Attached files

file filename
EX-10.2 - EX-10.2 OFFER LETTER OF EMPLOYMENT WITH RONALD J. FIOR - Quotient Technology Inc.quot-ex102_259.htm
EX-10.7 - EX-10.7 OPTION AGREEMENT FOR EMPLOYEES - Quotient Technology Inc.quot-ex107_607.htm
EX-32.2 - EX-32.2 - Quotient Technology Inc.quot-ex322_10.htm
EX-32.1 - EX-32.1 - Quotient Technology Inc.quot-ex321_9.htm
EX-31.2 - EX-31.2 - Quotient Technology Inc.quot-ex312_6.htm
EX-31.1 - EX-31.1 - Quotient Technology Inc.quot-ex311_8.htm
EX-10.8 - EX-10.8 OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS - Quotient Technology Inc.quot-ex108_608.htm
EX-10.6 - EX-10.6 RESTRICTED STOCK UNIT AGREEMENT - Quotient Technology Inc.quot-ex106_606.htm
EX-10.5 - EX-10.5 CHANGE OF CONTROL SEVERANCE AGREEMENT WITH RONALD J. FIOR - Quotient Technology Inc.quot-ex105_257.htm
EX-10.4 - EX-10.4 CHANGE OF CONTROL SEVERANCE AGREEMENT WITH MIR AAMIR - Quotient Technology Inc.quot-ex104_256.htm
EX-10.3 - EX-10.3 CHANGE OF CONTROL SEVERANCE AGREEMENT WITH STEVEN R. BOAL - Quotient Technology Inc.quot-ex103_258.htm
EX-10.1 - EX-10.1 TERMS OF SEPARATION & RELEASE OF CLAIMS WITH JENNIFER CERAN - Quotient Technology Inc.quot-ex101_260.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 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      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      No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 (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  

As of November 3, 2016, the registrant had 88,022,983 shares of common stock outstanding.

 

 

 

 


QUOTIENT TECHNOLOGY INC.

INDEX

REPORT ON

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2016

 

PART I FINANCIAL INFORMATION

 

Item 1 Financial Statements (unaudited):

  

3

 

Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015

  

3

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016 and 2015

  

4

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2016 and 2015

  

5

 

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

  

20

 

Item 3 Quantitative and Qualitative Disclosures About Market Risk

  

30

 

Item 4 Controls and Procedures

  

31

 

PART II OTHER INFORMATION

 

Item 1—Legal Proceedings

  

32

 

Item 1A—Risk Factors

  

32

 

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

  

56

 

Item 3—Defaults Upon Senior Securities

  

57

 

Item 4—Mine Safety Disclosures

  

57

 

Item 5—Other Information

  

57

 

Item 6—Exhibits

  

57

 

SIGNATURES

  

58

 

 

2


PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

September 30,

2016

 

 

December 31,

2015

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

92,496

 

 

$

134,947

 

Short-term investments

 

69,116

 

 

 

25,000

 

Accounts receivable, net of allowance for doubtful accounts of $931 and $833

   at September 30, 2016 and December 31, 2015, respectively

 

66,972

 

 

 

63,239

 

Prepaid expenses and other current assets

 

8,193

 

 

 

5,297

 

Total current assets

 

236,777

 

 

 

228,483

 

Property and equipment, net

 

19,282

 

 

 

25,128

 

Intangible assets, net

 

50,440

 

 

 

14,880

 

Goodwill

 

43,895

 

 

 

43,895

 

Other assets

 

1,029

 

 

 

8,685

 

Total assets

$

351,423

 

 

$

321,071

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

6,063

 

 

$

8,187

 

Accrued compensation and benefits

 

9,955

 

 

 

15,237

 

Other current liabilities

 

17,822

 

 

 

20,170

 

Deferred revenues

 

7,750

 

 

 

7,342

 

Total current liabilities

 

41,590

 

 

 

50,936

 

Other non-current liabilities

 

70

 

 

 

5

 

Deferred rent

 

2,215

 

 

 

701

 

Contingent consideration related to acquisitions

 

552

 

 

 

1,407

 

Deferred tax liabilities

 

2,519

 

 

 

2,532

 

Total liabilities

 

46,946

 

 

 

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 September 30, 2016 and December 31, 2015

 

 

 

 

 

Common stock, $0.00001 par value—250,000,000 shares authorized; 97,391,192

   shares issued and 87,755,940 outstanding at September 30, 2016; 89,935,381

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

 

1

 

 

 

1

 

Additional paid-in capital

 

643,601

 

 

 

570,588

 

Treasury stock, at cost

 

(96,449

)

 

 

(85,427

)

Accumulated other comprehensive loss

 

(738

)

 

 

(747

)

Accumulated deficit

 

(241,938

)

 

 

(218,925

)

Total stockholders’ equity

 

304,477

 

 

 

265,490

 

Total liabilities and stockholders’ equity

$

351,423

 

 

$

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues

$

66,470

 

 

$

56,467

 

 

$

199,768

 

 

$

167,896

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

35,126

 

 

 

22,778

 

 

 

85,500

 

 

 

66,767

 

Sales and marketing

 

20,415

 

 

 

23,403

 

 

 

67,656

 

 

 

66,321

 

Research and development

 

12,414

 

 

 

11,890

 

 

 

38,419

 

 

 

36,671

 

General and administrative

 

10,041

 

 

 

8,382

 

 

 

32,394

 

 

 

24,740

 

Change in fair value of escrowed shares and contingent

   consideration, net

 

105

 

 

 

(238

)

 

 

(963

)

 

 

1,484

 

Total costs and expenses

 

78,101

 

 

 

66,215

 

 

 

223,006

 

 

 

195,983

 

Loss from operations

 

(11,631

)

 

 

(9,748

)

 

 

(23,238

)

 

 

(28,087

)

Interest expense

 

 

 

 

(126

)

 

 

 

 

 

(288

)

Other income (expense), net

 

398

 

 

 

47

 

 

 

418

 

 

 

26

 

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

 

 

 

 

 

 

 

 

 

 

4,800

 

Loss before income taxes

 

(11,233

)

 

 

(9,827

)

 

 

(22,820

)

 

 

(23,549

)

Provision for (benefit from) income taxes

 

79

 

 

 

(9

)

 

 

193

 

 

 

(388

)

Net loss

$

(11,312

)

 

$

(9,818

)

 

$

(23,013

)

 

$

(23,161

)

Net loss per share attributable to common stockholders,

   basic and diluted

$

(0.13

)

 

$

(0.12

)

 

$

(0.28

)

 

$

(0.28

)

Weighted-average number of common shares used in

   computing net loss per share attributable to common

   stockholders, basic and diluted

 

84,732

 

 

 

82,831

 

 

 

83,484

 

 

 

83,335

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

4


QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net loss

$

(11,312

)

 

$

(9,818

)

 

$

(23,013

)

 

$

(23,161

)

Other comprehensive (income) loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

3

 

 

 

(67

)

 

 

9

 

 

 

(50

)

Comprehensive loss

$

(11,309

)

 

$

(9,885

)

 

$

(23,004

)

 

$

(23,211

)

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

5


QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Nine Months Ended

September 30,

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(23,013

)

 

$

(23,161

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

16,252

 

 

 

11,879

 

Stock-based compensation

 

21,647

 

 

 

25,513

 

Amortization of debt issuance costs

 

 

 

 

134

 

Loss on disposal of property and equipment

 

245

 

 

 

2

 

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

 

 

 

 

(4,800

)

Allowance for doubtful accounts

 

237

 

 

 

46

 

Deferred income taxes

 

193

 

 

 

(456

)

One-time charge for certain distribution fees

 

7,435

 

 

 

 

Change in fair value of escrowed shares and contingent consideration, net

 

(963

)

 

 

1,484

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(3,970

)

 

 

(2,295

)

Prepaid expenses and other current assets

 

(596

)

 

 

(2,790

)

Accounts payable and other current liabilities

 

(3,720

)

 

 

2,061

 

Accrued compensation and benefits

 

(5,180

)

 

 

(3,279

)

Deferred revenues

 

408

 

 

 

1,190

 

Net cash provided by operating activities

 

8,975

 

 

 

5,528

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(5,004

)

 

 

(9,406

)

Purchase of intangible assets

 

(63

)

 

 

(283

)

Purchase of short-term investments

 

(69,116

)

 

 

 

Proceeds from maturity of short-term investment

 

25,000

 

 

 

 

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

 

 

 

 

4,800

 

Net cash used in investing activities

 

(49,183

)

 

 

(4,889

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

9,613

 

 

 

4,656

 

Repurchases of common stock

 

(11,819

)

 

 

(8,852

)

Repayment of debt obligations

 

 

 

 

(7,500

)

Principal payments on capital lease obligations

 

(38

)

 

 

(46

)

Net cash used in financing activities

 

(2,244

)

 

 

(11,742

)

Effect of exchange rates on cash and cash equivalents

 

1

 

 

 

16

 

Net decrease in cash and cash equivalents

 

(42,451

)

 

 

(11,087

)

Cash and cash equivalents at beginning of period

 

134,947

 

 

 

201,075

 

Cash and cash equivalents at end of period

$

92,496

 

 

$

189,988

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

Fair value of common stock issued in connection with a services and data

   agreement

$

39,570

 

 

$

 

 

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. (the “Company"), 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, which was formerly known as Coupons.com Incorporated, changed its name effective October 20, 2015, 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, recoverability of non-refundable distribution fees, the valuation and useful lives of intangible assets and property and equipment, goodwill, stock-based compensation, 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.

When the Company delivers a digital coupon on a retailer’s website or mobile app or through its loyalty program, or the website or mobile app of a publisher, or through its Retailer iQ platform, and the consumer takes certain actions, the Company pays a distribution fee to the retailer or other publisher, which, in some cases may be prepaid prior to being incurred. During the three months ended September 30, 2016, the Company recorded a one-time charge associated with certain distribution fees under an arrangement with a retailer partner that were deemed unrecoverable. The Company considered various factors in its assessment including its historical experience with transaction volumes through the retailer and other comparative retailers, ongoing communications with the retailer to increase its marketing efforts to promote the digital platform, as well as the projected revenues, and associated revenue share payments. Accordingly, during the three months ended September 30, 2016, the Company recognized a one-time charge of $7.4 million related to such distribution fees in cost of revenues on the accompanying condensed consolidated statement of operations. As of September 30, 2016, the Company had a remaining non-refundable distribution fee prepayment balance of $0.6 million.

 

7


Foreign Currency

Prior to the first quarter of 2016, the functional currency of each of the Company’s international subsidiaries was the local currency, as its international subsidiaries negotiated and managed business locally with minimal involvement from the U.S. parent entity.

Beginning the first quarter of 2016, the functional currency of certain international subsidiaries changed from its local currency to U.S. Dollar (“USD”). The change in functional currency was the result of changes in the Company’s international strategy primarily resulting from the acquisition of Shopmium S.A. (a private company based in France). The Company acquired Shopmium S.A. as part of its strategy to broaden international operations and subsequently, the Company reviewed its international strategy, including management of its relationships with international CPG brands, evaluation of worldwide competition and international pricing strategy, its plan to manage future billings and collections for international customers and plan to further develop the acquired technology for its subsequent use by various entities. Consequently, as part of the Company’s new international strategy and changes to the way the Company runs its business internationally, it modified its existing international structure and entered into various inter-company licensing agreements between its U.S. entity and certain international entities. As these changes were significant, the Company considered the economic factors outlined in ASC 830, Foreign Currency Matters, for the determination of the functional currency. The Company concluded that most of the factors pointed to the use of the parent’s currency (USD) as the functional currency, which resulted in a change in functional currency to USD for such international subsidiaries.

The change in functional currency is applied on a prospective basis beginning with our first quarter of 2016 and translation adjustments for prior periods will continue to remain as a component of accumulated other comprehensive loss.  

Gains (losses) from foreign currency transactions are included in other income (expense), net in the accompanying condensed consolidated statements of operations. Foreign currency transaction gains (losses) were immaterial in the three and nine months ended September 30, 2016.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

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

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

8


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.

In August 2016, the FASB issued ASU. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The standard is effective for public business entities for annual reporting years beginning after December 15, 2017, 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.

3. Fair Value Measurements

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

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

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

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

9


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

 

 

September 30,

2016

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of deposits (2)

 

 

 

 

69,116

 

 

 

 

 

 

69,116

 

Total

$

 

 

$

69,116

 

 

$

 

 

$

69,116

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to Shopmium acquisition

$

 

 

$

 

 

$

552

 

 

$

552

 

Total

$

 

 

$

 

 

$

552

 

 

$

552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 deposits included using quoted prices in active markets for similar assets.

The fair value of contingent consideration related to the acquisition of Shopmium S.A. (Shopmium) was estimated using a Monte Carlo simulation and was based on significant inputs not observable in the market, thus classified as a Level 3 instrument. The inputs include the expected achievement of certain revenue and profit milestones for the years ending December 31, 2016 and 2017, historical volatility and risk free interest rate.

The fair value of contingent consideration related to the asset purchase agreement with Eckim LLC (Eckim) was determined based on an estimate of shares issuable to Eckim for achieving certain revenue and profit milestones at the end of the earnout period as of December 31, 2015. The inputs include the Company’s stock price and the number of shares issuable. On January 26, 2016, the Company and the sellers of Eckim agreed on performance against the milestones and the shares to be issued. Accordingly, the Company reclassified the contingent liability of $1.9 million related to Eckim to stockholder’s equity in the first quarter of 2016. The shares were issued during the second quarter of 2016.

10


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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

2016

 

 

September 30,

2016

 

 

Eckim

 

 

Shopmium

 

 

Eckim

 

 

Shopmium

 

 

Level 1

 

 

Level 3

 

 

Level 1

 

 

Level 3

 

Balance at the beginning of period

$

 

 

$

687

 

 

$

2,291

 

 

$

1,407

 

Change in fair value

 

 

 

 

(135

)

 

 

(348

)

 

 

(855

)

Settlement

 

 

 

 

 

 

 

(1,943

)

 

 

 

Balance as of September 30, 2016

$

 

 

$

552

 

 

$

 

 

$

552

 

 

 

 

 

For the three and nine months ended September 30, 2016, the Company recorded gains of $0.1 million and $1.2 million, respectively, related to the changes in fair value of contingent consideration. The change in fair value of Shopmium contingent consideration is due to a decline in expected revenue and profit milestones for the years ending December 31, 2016 and 2017. The change in fair value of Eckim contingent consideration is due to changes in the Company’s stock price at the valuation dates. The changes in the fair value of the contingent consideration is included as a component of operations in the accompanying condensed consolidated statements of operations.

There were no transfers between fair value hierarchies during the three and nine months ended September 30, 2016 and 2015.

 

4. Allowance for Doubtful Accounts  

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

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Balance at the beginning of period

$

883

 

 

$

245

 

 

$

833

 

 

$

408

 

Bad debt expense

 

86

 

 

 

81

 

 

 

237

 

 

 

46

 

Write-offs, net

 

(38

)

 

 

(24

)

 

 

(139

)

 

 

(152

)

Balance as of September30, 2016

$

931

 

 

$

302

 

 

$

931

 

 

$

302

 

 

 

5. Balance Sheet Components

Property and Equipment, Net

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

 

 

September 30,

2016

 

 

December 31,

2015

 

Software

$

32,656

 

 

$

33,139

 

Computer equipment

 

22,535

 

 

 

21,186

 

Leasehold improvements

 

8,390

 

 

 

4,721

 

Furniture and fixtures

 

2,372

 

 

 

1,670

 

Total

 

65,953

 

 

 

60,716

 

Accumulated depreciation and amortization

 

(47,912

)

 

 

(39,124

)

Projects in process

 

1,241

 

 

 

3,536

 

Property and equipment, net

$

19,282

 

 

$

25,128

 

 

Depreciation and amortization expense related to property and equipment was $4.1 million and $3.3 million for the three months ended September 30, 2016 and 2015, respectively, and $12.0 million and $9.6 million for the nine months ended September 30, 2016 and 2015, respectively.

The Company capitalized internal use software development and enhancement costs of $0.3 million during each of the three months ended September 30, 2016, and 2015, and $0.4 million and $1.1 million during the nine months ended

11


September 30, 2016 and 2015, respectively. Amortization expense related to internal use software, included in property and equipment depreciation and amortization expense above, and recorded as cost of revenues was $2.6 million and $2.4 million during the three months ended September 30, 2016 and 2015, respectively, and $7.9 million and $7.0 million during the nine months ended September 30, 2016 and 2015, respectively. The unamortized capitalized development and enhancement costs were $3.4 million and $11.1 million as of September 30, 2016 and December 31, 2015, respectively.

Accrued Compensation and Benefits

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

 

 

September 30,

2016

 

 

December 31,

2015

 

Bonus

$

3,825

 

 

$

6,858

 

Commissions

 

1,943

 

 

 

3,645

 

Vacation

 

1,918

 

 

 

2,118

 

Payroll and related expenses

 

2,269

 

 

 

2,616

 

Accrued compensation and benefits

$

9,955

 

 

$

15,237

 

 

Other Current Liabilities  

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

 

 

September 30,

2016

 

 

December 31,

2015

 

Distribution fees

$

12,113

 

 

$

8,349

 

Marketing expenses

 

1,853

 

 

 

3,336

 

Deferred rent, current

 

345

 

 

 

346

 

Legal and professional fees

 

335

 

 

 

745

 

Contingent consideration

 

 

 

 

2,291

 

Other

 

3,176

 

 

 

5,103

 

Other current liabilities

$

17,822

 

 

$

20,170

 

 

6. Intangible Assets

On August 3, 2016, the Company entered into a services and data agreement, (the “Agreement”), which provides the Company with certain exclusive rights to provide promotion and media services, and the use of shopper data, for 5.5 years, with certain rights continuing on a non-exclusive basis for up to an additional 4.5 years. In exchange, the Company agreed to issue 3,000,000 shares of common stock.

The consideration for such services and data rights aggregated to $39.6 million based on the fair value of 3,000,000 shares of the Company’s common stock at the date of entering into the Agreement. Out of the 3,000,000 shares issued, 1,000,000 shares were issued within five business days of execution of the Agreement and 2,000,000 shares are held in escrow and will be released in two equal installments, within 15 business days following the years ending December 31, 2017 and 2018. The fair value of the shares held in escrow was recorded in additional paid in capital and is subject to re-measurement until released from escrow. During the three months ended September 30, 2016, the Company recorded a loss of $0.2 million due to the change in the Company’s stock price. Gains and losses as a result of the changes in the fair value of the shares that are being held in escrow are included in change in fair value of escrowed shares and contingent consideration, net on the accompanying condensed consolidated statement of operations.

The consideration of $39.6 million as well as the capitalized transaction costs of $0.1 million were allocated to the acquired intangible assets based on the respective fair values. The Company is amortizing the intangible assets on a straight-line basis over their respective estimated useful lives in cost of revenues on the accompanying condensed consolidated statement of operations.

12


The following table presents the details of the acquired intangible assets (in thousands):

 

 

Amount

 

 

Estimated

Useful Life

(Years)

 

Promotion service rights

$

22,492

 

 

 

7.5

 

Media service rights

 

6,383

 

 

 

5.8

 

Data access rights

 

10,801

 

 

 

5.8

 

Total identifiable intangible assets

$

39,676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets consist of the following (in thousands):  

 

 

September 30, 2016

 

 

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

Net

 

 

Weighted

Average

Amortization

Period

(Years)

 

Promotion service rights

$

22,492

 

 

$

(501

)

 

$

 

 

$

21,991

 

 

 

7.3

 

Data access rights

 

10,801

 

 

$

(314

)

 

 

 

 

 

10,487

 

 

 

5.6

 

Customer relationships

 

8,860

 

 

 

(4,567

)

 

 

(36

)

 

 

4,257

 

 

 

3.3

 

Developed technologies

 

7,460

 

 

 

(2,768

)

 

 

(89

)

 

 

4,603

 

 

 

3.6

 

Media service rights

 

6,383

 

 

 

(185

)

 

 

 

 

 

6,198

 

 

 

5.6

 

Domain names

 

5,948

 

 

 

(3,900

)

 

 

(9

)

 

 

2,039

 

 

 

2.4

 

Patents

 

975

 

 

 

(705

)

 

 

 

 

 

270

 

 

 

5.9

 

Vendor relationships

 

890

 

 

 

(612

)

 

 

 

 

 

278

 

 

 

1.3

 

Registered users

 

420

 

 

 

(92

)

 

 

(11

)

 

 

317

 

 

 

3.6

 

Trade names

 

167

 

 

 

(168

)

 

 

1

 

 

 

 

 

 

 

 

$

64,396

 

 

$

(13,812

)

 

$

(144

)

 

$

50,440

 

 

 

5.8

 

 

As of September 30, 2016, the Company has a domain name with a gross value of $0.4 million that has an indefinite useful life, hence is not subject to amortization.

 

 

December 31, 2015

 

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

Net

 

 

Weighted

Average

Amortization

Period

(Years)

Customer relationships

$

8,860

 

 

$

(3,345

)

 

$

(36

)

 

$

5,479

 

 

4

Developed technologies

 

7,460

 

 

 

(1,709

)

 

 

(89

)

 

 

5,662

 

 

4

Domain names

 

5,948

 

 

 

(3,419

)

 

 

(9

)

 

 

2,520

 

 

3

Patents

 

1,050

 

 

 

(686

)

 

 

 

 

 

364

 

 

6

Vendor relationships

 

890

 

 

 

(445

)

 

 

 

 

 

445

 

 

2

Registered users

 

420

 

 

 

(18

)

 

 

(11

)

 

 

391

 

 

4

Trade names

 

167

 

 

 

(149

)

 

 

1

 

 

 

19

 

 

1

 

$

24,795

 

 

$

(9,771

)

 

$

(144

)

 

$

14,880

 

 

4

 

13


Amortization expense related to intangible assets subject to amortization was $2.1 million and $0.8 million during the three months ended September 30, 2016 and 2015, respectively, and $4.3 million and $2.3 million during the nine months ended September 30, 2016 and 2015, respectively. Estimated future amortization expense related to intangible assets as of September 30, 2016 is as follows (in thousands):    

 

 

Total

 

2016, remaining three months

$

2,452

 

2017

 

9,696

 

2018

 

9,419

 

2019

 

8,330

 

2020

 

6,908

 

2021 and beyond

 

13,282

 

Total estimated amortization expense

$

50,087

 

 

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

September 30,

 

 

Nine Months Ended

September 30,

 

2016

 

 

2015

 

 

2016

 

2015

Expected life (in years)

 

6.08

 

 

6.08

 

 

2.5 – 6.08

 

5.50 – 6.08

Risk-free interest rate

 

1.22%

 

 

 

1.67%

 

 

0.68% – 1.34%

 

1.67% – 1.89%

Volatility

 

55%

 

 

 

60%

 

 

55% – 70%

 

55% – 60%

Dividend yield

 

 

 

 

 

 

The weighted-average grant-date fair value of options granted was $6.87 and $5.34 per share during the three months ended September 30, 2016 and 2015, respectively, and $5.25 and $5.57 per share during the nine months ended September 30, 2016 and 2015, respectively.

 

Restricted Stock Units

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

14


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