

(9,818

)

 

$

(782

)

 

$

(23,161

)

 

$

(21,721

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(67

)

 

 

(47

)

 

 

(50

)

 

 

(2

)

Comprehensive loss

$

(9,885

)

 

$

(829

)

 

$

(23,211

)

 

$

(21,723

)

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

5


QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Nine Months Ended

September 30,

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(23,161

)

 

$

(21,721

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

11,879

 

 

 

10,778

 

Stock-based compensation

 

25,513

 

 

 

27,727

 

Accretion of debt discount

 

 

 

 

116

 

Amortization of debt issuance costs

 

134

 

 

 

57

 

Loss on disposal of property and equipment

 

2

 

 

 

9

 

Gain on sale of a right to use a web domain name

 

(4,800

)

 

 

 

Allowance for doubtful accounts

 

46

 

 

 

138

 

Deferred income taxes

 

(456

)

 

 

807

 

Change in fair value of contingent consideration

 

1,484

 

 

 

(2,806

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(2,295

)

 

 

(5,390

)

Prepaid expenses and other current assets

 

(2,790

)

 

 

(4,653

)

Accounts payable and other current liabilities

 

2,056

 

 

 

1,729

 

Accrued compensation and benefits

 

(3,279

)

 

 

(1,068

)

Deferred revenues

 

1,190

 

 

 

358

 

Other

 

5

 

 

 

(742

)

Net cash provided by operating activities

 

5,528

 

 

 

5,339

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(9,406

)

 

 

(6,621

)

Acquisitions, net of acquired cash

 

 

 

 

(11,641

)

Purchase of intangible assets

 

(283

)

 

 

(37

)

Proceeds from sale of a right to use a web domain name

 

4,800

 

 

 

 

Net cash used in investing activities

 

(4,889

)

 

 

(18,299

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

4,656

 

 

 

4,083

 

Repurchases of common stock

 

(8,852

)

 

 

 

Proceeds from initial public offering, net of offering costs

 

 

 

 

176,525

 

Exercise of warrant

 

 

 

 

1,610

 

Repayment of debt obligations, related party

 

 

 

 

(15,000

)

Repayment of debt obligations

 

(7,500

)

 

 

 

Principal payments on capital lease obligations

 

(46

)

 

 

(43

)

Net cash (used in) provided by financing activities

 

(11,742

)

 

 

167,175

 

Effect of exchange rates on cash and cash equivalents

 

16

 

 

 

10

 

Net (decrease) increase in cash and cash equivalents

 

(11,087

)

 

 

154,225

 

Cash and cash equivalents at beginning of period

 

201,075

 

 

 

38,972

 

Cash and cash equivalents at end of period

$

189,988

 

 

$

193,197

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

6


QUOTIENT TECHNOLOGY INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Description of Business

Quotient Technology Inc., formerly known as Coupons.com Incorporated (the “Company”) connects great brands and retailers with consumers by delivering digital promotions and media to consumers. The Company’s new name, which became effective October 20, 2015, is designed to better reflect the breadth and sophistication of the Company's business offerings, and its efforts to be a leader in the digital transformation of the promotions industry. The company stock now trades under the ticker symbol QUOT, reflecting the full corporate name, Quotient Technology Inc. Many brands from leading consumer packaged goods companies (“CPGs”) and many of the leading grocery, drug, dollar channel, club and mass merchandise retailers use the Company’s digital platform to engage consumers at the critical moments when they are choosing which products they will buy and where they will shop. The Company delivers digital coupons, including coupon codes, and media through its platform. The Company’s platform includes web, mobile and social channels, as well as those of the Company’s CPGs, retailers and its extensive network of publishers that display the Company’s coupon and media offerings on their websites and mobile applications. Consumers select coupons by either printing them for physical redemption at retailers or saving them to retailer loyalty accounts for automatic digital redemption.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2015 or for any other period.

There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on its condensed consolidated financial statements and related notes.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results may differ from the Company’s estimates, and such differences may be material to the accompanying condensed consolidated financial statements.

Reclassifications

Certain prior period financial statement amounts have been reclassified to conform to current period presentation.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09—Revenue from Contracts with Customers (Topic 606), and in August 2015, the FASB issued ASU 2015-14 – Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date which defers the effective date of ASU 2014-09 amended the existing accounting standards to achieve consistent application of revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or

7


services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the standard requires reporting companies to also disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB agreed to delay the effective date of this amendment by one year, accordingly, the Company is required to adopt the amendments in the first quarter of 2018. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application.   Early adoption is permitted, but not before the original effective date of the amendment.

 

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 eliminates the requirement for an acquirer to retrospectively adjust provisional amounts recorded in a business combination to reflect new information about the facts and circumstances that existed as of the acquisition date and that, if known, would have affected measurement or recognition of amounts initially recognized. As an alternative, the amendment requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the financial statements of the period in which adjustments to provisional amounts are determined, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 is effective prospectively for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, accordingly, the Company is required to adopt the amendment in the first quarter of 2016. Early adoption is permitted.

The Company is currently evaluating the impact of these amendments.

3. Fair Value Measurements

The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

8


The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in thousands):

 

 

September 30, 2015

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

$

14,940

 

 

$

 

 

$

 

 

$

14,940

 

Total

$

14,940

 

 

$

 

 

$

 

 

$

14,940

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration (2)

$

 

 

$

 

 

$

2,532

 

 

$

2,532

 

Total

$

 

 

$

 

 

$

2,532

 

 

$

2,532

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

$

14,928

 

 

$

 

 

$

 

 

$

14,928

 

Total

$

14,928

 

 

$

 

 

$

 

 

$

14,928

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration (2)

$

 

 

$

 

 

$

1,048

 

 

$

1,048

 

Total

$

 

 

$

 

 

$

1,048

 

 

$

1,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Included in cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Included in other current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The valuation technique used to measure the fair value of money market funds included using quoted prices in active markets for identical assets or liabilities.

The fair value of contingent consideration was estimated using a Monte Carlo simulation and was based on significant inputs not observable in the market, thus classified as a Level 3 instrument. The inputs include the Company’s stock price, maximum earn-out shares, historical and projected financial results of Eckim, LLC. (“Eckim”), historical volatility of the Company's stock price and risk-free interest rate.

The following table represents the change in the contingent consideration (in thousands):

 

 

 

 

 

 

 

 

Level 3

 

Balance as of December 31, 2014

 

 

 

 

 

 

$

1,048

 

Change in fair value

 

 

 

 

 

 

 

1,484

 

Balance as of September 30, 2015

 

 

 

 

 

 

$

2,532

 

 

The Company recorded a gain of $0.2 million during the three months ended September 30, 2015 and a loss of $1.5 million during the nine months ended September 30, 2015, due to the changes in fair value of the contingent consideration. The change in fair value of the contingent consideration during the third quarter was primarily related to the decrease in the Company’s stock price. The change in fair value of the contingent consideration during the nine months ended September 30, 2015, was primarily driven by the increase in the likelihood of achieving the post-acquisition contractual performance requirements, including revenue and profit milestones, partially offset by a decrease in the Company’s stock price. Gains and losses as a result of the changes in the fair value of the contingent consideration are included as a component of operations in the accompanying condensed consolidated statements of operations.

 

9


4. Allowance for Doubtful Accounts

The summary of activity in the allowance for doubtful accounts is as follows (in thousands):

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Balance at beginning of period

$

245

 

 

$

400

 

 

$

408

 

 

$

332

 

Bad debt expense (credit)

 

81

 

 

 

59

 

 

 

46

 

 

 

138

 

Recoveries (write-offs), net

 

(24

)

 

 

(44

)

 

 

(152

)

 

 

(55

)

Balance at end of period

$

302

 

 

$

415

 

 

$

302

 

 

$

415

 

 

 

5. Balance Sheet Components

Property and Equipment, Net

Property and equipment consist of the following (in thousands):

 

 

September 30,

2015

 

 

December 31,

2014

 

Software

$

32,320

 

 

$

30,791

 

Computer equipment

 

21,368

 

 

 

17,325

 

Leasehold improvements

 

5,908

 

 

 

2,393

 

Furniture and fixtures

 

1,744

 

 

 

1,645

 

Total

 

61,340

 

 

 

52,154

 

Accumulated depreciation and amortization

 

(37,721

)

 

 

(28,783

)

Projects in process

 

2,832

 

 

 

2,028

 

Property and equipment, net

$

26,451

 

 

$

25,399

 

 

Depreciation and amortization expense of property and equipment was $3.3 million and $9.6 million for the three and nine months ended September 30, 2015, respectively, and $3.4 million and $9.6 million for the three and nine months ended September 30, 2014, respectively.

During the three and nine months ended September 30, 2015, the Company capitalized internal use software development and enhancement costs related to the Company’s Retailer iQ platform (“Retailer iQ”) of $0.3 million and $1.1 million, respectively, compared to $0.3 million and $2.5 million during the three and nine months ended September 30, 2014, respectively. During the three and nine months ended September 30, 2015, the Company recognized $2.4 million and $7.0 million respectively, of amortization expense related to Retailer iQ in cost of revenues, and $2.1 million and $5.5 million during the three and nine months ended September 30, 2014, respectively.  The unamortized capitalized development and enhancement costs related to Retailer iQ was $13.1 million and $19.0 million as of September 30, 2015 and December 31, 2014, respectively.

Accrued Compensation and Benefits

Accrued compensation and benefits consist of the following (in thousands):

 

 

September 30,

2015

 

 

December 31,

2014

 

Bonus

$

5,168

 

 

$

6,909

 

Vacation

 

2,167

 

 

 

2,427

 

Commissions

 

2,281

 

 

 

3,458

 

Payroll and related expenses

 

1,944

 

 

 

2,067

 

Accrued compensation and benefits

$

11,560

 

 

$

14,861

 

 

10


Other Current Liabilities

Other current liabilities consist of the following (in thousands):

 

 

September 30,

2015

 

 

December 31,

2014

 

Distribution fees

$

7,659

 

 

$

5,805

 

Marketing expenses

 

2,635

 

 

 

3,415

 

Contingent consideration

 

2,532

 

 

 

1,048

 

Accrued property and equipment

 

1,172

 

 

 

687

 

Legal and professional fees

 

984

 

 

 

1,699

 

Deferred rent

 

268

 

 

 

536

 

Other

 

2,529

 

 

 

2,600

 

Other current liabilities

$

17,779

 

 

$

15,790

 

 

6. Goodwill and Intangible Assets

Goodwill represents the excess of the consideration paid over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The change in the carrying value of goodwill is as follows (in thousands):

 

 

Goodwill

 

Balance as of December 31, 2014

$

29,277

 

Foreign currency translation

 

(15

)

Balance as of September 30, 2015

$

29,262

 

 

Intangible assets consist of the following (in thousands):

 

 

September 30,

2015

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

September 30,

2015

Net

 

 

Weighted

Average

Amortization

Period

(Years)

Customer relationships

$

7,164

 

 

$

(2,959

)

 

$

13

 

 

$

4,218

 

 

4

Domain names

 

5,252

 

 

 

(3,264

)

 

 

 

 

 

1,988

 

 

4

Developed technologies

 

4,117

 

 

 

(1,405

)

 

 

 

 

 

2,712

 

 

4

Patents

 

1,050

 

 

 

(657

)

 

 

 

 

 

393

 

 

6

Vendor relationships

 

890

 

 

 

(389

)

 

 

 

 

 

501

 

 

2

Trade names

 

167

 

 

 

(142

)

 

 

2

 

 

 

27

 

 

1

 

$

18,640

 

 

$

(8,816

)

 

$

15

 

 

$

9,839

 

 

4

 

 

December 31,

2014

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

December 31,

2014

Net

 

 

Weighted

Average

Amortization

Period

(Years)

Customer relationships

$

7,164

 

 

$

(1,978

)

 

$

21

 

 

$

5,207

 

 

4

Domain names

 

4,968

 

 

 

(2,836

)

 

 

 

 

 

2,132

 

 

4

Developed technologies

 

4,117

 

 

 

(834

)

 

 

 

 

 

3,283

 

 

5

Patents

 

1,050

 

 

 

(570

)

 

 

 

 

 

480

 

 

6

Vendor relationships

 

890

 

 

 

(223

)

 

 

 

 

 

667

 

 

3

Trade names

 

167

 

 

 

(121

)

 

 

3

 

 

 

49

 

 

2

 

$

18,356

 

 

$

(6,562

)

 

$

24

 

 

$

11,818

 

 

4

 

11


Amortization expense related to intangible assets subject to amortization was $0.8 million and $2.3 million for the three and nine months ended September 30, 2015, respectively and $0.6 million and $1.2 million during the three and nine months ended September 30, 2014, respectively. Estimated future amortization expense of intangible assets as of September 30, 2015 is as follows (in thousands):

 

 

Total

 

2015, remaining three months

$

756

 

2016

 

2,889

 

2017

 

2,576

 

2018

 

2,299

 

2019

 

1,213

 

2020 and beyond

 

106

 

Total estimated amortization expense

$

9,839

 

 

7. Debt Obligation

In September 2013, the Company entered into an agreement with a commercial bank to establish an accounts receivable based revolving line of credit. The maximum amount available for borrowing under the revolving credit facility is the lesser of $25.0 million (which can be increased to $30.0 million if certain conditions are met) or an amount equal to 85% of certain eligible accounts, which excludes accounts that are over 60 days outstanding from the original due date. The revolving line of credit has a maturity date of September 30, 2016 and may be repaid and redrawn at any time prior to the maturity date. Interest is charged at a floating interest rate based on the daily three month LIBOR, plus % applicable margin. In May 2014, the Company entered into an amendment, which revised the applicable margin from 2.75% to 2.00% per annum and the financial reporting intervals from monthly to quarterly reporting. As of December 31, 2014, $7.5 million was outstanding under the revolving line of credit. During the quarter ended September 30, 2015, the Company terminated the line of credit and paid off the balance in full. As of September 30, 2015, there were no amounts outstanding or available under the line of credit.

 

 

8. Stock-based Compensation

2013 Equity Incentive Plan

In October 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), which became effective in March 2014 and serves as the successor to the Company’s 2006 Stock Plan (the “2006 Plan”).  Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares and units to employees, directors and consultants.

Stock Options

The fair value of each option was estimated on the date of grant for the period presented using the following assumptions:

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2015

 

 

2014

 

2015

 

2014

 

Expected life (in years)

 

6.08

 

 

 

5.50 - 6.08

 

 

6.08

 

Risk-free interest rate

 

1.67%

 

 

 

1.67 - 1.89%

 

 

2.33%

 

Volatility

 

60%

 

 

 

55 - 60%

 

 

55%

 

Dividend yield

 

 

 

 

 

 

The weighted-average grant-date fair value of options granted was $5.34 and $5.57 per share during the three months and nine months ended September 30, 2015 and $8.60 per share during the nine months ended September 30, 2014.  There were no option grants during the three months ended September 30, 2014.

Restricted Stock Units

The fair value of RSUs equals the market value of the Company’s common stock on the date of the grant. The RSUs are excluded from issued and outstanding shares until they are vested.

12


A summary of the Company’s stock option and RSUs award activity under the 2013 Plan is as follows:

 

 

 

 

 

 

Options Outstanding

 

 

RSUs Outstanding

 

 

Shares

Available

for Grant

 

 

Number of

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value

(in thousands)

 

 

Number of

Shares

 

 

Weighted

Average

Grant

Date Fair

Value

 

Balance as of December 31, 2014

 

1,825,112

 

 

 

9,494,763

 

 

$

7.00

 

 

 

6.57

 

 

$

107,913

 

 

 

6,809,415

 

 

$

12.66

 

Increase in shares authorized

 

3,255,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

(328,680

)

 

 

328,680

 

 

 

10.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercised

 

 

 

 

(1,034,605

)

 

 

3.51

 

 

 

 

 

 

 

9,438

 

 

 

 

 

 

 

 

 

Options canceled or expired

 

49,829

 

 

 

(49,829

)

 

 

8.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs granted

 

(3,155,953

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,155,953

 

 

 

13.48

 

RSUs released

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,687,983

)

 

 

11.75

 

RSUs canceled or expired

 

1,117,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,117,472

)

 

 

12.83

 

Balance as of September 30, 2015

 

2,762,980

 

 

 

8,739,009

 

 

$

7.52

 

 

 

6.12

 

 

$

31,768

 

 

 

7,159,913

 

 

$

13.14

 

Vested and expected to vest as of

  September 30, 2015

 

 

 

 

 

8,350,252

 

 

$

7.27

 

 

 

6.03

 

 

$

31,409

 

 

 

 

 

 

 

 

 

Vested and exercisable as of

   September 30, 2015

 

 

 

 

 

6,668,290

 

 

$

5.82