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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 SEPTEMBER 30, 2016

 

OR

 

 

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

 

FOR THE TRANSITION PERIOD FROM               TO             



Commission File No. 1-35206



Picture 3

(Exact name of registrant as specified in its charter)





 

 

Delaware

 

65-0423422

(State or other jurisdiction of incorporation or organization)

 

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



 

 

1675 Broadway, 22nd Floor

New York, NY 

 

10019

(Address of principal executive offices)

 

(Zip Code)



Registrant’s telephone number, including area code: 917-368-8600

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 definitions of “large accelerated filer,” “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  



The number of outstanding shares of the issuer’s common stock as of October 31, 2016  was as follows: 90,133,475  shares of Common stock, $.01 par value.

 


 



Table of Contents

Bankrate, Inc. and Subsidiaries

Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2016





 

 

 

 

PART I. FINANCIAL INFORMATION

  

 

  

Item  1. Condensed Consolidated Financial Statements (Unaudited)

  

 

  

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

  

 

31 

  

Item  3. Quantitative and Qualitative Disclosures About Market Risk

  

 

43 

  

Item  4. Controls and Procedures

  

 

43 

  

PART II. OTHER INFORMATION

  

 

44 

  

Item  1. Legal Proceedings

  

 

44 

  

Item  1A. Risk Factors

  

 

44 

  

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

  

 

44 

  

Item 3. Default Upon Senior Securities

 

 

44

 

Item 4. Mine Safety Disclosures

 

 

44

 

Item  5. Other Information

  

 

44 

  

Item  6. Exhibits

  

 

45 

  

Signatures

  

 

46 

  





 

2


 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, revenues, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends or regarding resolution of regulatory matters described in this Quarterly Report on Form 10-Q are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon certain assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known or unknown factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on, and speak only as of, the date of this report.

Important factors that could cause actual results to differ materially from our expectations, which we refer to as cautionary statements, are discussed in detail in Part I, Item 1A. “Risk Factors” in our Annual  Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC” or “Commission”) on March 9, 2016 as updated in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016. All forward-looking information in this Quarterly Report on Form 10-Q and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include without limitation:

·

the willingness or interest of banks, lenders, brokers, credit card issuers, senior care providers and other advertisers in the business verticals in which we operate to advertise on our websites or mobile applications, or purchase our leads, clicks, calls and referrals;

·

changes in application approval rates by our credit card issuer customers;

·

increased competition and its effect on our website traffic, click-through rates, advertising rates, margins, and market share;

·

our dependence on internet search engines to attract a significant portion of the visitors to our websites and our ability to diversify the sources from which we obtain visitor traffic to our websites and mobile applications, including without limitation through use of social media channels;

·

changes in the way that search engines display paid and organic search results and the impact of those changes on the number of consumers that visit our online network;

·

the cost of driving consumers to our online network, including without limitation our ability to generate traffic profitably through online marketing channels;

·

our dependence on traffic from our partners to produce a significant portion of the Company’s revenue and our ability to establish and maintain distribution arrangements;

·

risks related to the successful integration of the NextAdvisor business acquired and the ability to realize the expected benefits from such acquisition;

·

risks and uncertainties associated with the NextAdvisor business;

·

the willingness of consumers to accept the Internet and our online network as a medium for obtaining information on financial products or senior care;

·

shift of visitors from desktop to mobile and mobile app environments;

·

the rate of conversion of consumers’ visits to our websites or mobile applications into senior care referrals and the rate at which those referrals result in move-ins with our senior care customers;

·

the number of consumers seeking information about the financial and senior care products we have on our websites or mobile applications;

·

our ability to successfully execute on our strategies, and the effectiveness of our strategies and investments in our business, including without limitation whether they result in increased revenue or profitability;

·

our ability to maintain good working relationships with our customers and third-party providers and to continue to attract new customers;

3


 

·

the material weakness in the operating effectiveness of our internal controls over financial reporting discussed in our 2015 Annual Report on Form 10-K and our ability to remediate the weakness completely and promptly;

·

risks relating to the defense or litigation of lawsuits, including without limitation the failure to obtain final court approval of the proposed settlement of the putative securities law class action lawsuit described in our SEC filings or delay in obtaining such approval, and risks related to decisions by class members to opt out of or object to the proposed settlement;

·

the timing and outcome of, including potential expense associated with, and the potential impact on our business and stock price of any announcements regarding, the United States Department of Justice (“DOJ”) investigation relating to our financial reporting during 2012;

·

the timing and outcome of, including potential expense associated with, and the potential impact on our business and stock price of any announcements regarding, the Consumer Financial Protection Bureau (“CFPB”) investigation;

·

the costs of indemnification obligations to current and former directors, officers and employees;

·

any delay or failure to pay the deferred portion of the purchase price, or contractually required reduction in the purchase price as a result of closing working capital adjustments, in connection with the sale of the Company’s Insurance business in December 2015;

·

our ability to anticipate and manage cybersecurity risk and data security risk and to mitigate or resolve issues that may arise;

·

the effects of any security breach, data breach or cyberattack on our systems, websites or mobile applications, or on our reputation, and the impact of any notification costs or other liability arising from any security breach, data breach or cyberattack on our business;

·

technological changes and our ability to adapt to new or evolving technologies that affect our business environment or operations;

·

our ability to maintain effective disclosure controls and procedures and internal control over financial reporting;

·

our ability to manage traffic on our websites or mobile applications, and service interruptions;

·

our ability to maintain and develop our brands and content;

·

our indebtedness and the effect such indebtedness may have on our business;

·

our need and our ability to obtain additional debt or equity financing;

·

our ability to integrate the operations and realize the expected benefits of businesses that we have acquired and may acquire in the future;

·

the effect of unexpected liabilities we assume (whether intentional or not) from our acquisitions;

·

the effect of programmatic advertising platforms on display revenue;

·

our ability to attract and retain executive officers and personnel;

·

any failure or refusal by our insurance providers to provide coverage under our insurance policies, including without limitation in connection with the putative securities class action lawsuit;

·

our ability to protect our intellectual property;

·

the effects of potential liability for content on our websites or mobile applications;

·

the effect of our operations in the United Kingdom and possible expansion to other international markets, in which we may have limited experience, and our ability to successfully execute on our business strategies in international markets;

·

risks associated with the wind down of our operations in China:

·

the strength of the U.S. economy in general and the financial services industry in particular;

·

changes in monetary and fiscal policies of the U.S. government and interest rate volatility;

·

changes in consumer spending and saving habits;

·

review of our business and operations by regulatory or other governmental authorities;

·

changes in laws and regulations or interpretations of laws and regulations, other changes in the legal and regulatory environment, and the impact of such changes on the operation of our business;

·

any further impairment to our goodwill and/or intangible assets, including without limitation further impairment of the goodwill of our Banking reporting unit or our Quizzle reporting unit, and the potential for impairment of the goodwill of our

4


 

Senior Care reporting unit, as discussed in Note 2 to the Condensed Consolidated Financial Statements included in this report;

·

changes in accounting principles, policies, practices or guidelines; and

·

our ability to manage the risks involved in the foregoing.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q may not in fact occur. Accordingly, investors should not place undue reliance on those statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.





5


 

PART I. FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements (Unaudited)



Bankrate, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)



 

 

 

 

 

 



 

(Unaudited)

 

 

 



 

September 30,

 

December 31,



 

2016

 

2015

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

135,831 

 

$

237,204 

Accounts receivable, net of allowance for doubtful accounts of

 

 

 

 

 

 

$238 and $147, respectively

 

 

71,029 

 

 

56,265 

Prepaid expenses and other current assets

 

 

23,404 

 

 

27,773 

Total current assets

 

 

230,264 

 

 

321,242 

Furniture, fixtures and equipment, net of accumulated depreciation of

 

 

 

 

 

 

$20,115 and $16,027, respectively

 

 

14,092 

 

 

10,189 

Intangible assets, net of accumulated amortization of

 

 

 

 

 

 

$194,986 and $168,627, respectively

 

 

208,924 

 

 

205,766 

Goodwill

 

 

604,789 

 

 

567,544 

Other assets

 

 

36,059 

 

 

23,127 

Total assets

 

$

1,094,128 

 

$

1,127,868 

Liabilities and stockholders' equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

11,163 

 

$

10,147 

Accrued expenses

 

 

31,917 

 

 

25,838 

Deferred revenue and customer deposits

 

 

1,086 

 

 

1,508 

Accrued interest payable

 

 

2,297 

 

 

6,890 

Other current liabilities

 

 

7,211 

 

 

15,583 



 

 

53,674 

 

 

59,966 

Deferred income taxes

 

 

6,950 

 

 

7,552 

Long term debt, net of unamortized discount

 

 

295,103 

 

 

293,284 

Other liabilities

 

 

48,976 

 

 

5,871 

Total liabilities

 

 

404,703 

 

 

366,673 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, par value $.01 per share -

 

 

 

 

 

 

300,000,000 shares authorized

 

 

 

 

 

 

103,133,890 shares and 103,845,310 shares issued,

 

 

 

 

 

 

respectively; 90,145,705 shares and 96,794,018 shares outstanding, respectively

 

 

1,032 

 

 

1,039 

Additional paid-in capital

 

 

898,440 

 

 

886,261 

Accumulated deficit

 

 

(66,973)

 

 

(36,985)

Less: Treasury stock, at cost - 12,988,185 shares and 7,051,292 shares, respectively

 

 

(142,344)

 

 

(88,616)

Accumulated other comprehensive loss

 

 

(730)

 

 

(504)

Total stockholders' equity

 

 

689,425 

 

 

761,195 

Total liabilities and stockholders' equity

 

$

1,094,128 

 

$

1,127,868 

















The accompanying notes are an integral part of these condensed consolidated financial statements.





6


 

Bankrate, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands, except share and per share data)





 

 

 

 

 

 

 

 

 

 

 

 



 

 

Three months ended

 

 

Nine months ended



 

September 30,

 

September 30,

 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Revenue

 

$

128,798 

 

$

99,659 

 

$

320,578 

 

$

278,219 



 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

64,516 

 

 

44,526 

 

 

164,936 

 

 

127,700 

Sales and marketing

 

 

4,619 

 

 

4,269 

 

 

13,237 

 

 

12,773 

Product development and technology

 

 

8,122 

 

 

6,320 

 

 

22,171 

 

 

17,060 

General and administrative

 

 

23,939 

 

 

19,206 

 

 

60,928 

 

 

51,602 

Legal settlements

 

 

(13,824)

 

 

 -

 

 

5,325 

 

 

Acquisition, disposition and related expenses

 

 

(80)

 

 

557 

 

 

1,255 

 

 

1,131 

Restructuring-related expenses

 

 

(93)

 

 

93 

 

 

(127)

 

 

93 

Changes in fair value of contingent acquisition consideration

 

 

3,389 

 

 

348 

 

 

3,490 

 

 

736 

Impairment charges

 

 

4,178 

 

 

 -

 

 

29,178 

 

 

 -

Depreciation and amortization

 

 

10,845 

 

 

9,983 

 

 

31,551 

 

 

29,285 

Total costs and expenses

 

 

105,611 

 

 

85,302 

 

 

331,944 

 

 

240,383 

Income (loss) from operations

 

 

23,187 

 

 

14,357 

 

 

(11,366)

 

 

37,836 



 

 

 

 

 

 

 

 

 

 

 

 

Interest and other expenses, net

 

 

4,871 

 

 

5,583 

 

 

14,693 

 

 

17,266 



 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

 

 

18,316 

 

 

8,774 

 

 

(26,059)

 

 

20,570 

Income tax expense

 

 

7,534 

 

 

3,109 

 

 

3,747 

 

 

8,411 

Net income (loss) from continuing operations

 

 

10,782 

 

 

5,665 

 

 

(29,806)

 

 

12,159 

Net loss from discontinued operation, net of income taxes

 

 

(96)

 

 

(29,056)

 

 

(182)

 

 

(30,277)

Net income (loss)

 

$

10,686 

 

$

(23,391)

 

$

(29,988)

 

$

(18,118)



 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.12 

 

$

0.06 

 

$

(0.33)

 

$

0.12 

Discontinued operation

 

 

 -

 

 

(0.30)

 

 

 -

 

 

(0.30)

Basic net income (loss) per share:

 

$

0.12 

 

$

(0.24)

 

$

(0.33)

 

$

(0.18)



 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.12 

 

$

0.06 

 

$

(0.33)

 

$

0.12 

Discontinued operation

 

 

 -

 

 

(0.29)

 

 

 -

 

 

(0.30)

Diluted net income (loss) per share

 

$

0.12 

 

$

(0.23)

 

$

(0.33)

 

$

(0.18)



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

87,865,210 

 

 

98,637,078 

 

 

89,596,668 

 

 

98,661,043 

Diluted

 

 

88,895,104 

 

 

99,305,197 

 

 

89,596,668 

 

 

99,246,176 



 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

10,686 

 

$

(23,391)

 

$

(29,988)

 

$

(18,118)

Other comprehensive loss, net of tax

 

 

(69)

 

 

(123)

 

 

(226)

 

 

(96)

Comprehensive income (loss)

 

$

10,617 

 

$

(23,514)

 

$

(30,214)

 

$

(18,214)









The accompanying notes are an integral part of these condensed consolidated financial statements.

7


 

Bankrate, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows 

(Unaudited)

(In thousands)





 

 

 

 

 

 



 

 

 

 

 

 



 

Nine months ended



 

September 30,

 

September 30,



 

2016

 

2015

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(29,988)

 

$

(18,118)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

31,551 

 

 

48,000 

Provision for doubtful accounts receivable

 

 

103 

 

 

281 

Deferred income taxes

 

 

(602)

 

 

334 

Amortization of deferred financing charges and original issue discount

 

 

2,038 

 

 

1,130 

Stock-based compensation

 

 

14,053 

 

 

21,609 

Loss on disposal of assets

 

 

175 

 

 

75 

Changes in fair value of contingent acquisition consideration

 

 

3,490 

 

 

736 

Impairment charges

 

 

29,178 

 

 

35,000 

Purchase accounting adjustment

 

 

41 

 

 

(1,010)

Change in operating assets and liabilities, net of effect of business acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(6,610)

 

 

(4,970)

Prepaid expenses and other assets

 

 

(10,160)

 

 

7,970 

Accounts payable

 

 

(1,260)

 

 

5,679 

Accrued expenses

 

 

3,749 

 

 

(18,969)

Other liabilities

 

 

1,889 

 

 

(10,175)

Deferred revenue and customer deposits

 

 

(422)

 

 

(400)

Net cash provided by operating activities

 

 

37,225 

 

 

67,172 



 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of furniture, fixtures and equipment and capitalized software and website development costs

 

 

(8,318)

 

 

(10,439)

Cash used in business acquisitions, net

 

 

(63,409)

 

 

(30,753)

Net cash used in investing activities

 

 

(71,727)

 

 

(41,192)



 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Cash paid for contingent acquisition consideration

 

 

(8,613)

 

 

(7,545)

Cash paid for deferred acquisition consideration

 

 

(3,750)

 

 

 -

Purchase of Company stock

 

 

(54,583)

 

 

(15,683)

Net cash used in financing activities

 

 

(66,946)

 

 

(23,228)



 

 

 

 

 

 

Effect of exchange rate on cash and cash equivalents

 

 

75 

 

 

101 

Net (decrease) increase in cash

 

 

(101,373)

 

 

2,853 

Cash - beginning of period

 

 

237,204 

 

 

142,051 

Cash - end of period

 

 

135,831 

 

 

144,904 

Less cash of discontinued operations - end of period

 

 

 -

 

 

16,203 

Cash of continuing operations - end of period

 

$

135,831 

 

$

128,701 



 

 

 

 

 

 

Supplemental disclosure of other cash flow activities

 

 

 

 

 

 

Cash paid for interest

 

$

18,597 

 

$

18,641 

Cash refunded for taxes, net

 

 

(5,791)

 

 

(6,261)



 

 

 

 

 

 







The accompanying notes are an integral part of these condensed consolidated financial statements.





 

8


 

Bankrate, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)





NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION



The Company

Bankrate, Inc. and its subsidiaries (“Bankrate” or the “Company,” “we,” “us,” “our”) own and operate an Internet-based consumer banking, personal finance and senior care network (“Online Network”). Our flagship websites, Bankrate.com,  CreditCards.com and Caring.com are some of the Internet’s leading aggregators of information on more than 300 financial and senior care products and services, including mortgages, deposits, credit cards, other personal finance categories and senior care resources. Additionally, we provide financial applications and information to a network of distribution partners and through national and state publications.

We operate the following reportable business segments:



·

Banking – we offer information on rates for various types of mortgages, home lending and refinancing. We maintain current rate information for more than 600 local markets, covering all 50 U.S. states. Consumers can customize searches for mortgage rates by loan size, type, maturity, and location through our online portals. We also offer rate information and original editorial content on various deposit products, retirement, taxes and debt management.

·

Credit Cards – we present visitors a comprehensive selection of consumer and business credit and prepaid cards, providing detailed information and comparison capabilities and host news and advice on personal finance, credit card and bank policies, as well as tools, calculators and products such as free credit reports and estimates of card benefits.

·

Senior Care – we provide helpful caregiving content, a comprehensive online senior living directory for the United States, a local directory covering a wide array of other senior caregiving services and telephone support and advice from trained Family Advisors.

·

Other – includes unallocated corporate overhead, the elimination of transactions between segments and the wind down of our China operations.

Basis of Presentation



The accompanying consolidated financial statements include the accounts of Bankrate, Inc., and subsidiaries CreditCards.com, Inc. (“CreditCards”), LinkOffers, Inc., CreditCards.com Limited (United Kingdom), Freedom Marketing Limited (United Kingdom), Caring, Inc., Wallaby Financial Inc., Quizzle, LLC, and BR1 Holdings, LLC after elimination of all intercompany accounts and transactions.



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of our results have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016, for any future interim period or for any future year.



The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s 2015 Annual Report on Form 10-K (“2015 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 9, 2016.



Other than as noted below, there have been no significant changes in the Company’s accounting policies from those disclosed in our 2015 Annual Report.



9


 

Reclassifications



During the third quarter 2016, management revised the strategy of its Quizzle reporting unit to focus its technology resources primarily on enhancing the user experience of the products and services provided by the Banking segment through greater personalization, and realigned its management reporting structure by integrating the Quizzle operations into the Banking segment. All segment results reported for the three and nine months ended September 30, 2016 and 2015, and as of December 31, 2015, have been revised to reflect such change.



Certain amounts presented for the three and nine months ended September 30, 2015 reflect reclassifications made to conform to the presentation in our 2015 Annual Report and our current presentation. We revised the calculations of basic and diluted weighted average common shares outstanding for certain adjustments to the prior year presentation. There was no change in the calculated basic net income per share or diluted net income per share in total for the three and nine months ended September 30, 2016.



In accordance with the adoption of Accounting Standards Update (“ASU”) ASU 2015-03, “Imputation of InterestSimplifying the Presentation of Debt Issuance Costs,” our senior unsecured notes are presented net of their related deferred financing costs as of September 30, 2016 and December 31, 2015.



Our operations in China were previously presented as a  discontinued operation as we were marketing them for sale. During the second quarter 2016 we could not come to terms with the potential buyers of the business, negotiations ended and the plan to sell the business was abandoned. It was then determined to start the process of winding down and closing the operations in China, a process which, based on local requirements and regulations, is not expected to be completed until 2017.  During the nine months ended September 30, 2016, we recorded approximately $723,000 for the acceleration of amortization and depreciation of certain intangible and work-in-process assets, furniture, fixtures and equipment and other assets based on their estimated remaining future economic life, and $479,000 as employee severance as the operations wind down.



Discontinued Operation



In December 2015, we sold our Insurance business. In accordance with GAAP, the results of our Insurance business through the date of sale, December 29, 2015, are presented as a  discontinued operation, and, as such, have been excluded from continuing operations in the Condensed Consolidated Statements of Comprehensive Income (Loss) for all periods presented. The operating results of the Insurance business for 2015 are classified as a  discontinued operation in the Company’s condensed consolidated financial statements with the exception of the condensed consolidated statements of cash flows which is presented on a consolidated basis. The operating results of the Insurance business are consistently excluded from the Notes to Condensed Consolidated Financial Statements for all periods presented. During the three and nine months ended September 30, 2016 we incurred expenses and received reimbursements related to our 2015 disposal of our Insurance business, which have been classified as a discontinued operation. See Note 13Discontinued Operation for presentation of the results of the discontinued operation of the Insurance business.  



New Accounting Pronouncements



Recently Adopted Pronouncements

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Allow a Performance Target to Be Achieved After the Requisite Service Period,” which requires that a performance target that could be achieved after the requisite service period be treated as a performance condition that affects the vesting of the award. We adopted ASU 2014-12 on January 1, 2016, as required, and it did not have a significant impact on our consolidated financial statements.

In January 2015, the FASB issued ASU 2015-01, “Income Statement—Extraordinary and Unusual Items.” This guidance eliminates the concept of an extraordinary item, which required that an entity separately classify, present, and disclose extraordinary events and transactions, on the income statement, net of tax after earnings from continuing operations and disclose applicable income taxes and earnings per share date applicable to the extraordinary item. We adopted ASU 2015-01 on January 1, 2016, as required, and it did not have a significant impact on our consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest—Simplifying the Presentation of Debt Issuance Costs.” This guidance requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the debt liability, consistent with the presentation of a debt discount. We adopted ASU 2015-03 on January 1, 2016, as required. The Company’s $300.0 million senior unsecured notes due 2018 are presented at September 30, 2016 and December 31, 2015 net of deferred financing costs of $3.6 million and $4.9 million, respectively. Deferred financing costs were previously included in other assets in the condensed consolidated financial statements.

10


 

In April 2015, the FASB issued ASU 2015-05 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)—Customers Accounting for Fees Paid in a Cloud Computing Arrangement.” The guidance in this update provide a basis for evaluating whether a cloud computing arrangement includes a software license and clarification of the treatment of fees paid by the customer if that license is to internal-use software, other than internal-use software or not considered a license. We adopted ASU 2015-05 on January 1, 2016, as required, and it did not have a significant impact on our consolidated financial statements.

In June 2015, the FASB issued ASU 2015-10, “Technical Corrections and Improvements.” This guidance’s intention is (i) to clarify the Codification for differences between original guidance and the Codification, (ii) correct unintended application of guidance and correct references, or (iii) streamline, simplify or make minor improvements to the Codification through minor structural changes to headings or minor editing of text to improve the usefulness and understandability, that are not expected to have a significant effect on current accounting practice. We adopted ASU 2015-10 on January 1, 2016, as required, and it did not have a significant impact on our consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805)Simplifying the Accounting for Measurement-Period Adjustments.” The intention of this guidance is to simplify the accounting adjustments made to provisional amounts recognized in business combinations, as the amendment requires the adjustments to provisional amounts be recorded in the current period that they are identified, which eliminates the need to retrospectively account for those adjustments. We adopted ASU 2015-16 on January 1, 2016, as required, and it did not have a significant impact on our consolidated financial statements.

Recently Issued Pronouncements, Not Adopted as of September 30, 2016

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” and in August 2015 issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date.” The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers that supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, to be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and to provide related footnote disclosures in certain circumstances. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This update amends some of the existing guidance related to the recognition, measurement, presentation, and disclosure of financial instruments. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” This update will supersede the leases requirements in Topic 840, Leases, and create an additional Topic 842, which specifies the accounting for leases. The objective is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” This update is intended to clarify the implementation guidance on principal versus agent considerations. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements of ASU 2014-09. ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” defers the effective date of ASU 2014-09 by one year, as such, this guidance is effective for fiscal years, and

11


 

interim periods within those fiscal years, beginning after December 15, 2017. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This update is intended to reduce complexity in accounting standard and simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. In addition, the amendments in this update eliminate the guidance in Topic 718. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted for any entity in any interim or annual period. We are evaluating the effect that this update will have on our consolidated financial statements, earnings per share and related disclosures.



In May 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This update is to clarify several aspects of Topic 606, (i) identifying performance obligation and (ii) licensing implementation guidance, while retaining the related principles for those areas. The effective date and transition requirements for this amendment are the same as the effective date and transition requirements of Update 2014-09. ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” defers the effective date of ASU 2019-09 by one year, as such, this guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.



In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF (Emerging Issue Task Force) Meeting.” This update rescinds SEC paragraphs pursuant to the SEC Staff Announcement, “Rescission of Certain SEC Staff Observer Comments upon Adoption of Topic 606,” and the SEC Staff Announcement, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or Equity,” announced at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.



In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” This update does not change the core principle of Topic 606, but affect several aspects related to how an entity should recognize revenue 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. The effective date and transition requirements for this amendment are the same as the effective date and transition requirements of Update 2014-09. ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” defers the effective date of ASU 2019-09 by one year, as such, this guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.



In June 2016, the FASB issued ASU 2016-13, “Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This update requires a financial asset, or group of financial assets, measured at amortized cost basis to be presented at the net amount expected to be collected. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any entity in any interim or annual period within those fiscal years, beginning after December 15, 2018. We are evaluating the effect that this update will have on our consolidated financial statements and related disclosures.



In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” to address diversity in how certain specific cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted for any entity in any interim or annual period. The effect of this update will impact the classification of certain transactions on our statement of cash flows.



NOTE 2 – GOODWILL AND INTANGIBLE ASSETS



During the third quarter 2016, management revised the strategy of its Quizzle reporting unit to focus its technology resources primarily on enhancing the user experience of the products and services provided by the Banking segment through greater personalization, and realigned its management reporting structure by integrating the Quizzle operations into the Banking segment. Management determined that these changes, along with the performance of initiatives utilizing Quizzle resources, represented a triggering event for impairment testing at the Quizzle reporting unit. As a result, we completed Step 1 analysis of goodwill, which indicated that the fair value was lower than the reporting unit’s carrying value. In accordance with ASC 350-20-35-18, management elected to make an estimate of the goodwill impairment charge as of September 30, 2016, subject to completing our review and finalizing Step 2 of the analysis during the fourth quarter 2016. The estimate was determined using the income and market approaches,

12


 

and was based on a number of factors including the estimated fair value of developed technology, trademarks and customer relationships,  as well as relevant market related data. The estimated impairment of goodwill for the Quizzle reporting unit as of September 30, 2016 was $4.2 million. Subsequent to the estimated impairment charge recorded, the carrying values of Quizzle’s goodwill and intangible assets as of September 30, 2016 were $14.4 million and $8.9 million, respectively.  



During the second quarter 2016, management noted that the operating results of its Banking reporting unit had begun to track below plan, primarily due to macroeconomic trends impacting its deposit and display advertising businesses. This triggering event resulted in impairment testing as of June 30, 2016. It was concluded that the reporting unit’s goodwill was impaired and we recorded a $25.0 million charge for the impairment of its goodwill, determined using the income and market approaches. The Banking reporting unit was tested for impairment again as of September 30, 2016 and it was concluded that no impairment had occurred. The fair value was greater than the carrying value by less than 1%. If Banking does not track to expectations, this could lead to further impairment.



During the first quarter 2016, the Company’s agreement with a large customer of its Senior Care segment was not renewed. This triggering event resulted in impairment testing as of February 29, 2016. It was concluded that no impairment had occurred. The fair value was greater than the carrying value by approximately 18%, however, the absolute dollar amount of the Senior Care cushion was small. If Senior Care does not track to expectations for strong growth, this could lead to impairment. 



Management did not identify any other circumstances or triggers with its other reporting units during the third quarter that could more likely than not reduce the fair value of those reporting units below the carrying amounts based upon the financial performance in the third quarter of 2016.



During the second quarter 2016, the Company acquired the NextAdvisor business, which is reported in our Credit Cards segment (see Note 11Acquisitions).



Goodwill activity for the nine months ended September 30, 2016 is shown below:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Banking (A)

 

Credit Cards

 

Senior Care

 

Total Company

Balance, January 1, 2016

 

$

159,148 

 

$

383,878 

 

$

24,518 

 

$

567,544 

Additions due to acquisitions

 

 

 -

 

 

66,423 

 

 

 -

 

 

66,423 

Impairment charges (B)

 

 

(29,178)

 

 

 -

 

 

 -

 

 

(29,178)

Balance, September 30, 2016

 

$

129,970 

 

$

450,301 

 

$

24,518 

 

$

604,789 



 

 

 

 

 

 

 

 

 

 

 

 

__________

(A)During the third quarter 2016, management realigned its management reporting structure by integrating the Quizzle operations into the Banking segment. Previously, Quizzle was reported within Other.

(B)During the third quarter 2016, the Company recorded $4.2 million for the impairment of goodwill in its Quizzle reporting unit and during the second quarter 2016 recorded $25.0 million for the impairment of goodwill in its Banking reporting unit.



Intangible assets consist primarily of trademarks and domain names, customer relationships, affiliate relationships and developed technologies. Intangible assets are being amortized over their estimated useful lives on a straight-line basis. The increase in intangible assets during 2016 relates to our acquisition of the NextAdvisor business.



Intangible assets subject to amortization were as follows as of September 30, 2016:  





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Cost

 

Accumulated Amortization

 

Net

 

Weighted Average Amortization Period Years

Trademarks and domain names

 

$

205,408 

 

$

(80,858)

 

$

124,550 

 

16.5

Customer relationships

 

 

157,831 

 

 

(96,221)

 

 

61,610 

 

9.0

Affiliate relationships

 

 

12,670 

 

 

(6,787)

 

 

5,883 

 

10.3

Developed technologies

 

 

26,570 

 

 

(10,981)

 

 

15,589 

 

7.6

Non-compete

 

 

1,431 

 

 

(139)

 

 

1,292 

 

3.0



 

$

403,910 

 

$

(194,986)

 

$

208,924 

 

12.7



13


 

Intangible assets subject to amortization were as follows as of December 31, 2015:





 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Cost

 

Accumulated Amortization

 

Net

 

Weighted Average Amortization Period Years

Trademarks and domain names

 

$

199,461 

 

$

(69,002)

 

$

130,459 

 

17.1

Customer relationships

 

 

135,831 

 

 

(84,183)

 

 

51,648 

 

9.1

Affiliate relationships

 

 

12,670 

 

 

(6,382)

 

 

6,288 

 

10.3

Developed technologies

 

 

26,431 

 

 

(9,060)

 

 

17,371 

 

7.6



 

$

374,393 

 

$

(168,627)

 

$

205,766 

 

13.3



Amortization expense for the three and nine months ended September 30, 2016 was $9.5 million and  $26.6 million, respectively, and amortization expense for the three and nine months ended September 30, 2015 was $8.8 million and $26.1 million, respectively.  



Future amortization expense for intangible assets placed into service on or before September 30, 2016 is expected to be:





 

 

 

 

 

 



 

 

 

 

 

 



 

 

 

 

Amortization

(In thousands)

 

 

 

 

Expense

Remainder of 2016

 

 

 

 

$

9,496 

2017

 

 

 

 

 

35,425 

2018

 

 

 

 

 

31,788 

2019

 

 

 

 

 

23,187 

2020

 

 

 

 

 

16,620 

2021

 

 

 

 

 

14,242 

Thereafter

 

 

 

 

 

78,166 

Total expected amortization expense for intangible assets

 

 

 

 

$

208,924 













NOTE 3 – EARNINGS (LOSS) PER SHARE



We compute basic earnings (loss) per share by dividing net income (loss) for the period by the weighted average number of shares outstanding for the period. Diluted earnings (loss) per share includes the effects of dilutive common stock equivalents, consisting of outstanding stock-based awards in accordance with ASC 718, CompensationStock Compensation, to the extent the effect is not anti-dilutive, using the treasury stock method.



14


 

The following table presents the computation of basic and diluted earnings (loss) per share:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three months ended

 

Nine months ended



 

September 30,

 

September 30,

 

September 30,

 

September 30,

(In thousands, except share and per share data)

 

2016

 

2015

 

2016

 

2015

Net income (loss) from continuing operations

 

$

10,782 

 

$

5,665 

 

$

(29,806)

 

$

12,159 

Net loss from discontinued operation, net of income taxes

 

 

(96)

 

 

(29,056)

 

 

(182)

 

 

(30,277)

Net income (loss)

 

$

10,686 

 

$

(23,391)

 

$

(29,988)

 

$

(18,118)



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for basic earnings (loss) per share

 

 

87,865,210 

 

 

98,637,078 

 

 

89,596,668 

 

 

98,661,043 

Additional dilutive shares related to share based awards

 

 

1,029,894 

 

 

668,119 

 

 

 -

 

 

585,133 

Weighted average common shares outstanding for diluted earnings (loss) per share

 

 

88,895,104 

 

 

99,305,197 

 

 

89,596,668 

 

 

99,246,176 



 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.12 

 

$

0.06 

 

$

(0.33)

 

$

0.12 

Discontinued operation

 

 

 -

 

 

(0.30)

 

 

 -

 

 

(0.30)

Basic net income (loss) per share:

 

$

0.12 

 

$

(0.24)

 

$

(0.33)

 

$

(0.18)



 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.12 

 

$

0.06 

 

$

(0.33)

 

$

0.12 

Discontinued operation

 

 

 -

 

 

(0.29)

 

 

 -

 

 

(0.30)

Diluted net income (loss) per share

 

$

0.12 

 

$

(0.23)

 

$

(0.33)

 

$

(0.18)





As we incurred a loss from continuing operations for the nine months ended September 30, 2016, all outstanding stock options, restricted stock awards and performance stock awards have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding for those periods. Accordingly, basic and diluted weighted average shares outstanding are equal for such periods. The following were excluded from the calculation of diluted earnings per share because their impact would have been anti-dilutive:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three months ended

 

Nine months ended



 

September 30,

 

September 30,

 

September 30,

 

September 30,



 

2016

 

2015

 

2016

 

2015

Restricted shares and restricted share units

 

 

1,835,438 

 

 

1,421,981 

 

 

1,719,795 

 

 

1,355,614 

Performance shares and performance share units

 

 

 -

 

 

 -

 

 

159,077 

 

 

 -

Stock options

 

 

1,937,550 

 

 

2,768,331 

 

 

2,264,734 

 

 

2,774,712 



 

 

 

 

 

 

 

 

 

 

 

 





15


 

NOTE 4 – STOCKHOLDERS’ EQUITY



The activity in stockholders’ equity for the nine months ended September 30, 2016 is shown below:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common Stock

 

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

(In thousands)

 

Shares

 

Amount

 

Additional paid-in capital

 

Accumulated Deficit

 

Shares

 

Amount

 

Accumulated Other Comprehensive Loss - Foreign Currency Translation

 

Total Stockholders' Equity



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2015

 

103,845 

 

$

1,039 

 

$

886,261 

 

$

(36,985)

 

 

(7,051)

 

$

(88,616)

 

$

(504)

 

$

761,195 

Other comprehensive loss, net of taxes

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(226)

 

 

(226)

Treasury stock purchased

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(6,016)

 

 

(54,583)

 

 

 -

 

 

(54,583)

Restricted stock issued, net of cancellations

 

(100)

 

 

(1)

 

 

(854)

 

 

 -

 

 

79 

 

 

855 

 

 

 -

 

 

 -

Performance stock issued, net of cancellations

 

(611)

 

 

(6)

 

 

 

 

 -

 

 

 -

 

 

 

 

 

 -

 

 

 -

Stock-based compensation

 

 -

 

 

 -

 

 

13,027 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

13,027 

Net loss

 

 -

 

 

 -

 

 

 -

 

 

(29,988)

 

 

 -

 

 

 -

 

 

 -

 

 

(29,988)

Balance at September 30, 2016

 

103,134 

 

$

1,032 

 

$

898,440 

 

$

(66,973)

 

 

(12,988)

 

$

(142,344)

 

$

(730)

 

$

689,425 



In February 2016, the Company’s Board of Directors authorized a $50.0 million share repurchase program. Under the terms of the program, the Company was authorized to repurchase up to $50.0 million of its outstanding common stock, excluding commissions. Stock repurchases under this program could be made through open market and privately negotiated transactions. The timing and amount of specific repurchases were subject to the requirements of federal securities law, market conditions, alternative uses of capital and other factors. The program was completed in April 2016. As a result, during the nine months ended September 30, 2016, we repurchased approximately 5.6 million shares under the repurchase program, for approximately  $50.0 million, plus commission fees.













NOTE 5 – SEGMENTS



The reportable segments presented below represent the Company’s operating segments for which separate financial information is available and utilized on a regular basis by its chief operating decision maker, the Company’s chief executive officer, to assess performance and allocate resources. Management evaluates the operating results of each of the Company’s operating segments based upon revenue and “Adjusted EBITDA”, which we define as income from continuing operations before depreciation and amortization; interest; income taxes; changes in fair value of contingent acquisition consideration; stock-based compensation and other items such as loss on extinguishment of debt, legal settlements, acquisition, disposition and related expenses; restructuring charges; any impairment charges; NextAdvisor contingent payments for the acquisition; costs related to the Restatement, the Internal Review, the SEC and DOJ investigations and related litigation and indemnification obligations; purchase accounting adjustments; and our operations in China as we are winding down and ceasing its operations. The Company’s presentation of Adjusted EBITDA, a non-GAAP measure, may not be comparable to similarly titled measures used by other companies.



During the third quarter 2016, management revised the strategy of its Quizzle reporting unit to focus its technology resources primarily on enhancing the user experience of the products and services provided by the Banking segment through greater personalization, and realigned its management reporting structure by integrating the Quizzle operations into the Banking segment. All segment results reported for the three and nine months ended September 30, 2016 and 2015 have been revised to reflect such change.





16


 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three months ended September 30,



 

2016

 

2015

(In thousands)

 

Revenue

 

Adjusted EBITDA

 

Revenue

 

Adjusted EBITDA

Banking

 

$

26,062 

 

$

6,355 

 

$

28,534 

 

$

7,668 

Credit Cards (A)

 

 

98,310 

 

 

39,154 

 

 

65,388 

 

 

32,771 

Senior Care

 

 

5,861 

 

 

222 

 

 

6,632 

 

 

597 

Other

 

 

(1,435)

 

 

(7,245)

 

 

(895)

 

 

(5,761)

Total Company

 

$

128,798 

 

 

38,486 

 

$

99,659 

 

 

35,275 



 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other expenses, net

 

 

 

 

 

4,871 

 

 

 

 

 

5,583 

Depreciation and amortization

 

 

 

 

 

10,845 

 

 

 

 

 

9,983 

Changes in fair value of contingent acquisition consideration

 

 

 

 

 

3,389 

 

 

 

 

 

348 

Stock-based compensation expense

 

 

 

 

 

5,395 

 

 

 

 

 

8,832 

Legal settlements (B)

 

 

 

 

 

(13,824)

 

 

 

 

 

 -

Acquisition, disposition and related expenses (C)

 

 

 

 

 

(80)

 

 

 

 

 

557 

Restatement-related expenses (D)