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EX-31.1 - EX-31.1_Q1-16 - Quotient Technology Inc.quot-ex311_48.htm
EX-32.1 - EX-32.1_Q1-16 - Quotient Technology Inc.quot-ex321_45.htm
EX-31.2 - EX-31.2_Q1-16 - Quotient Technology Inc.quot-ex312_47.htm
EX-32.2 - EX-32.2_Q1-16 - Quotient Technology Inc.quot-ex322_46.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 March 31, 2016

OR

¨

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

For the transition period from              to             

Commission File Number: 001-36331

 

Quotient Technology Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

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)

 

(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

 

x

 

 

 

 

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   x

As of May 2, 2016, the registrant had 82,923,157 shares of common stock outstanding.

 

 

 

 

 

 


QUOTIENT TECHNOLOGY INC.

INDEX

REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2016

 

PART I FINANCIAL INFORMATION

 

Item 1 Financial Statements (unaudited):

  

3

 

Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015

  

3

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015

  

4

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2016 and 2015

  

5

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015

  

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

  

25

 

Item 4 Controls and Procedures

  

25

 

PART II OTHER INFORMATION

 

Item 1—Legal Proceedings

  

26

 

Item 1A—Risk Factors

  

26

 

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

  

49

 

Item 3—Defaults Upon Senior Securities

  

50

 

Item 4—Mine Safety Disclosures

  

50

 

Item 5—Other Information

  

50

 

Item 6—Exhibits

  

50

 

SIGNATURES

  

51

 

 

 

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)

 

 

March 31,

2016

 

 

December 31,

2015

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

124,259

 

 

$

134,947

 

Short-term investments

 

25,000

 

 

 

25,000

 

Accounts receivable, net of allowance for doubtful accounts of $711 and $833

   at March 31, 2016 and December 31, 2015, respectively

 

57,565

 

 

 

63,239

 

Prepaid expenses and other current assets

 

8,525

 

 

 

5,297

 

Total current assets

 

215,349

 

 

 

228,483

 

Property and equipment, net

 

22,438

 

 

 

25,128

 

Intangible assets, net

 

13,853

 

 

 

14,880

 

Goodwill

 

43,895

 

 

 

43,895

 

Other assets

 

8,261

 

 

 

8,685

 

Total assets

$

303,796

 

 

$

321,071

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

7,951

 

 

$

8,187

 

Accrued compensation and benefits

 

8,874

 

 

 

15,237

 

Other current liabilities

 

15,389

 

 

 

20,170

 

Deferred revenues

 

7,828

 

 

 

7,342

 

Total current liabilities

 

40,042

 

 

 

50,936

 

Other non-current liabilities

 

67

 

 

 

5

 

Deferred rent

 

1,801

 

 

 

701

 

Contingent consideration related to acquisitions

 

1,653

 

 

 

1,407

 

Deferred tax liabilities

 

2,561

 

 

 

2,532

 

Total liabilities

 

46,124

 

 

 

55,581

 

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 March 31, 2016 and December 31, 2015

 

 

 

 

 

Common stock, $0.00001 par value—250,000,000 shares authorized; 91,735,158

   shares issued and 82,105,905 outstanding at March 31, 2016; 89,935,381

   shares issued and 81,995,286 outstanding at December 31, 2015

 

1

 

 

 

1

 

Additional paid-in capital

 

581,927

 

 

 

570,588

 

Treasury stock, at cost

 

(96,390

)

 

 

(85,427

)

Accumulated other comprehensive loss

 

(746

)

 

 

(747

)

Accumulated deficit

 

(227,120

)

 

 

(218,925

)

Total stockholders’ equity

 

257,672

 

 

 

265,490

 

Total liabilities and stockholders’ equity

$

303,796

 

 

$

321,071

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

3


 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Revenues

$

66,051

 

 

$

55,562

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of revenues

 

25,212

 

 

 

21,867

 

Sales and marketing

 

24,500

 

 

 

21,084

 

Research and development

 

13,532

 

 

 

12,942

 

General and administrative

 

11,250

 

 

 

8,491

 

Change in fair value of contingent consideration

 

(102

)

 

 

(354

)

Total costs and expenses

 

74,392

 

 

 

64,030

 

Loss from operations

 

(8,341

)

 

 

(8,468

)

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

 

 

 

 

4,800

 

Interest expense

 

 

 

 

(80

)

Other income (expense), net

 

192

 

 

 

(61

)

Loss before income taxes

 

(8,149

)

 

 

(3,809

)

Provision for income taxes

 

46

 

 

 

192

 

Net loss

$

(8,195

)

 

$

(4,001

)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.10

)

 

$

(0.05

)

Weighted-average number of common shares used in computing net loss per

   share attributable to common stockholders, basic and diluted

 

82,518

 

 

 

82,166

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

4


QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Net loss

$

(8,195

)

 

$

(4,001

)

Other comprehensive (income) loss:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

1

 

 

 

(65

)

Comprehensive loss

$

(8,194

)

 

$

(4,066

)

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

 

5


QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(8,195

)

 

$

(4,001

)

Adjustments to reconcile net loss to net cash provided by (used in) operating

   activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

5,128

 

 

 

3,908

 

Stock-based compensation

 

7,610

 

 

 

8,932

 

Amortization of debt issuance costs

 

 

 

 

19

 

Loss on disposal of property and equipment

 

11

 

 

 

 

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

 

 

 

 

(4,800

)

Allowance for doubtful accounts

 

(56

)

 

 

9

 

Deferred income taxes

 

20

 

 

 

164

 

Change in fair value of contingent consideration

 

(102

)

 

 

(354

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

5,731

 

 

 

3,101

 

Prepaid expenses and other current assets

 

(3,039

)

 

 

(1,516

)

Accounts payable and other current liabilities

 

(1,039

)

 

 

233

 

Accrued compensation and benefits

 

(6,369

)

 

 

(6,883

)

Deferred revenues

 

486

 

 

 

333

 

Other

 

1

 

 

 

3

 

Net cash provided by (used in) operating activities

 

187

 

 

 

(852

)

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(1,684

)

 

 

(1,805

)

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

 

 

 

 

4,800

 

Net cash provided by (used in) investing activities

 

(1,684

)

 

 

2,995

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

1,785

 

 

 

1,254

 

Repurchases of common stock

 

(10,963

)

 

 

(2,052

)

Principal payments on capital lease obligations

 

(13

)

 

 

(15

)

Net cash used in financing activities

 

(9,191

)

 

 

(813

)

Effect of exchange rates on cash and cash equivalents

 

 

 

 

9

 

Net (decrease) increase in cash and cash equivalents

 

(10,688

)

 

 

1,339

 

Cash and cash equivalents at beginning of period

 

134,947

 

 

 

201,075

 

Cash and cash equivalents at end of period

$

124,259

 

 

$

202,414

 

 

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, is a provider of digital promotions and media solutions driven by consumer-shopping data. The Company connects consumer packaged goods (CPG) brands and retailers with shoppers by delivering digital promotions and media to shoppers through mobile, web and social channels. Leading brands, as well as leading retailers in the grocery, drug, dollar, club and mass merchandise channels, use its platform to engage shoppers at the critical moments when they are choosing what products to buy and where to shop. The Company’s new corporate name, which became effective October 20, 2015, is designed to better reflect the breadth and sophistication of its business offerings, along with its deepening relationships with Fortune 500 CPGs and retailers.

 

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2016 or for any other period.

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

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s condensed consolidated financial statements and accompanying notes.  Such management estimates include, but are not limited to, revenue recognition, collectability of accounts receivable, stock-based compensation, the valuation and useful lives of intangible assets and property and equipment, goodwill, contingent consideration and income taxes. Actual results may differ from the Company’s estimates, and such differences may be material to the accompanying condensed consolidated financial statements.

 

Foreign Currency

Prior to the first quarter of 2016, the functional currency of our international subsidiaries was the local currency.

In the first quarter of 2016, the functional currency of certain international subsidiaries changed from the local currency to USD.  This was due to significant changes in the nature of how we conduct business internationally.

Gains (losses) from foreign currency transactions are included in other income (expense), net in the accompanying condensed consolidated statements of operations. Foreign currency transaction gains (losses) were immaterial in the first quarter of 2016.

7


Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09—Revenue from Contracts with Customers (Topic 606), and in August 2015, the FASB issued ASU 2015-14– Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date which defers the effective date of ASU 2014-09 amended the existing accounting standards to achieve consistent application of revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the standard requires reporting companies to also disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB agreed to delay the effective date of this amendment by one year, accordingly, the Company is required to adopt the amendments in the first quarter of 2018. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. Early adoption is permitted, but not before the original effective date of the amendment, which is the first quarter of 2017. The Company is currently evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842). The guidance requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s accounting. Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The standard is effective for public business entities for annual reporting periods beginning after 15 December 2018, and interim periods within that reporting period, which would be the first quarter of 2019 for the Company. Early adoption is permitted. ASU 2016-02 is required to be adopted using a modified retrospective approach. The Company is currently evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09—Stock Compensation (Topic 718).  The new guidance requires all of the tax effects related to share based payments to be recorded through the income statement. The new guidance also removes the present requirement to delay recognition of a windfall tax benefit until it reduces current taxes payable; instead it is recognized at the time of settlement, subject to normal valuation allowance consideration. While the simplification will eliminate some administrative complexities, it will increase the volatility of income tax expense. The standard is effective for public business entities for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption is permitted.  The Company is currently evaluating the impact of adopting this new accounting guidance on the consolidated financial statements.

Accounting Pronouncements Adopted

In September 2015, the FASB issued ASU 2015-16Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date.  We adopted ASU 2015-16 on a prospective basis beginning on January 1, 2016. The impact of ASU 2015-16 did not have a significant impact on the condensed consolidated financial statements.

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.

8


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

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

 

 

March 31,

2016

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

$

19,968

 

 

$

 

 

$

 

 

$

19,968

 

Certificate of deposit (2)

 

 

 

 

25,000

 

 

 

 

 

 

25,000

 

Total

$

19,968

 

 

$

25,000

 

 

$

 

 

$

44,968

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to Shopmium acquisition

$

 

 

$

 

 

$

1,653

 

 

$

1,653

 

Total

$

 

 

$

 

 

$

1,653

 

 

$

1,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

2015

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

$

19,948

 

 

$

 

 

$

 

 

$

19,948

 

Certificate of deposit (2)

 

 

 

 

25,000

 

 

 

 

 

 

25,000

 

Total

$

19,948

 

 

$

25,000

 

 

$

 

 

$

44,948

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to Eckim acquisition (3)

$

2,291

 

 

$

 

 

$

 

 

$

2,291

 

Contingent consideration related to Shopmium acquisition

 

 

 

 

 

 

 

1,407

 

 

 

1,407

 

Total

$

2,291

 

 

$

 

 

$

1,407

 

 

$

3,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Included in cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Included in short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) Included in other current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

The fair value of contingent consideration related to Eckim LLC (Eckim) is the result of the earnout period ending for measuring shares issuable on Eckim achieving certain revenue and profit milestones as of December 31, 2015.  On January 26, 2016, the Company and the sellers of Eckim agreed on the performance against the milestones and the shares to be issued. Accordingly, we reclassified the contingent liability of $1.9 million to stockholder’s equity, and recognized a gain of $0.3 million as a component of loss from operations in the first quarter of 2016. The shares are issuable on or before April 30, 2016.    

The fair value of contingent consideration related to the acquisition of Shopmium S.A. (Shopmium) was estimated using a Monte Carlo simulation and was based on significant inputs not observable in the market, thus classified as a Level 3 instrument. The inputs include the expected achievement of certain revenue and profit milestones for the year ended December 31, 2016 and 2017 and the risk free interest rate.  A loss of $0.2 million was recorded as a component of loss from operations as a result of the remeasurement of the contingent consideration as of March 31, 2016.

9


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

 

 

 

 

Eckim

 

 

Shopmium

 

 

 

 

Level 1

 

 

Level 3

 

Balance as of December 31, 2015

 

 

$

2,291

 

 

$

1,407

 

Change in fair value

 

 

 

(348

)

 

 

246

 

Reclassification to stockholder's equity

 

 

 

(1,943

)

 

 

 

Balance as of March 31, 2016

 

 

$

 

 

$

1,653

 

 

 

 

 

The Company recorded a net gain due to the change in fair value of the contingent consideration of $0.1 million and $0.4 million during the three months ended March 31, 2016 and 2015, respectively. The change in fair value of the contingent consideration during the period was primarily related to the decrease in the Company’s stock price for Eckim and the increase in the likelihood of achieving certain revenue and profit milestones for Shopmium.  The net gain as a result of the changes in the fair value of the contingent consideration is included as a component of operations in the accompanying condensed consolidated statements of operations.

 

There were no transfers between fair value hierarchies during the three months ended March 31, 2016 and 2015.

 

4. Allowance for Doubtful Accounts  

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

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Balance at beginning of period

$

833

 

 

$

408

 

Bad debt expense (reversal)

 

(56

)

 

 

9

 

Write-offs, net

 

(66

)

 

 

(10

)

Balance at end of period

$

711

 

 

$

407

 

 

 

5. Balance Sheet Components

Property and Equipment, Net

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

 

 

March 31,

2016

 

 

December 31,

2015

 

Software

$

33,143

 

 

$

33,139

 

Computer equipment

 

22,517

 

 

 

21,186

 

Leasehold improvements

 

6,486

 

 

 

4,721

 

Furniture and fixtures

 

2,012

 

 

 

1,670

 

Total

 

64,158

 

 

 

60,716

 

Accumulated depreciation and amortization

 

(42,717

)

 

 

(39,124

)

Projects in process

 

997

 

 

 

3,536

 

Property and equipment, net

$

22,438

 

 

$

25,128

 

 

Depreciation and amortization expense of property and equipment was $3.9 million and $3.1 million for the three months ended March 31, 2016 and 2015, respectively.

The Company capitalized internal use software development and enhancement costs related to the Company’s Retailer iQ platform (“Retailer iQ”) of $0.1 million and $0.3 million during the three months ended March 31, 2016 and 2015, respectively. Amortization expense related to Retailer iQ recorded as cost of revenues was $2.7 million and $2.3 million during the three months ended March 31, 2016 and 2015, respectively.  The unamortized capitalized development and enhancement costs related to Retailer iQ were $8.6 million and $11.1 million as of March 31, 2016 and December 31, 2015, respectively.

10


Accrued Compensation and Benefits

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

 

 

March 31,

2016

 

 

December 31,

2015

 

Bonus

$

2,258

 

 

$

6,858

 

Commissions

 

2,130

 

 

 

3,645

 

Vacation

 

2,123

 

 

 

2,118

 

Payroll and related expenses

 

2,363

 

 

 

2,616

 

Accrued compensation and benefits

$

8,874

 

 

$

15,237

 

 

Other Current Liabilities  

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

 

 

March 31,

2016

 

 

December 31,

2015

 

Distribution fees

$

8,078

 

 

$

8,349

 

Marketing expenses

 

2,474

 

 

 

3,336

 

Deferred rent, current

 

517

 

 

 

346

 

Legal and professional fees

 

448

 

 

 

745

 

Accrued property and equipment

 

8

 

 

 

929

 

Contingent consideration

 

 

 

 

2,291

 

Other

 

3,864

 

 

 

4,174

 

Other current liabilities

$

15,389

 

 

$

20,170

 

 

6. Intangible Assets

Intangible assets consist of the following (in thousands):  

 

 

March 31,

2016

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

March 31,

2016

Net

 

 

Weighted

Average

Amortization

Period

(Years)

Customer relationships

$

8,860

 

 

$

(3,749

)

 

$

(36

)

 

$

5,075

 

 

4

Developed technologies

 

7,460

 

 

 

(2,060

)

 

 

(89

)

 

 

5,311

 

 

4

Domain names

 

5,948

 

 

 

(3,580

)

 

 

(9

)

 

 

2,359

 

 

3

Patents

 

1,050

 

 

 

(713

)

 

 

 

 

 

337

 

 

6

Vendor relationships

 

890

 

 

 

(500

)

 

 

 

 

 

390

 

 

2

Registered users

 

420

 

 

 

(40

)

 

 

(11

)

 

 

369

 

 

4

Trade names

 

167

 

 

 

(156

)

 

 

1

 

 

 

12

 

 

0.5

 

$

24,795

 

 

$

(10,798

)

 

$

(144

)

 

$

13,853

 

 

4

 

11


As of March 31, 2016, the Company has a domain name with a gross value of $0.4 million that has an indefinite useful life, hence is not subject to amortization.

 

 

December 31,

2015

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

December 31,

2015

Net

 

 

Weighted

Average

Amortization

Period

(Years)

Customer relationships

$

8,860

 

 

$

(3,345

)

 

$

(36

)

 

$

5,479

 

 

4

Developed technologies

 

7,460

 

 

 

(1,709

)

 

 

(89

)

 

 

5,662

 

 

4

Domain names

 

5,948

 

 

 

(3,419

)

 

 

(9

)

 

 

2,520

 

 

3

Patents

 

1,050

 

 

 

(686

)

 

 

 

 

 

364

 

 

6

Vendor relationships

 

890

 

 

 

(445

)

 

 

 

 

 

445

 

 

2

Registered users

 

420

 

 

 

(18

)

 

 

(11

)

 

 

391

 

 

4

Trade names

 

167

 

 

 

(149

)

 

 

1

 

 

 

19

 

 

1

 

$

24,795

 

 

$

(9,771

)

 

$

(144

)

 

$

14,880

 

 

4

 

Amortization expense related to intangible assets subject to amortization was $1.0 million and $0.8 million for the three months ended March 31, 2016 and 2015, respectively. Estimated future amortization expense of intangible assets as of March 31, 2016 is as follows (in thousands):    

 

 

Total

 

2016, remaining nine months

$

3,003

 

2017

 

3,727

 

2018

 

3,449

 

2019

 

2,346

 

2020

 

907

 

2021 and beyond

 

68

 

Total estimated amortization expense

$

13,500

 

 

7. Debt Obligation

In September 2013, the Company entered into an agreement with a commercial bank to establish an accounts receivable based revolving line of credit.   During the year ended December 31, 2015, the Company terminated the line of credit and paid off the balance in full.  

 

 

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

March 31,

 

 

2016

 

Expected life (in years)

5.93 6.08

 

Risk-free interest rate

1.32% - 1.34%

 

Volatility

 

65%

 

Dividend yield

 

12


 

The weighted-average grant-date fair value of options granted was $8.51 per share during the three months ended March 31, 2016.There were no option grants during the three months ended March 31, 2015.

 

Restricted Stock Units

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

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

 

 

 

 

 

 

RSUs Outstanding

 

 

Options Outstanding

 

 

Shares

Available

for Grant

 

 

Number of

Shares

 

 

Weighted

Average

Grant

Date Fair

Value

 

 

Number of

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value

(in thousands)

 

Balance as of December 31, 2015

 

2,889,301

 

 

 

6,786,446

 

 

$

13.14

 

 

 

8,469,666

 

 

$

7.62

 

 

 

5.91

 

 

$

19,231

 

Increase in shares authorized

 

3,279,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

(1,964,700

)

 

 

 

 

 

 

 

 

 

 

1,964,700

 

 

 

8.51

 

 

 

 

 

 

 

 

 

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

(533,205

)

 

 

3.35

 

 

 

 

 

 

 

2,040

 

Options canceled or expired

 

155,675

 

 

 

 

 

 

 

 

 

 

 

(155,675

)

 

 

7.85

 

 

 

 

 

 

 

 

 

RSUs granted

 

(968,648

)

 

 

968,648

 

 

 

7.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs vested

 

 

 

 

(1,267,623

)

 

 

13.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs canceled or expired

 

542,684

 

 

 

(542,684

)

 

 

13.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2016

 

3,934,123

 

 

 

5,944,787

 

 

$

11.71

 

 

 

9,745,486

 

 

$

8.03

 

 

 

6.55

 

 

$

40,379

 

Vested and expected to vest as of

  March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

8,899,161

 

 

$

7.78

 

 

 

6.36

 

 

$

38,717

 

Vested and exercisable as of

   March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

6,334,334

 

 

$

6.55

 

 

 

5.19

 

 

$

34,458

 

 

The aggregate intrinsic value disclosed in the table above is based on the difference between the exercise price of the options and the fair value of the Company’s common stock.

The aggregate total fair value of options which vested during the three months ended March 31, 2016 and 2015 was $0.8 million and $1.2 million, respectively.

 

Employee Stock Purchase Plan

Eligible employees can enroll and elect to contribute up to 15% of their base compensation through payroll withholdings in each offering period which is six months in duration, subject to certain limitations. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date.

The fair value of the option feature is estimated using the Black-Scholes model for the period presented based on the following assumptions:

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Expected life (in years)

 

0.50

 

 

 

0.50

 

Risk-free interest rate

 

0.33%

 

 

 

0.07%

 

Volatility

 

72%

 

 

 

70%

 

Dividend yield

 

 

 

 

As of March 31, 2016, a total of 365,772 shares of common stock was issued under the 2013 Employee Stock Purchase Plan (“ESPP”).  As of March 31, 2016, a total of 1,634,228 shares are available for issuance under the ESPP.

13


Stock-based Compensation Expense

The following table sets forth the total stock-based compensation expense resulting from stock options, RSUs and ESPP included in the Company’s condensed consolidated statements of operations (in thousands):

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Cost of revenues

$

497

 

 

$

449

 

Sales and marketing

 

1,583

 

 

 

2,941

 

Research and development

 

2,240

 

 

 

2,784

 

General and administrative

 

3,290

 

 

 

2,758

 

Total stock-based compensation expense

$

7,610

 

 

$

8,932

 

 

The amount of stock-based compensation cost capitalized in property and equipment, net on the accompanying condensed consolidated balance sheets was immaterial for all periods presented.

As of March 31, 2016, there was $54.2 million of unrecognized stock-based compensation expense (net of estimated forfeitures), of which $11.8 million is related to stock options and ESPP shares and $42.4 million is related to RSUs. The total unrecognized stock-based compensation expense related to stock options and ESPP as of March 31, 2016 will be amortized over a weighted-average period of 3.25 years. The total unrecognized stock-based compensation expense related to RSUs as of March 31, 2016 will be amortized over a weighted-average period of 2.69 years.

 

9. Common Stock Repurchase Program

In February 2015, the Company’s Board of Directors authorized a Share Repurchase Program (“Program”) to repurchase up to $50.0 million of the Company’s common stock through February 2016, subject to certain limitations. Through February 2016, a total of $31.3 million in stock was repurchased under this Program. The Program expired in February 2016 with an unused balance of $18.7 million. In February 2016, the Company’s Board of Directors authorized a new share repurchase program (“New Program”) to repurchase up to $50.0 million of the Company’s common stock through February 2017. During the three months ended March 31, 2016, the Company repurchased shares of its common stock for an aggregate amount of $8.0 million under the Program and $3.0 million under the New Program. As of March 31, 2016, $47.0 million remains available for future share repurchases under the New Program.

 

10. Income Taxes

The Company recorded an income tax provision of $46,000 and $0.2 million during the three months ended March 31, 2016 and 2015, respectively. The decrease in income tax expense of $0.1 million is primarily attributable to the change in deferred tax liabilities as a result of the change in fair value of contingent consideration from prior year acquisitions and a decrease in foreign income taxed at non-US tax rates.

 

11. Net Loss per Share

The computation of the Company’s basic and diluted net loss per share attributable to common stockholders is as follows (in thousands, except per share data):

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Net loss

$

(8,195

)

 

$

(4,001

)

 

 

 

 

 

 

 

 

Weighted-average number of common shares used in computing net loss per

   share attributable to common stockholders, basic and diluted

 

82,518

 

 

 

82,166

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

$

(0.10

)

 

$

(0.05

)

 

14


The outstanding common equivalent shares excluded from the computation of the diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as follows (in thousands):

 

 

Three Months Ended

March 31,

 

 

2016

 

 

2015

 

Stock options and ESPP

 

9,851

 

 

 

9,200

 

Restricted stock units

 

5,623

 

 

 

7,526

 

 

 

15,474

 

 

 

16,726

 

 

12. Commitments and Contingencies

 

Leases

As of March 31, 2016, the Company’s minimum payments under its non-cancelable operating and capital leases are as follows (in thousands):

 

 

Operating Leases

 

 

Capital Leases

 

2016, remaining nine months

$

2,909

 

 

$

38