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EX-31.2 - EX-31.2 CERTIFICATE OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF TH - Quotient Technology Inc.quot-ex312_6.htm
EX-32.2 - EX-32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1 - Quotient Technology Inc.quot-ex322_11.htm
EX-32.1 - EX-32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1 - Quotient Technology Inc.quot-ex321_9.htm
EX-31.1 - EX-31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE PURSUANT TO SECTION 302 OF THE SARB - Quotient Technology Inc.quot-ex311_17.htm
EX-10.1 - EX-10.1 AMENDED AND RESTATED QUOTIENT TECHNOLOGY, INC. 2013 EMPLOYEE STOCK PURCH - Quotient Technology Inc.quot-ex101_363.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 March 31, 2017

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, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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 May 2, 2017, the registrant had 90,373,213 shares of common stock outstanding.

 

 


 

QUOTIENT TECHNOLOGY INC.

INDEX

REPORT ON

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2017

 

PART I FINANCIAL INFORMATION

 

Item 1 Financial Statements (unaudited):

  

3

 

Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016

  

3

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016

  

4

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2017 and 2016

  

5

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016

  

6

 

Notes to Condensed Consolidated Financial Statements

  

7

 

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

  

18

 

Item 3 Quantitative and Qualitative Disclosures About Market Risk

  

27

 

Item 4 Controls and Procedures

  

27

 

PART II OTHER INFORMATION

 

Item 1—Legal Proceedings

  

28

 

Item 1A—Risk Factors

  

28

 

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

  

53

 

Item 3—Defaults Upon Senior Securities

  

53

 

Item 4—Mine Safety Disclosures

  

53

 

Item 5—Other Information

  

53

 

Item 6—Exhibits

  

53

 

SIGNATURES

  

54

 

 

2


 

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

March 31,

2017

 

 

December 31,

2016

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

130,486

 

 

$

106,174

 

Short-term investments

 

44,134

 

 

 

69,172

 

Accounts receivable, net of allowance for doubtful accounts of $1,059 and $1,338

   at March 31, 2017 and December 31, 2016, respectively

 

71,948

 

 

 

71,945

 

Prepaid expenses and other current assets

 

7,654

 

 

 

6,293

 

Total current assets

 

254,222

 

 

 

253,584

 

Property and equipment, net

 

16,046

 

 

 

16,376

 

Intangible assets, net

 

45,586

 

 

 

47,987

 

Goodwill

 

43,895

 

 

 

43,895

 

Other assets

 

855

 

 

 

914

 

Total assets

$

360,604

 

 

$

362,756

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

4,388

 

 

$

4,968

 

Accrued compensation and benefits

 

8,360

 

 

 

13,202

 

Other current liabilities

 

19,507

 

 

 

20,864

 

Deferred revenues

 

7,582

 

 

 

6,856

 

Total current liabilities

 

39,837

 

 

 

45,890

 

Other non-current liabilities

 

658

 

 

 

78

 

Deferred rent

 

2,184

 

 

 

2,285

 

Contingent consideration related to acquisitions

 

 

 

 

185

 

Deferred tax liabilities

 

2,309

 

 

 

2,569

 

Total liabilities

 

44,988

 

 

 

51,007

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

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

   issued or outstanding at March 31, 2017 and December 31, 2016

 

 

 

 

 

Common stock, $0.00001 par value—250,000,000 shares authorized; 99,914,145

   shares issued and 90,266,438 outstanding at March 31, 2017; 98,208,117

   shares issued and 88,560,409 outstanding at December 31, 2016

 

1

 

 

 

1

 

Additional paid-in capital

 

657,355

 

 

 

647,474

 

Treasury stock, at cost

 

(96,574

)

 

 

(96,574

)

Accumulated other comprehensive loss

 

(707

)

 

 

(748

)

Accumulated deficit

 

(244,459

)

 

 

(238,404

)

Total stockholders’ equity

 

315,616

 

 

 

311,749

 

Total liabilities and stockholders’ equity

$

360,604

 

 

$

362,756

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

3


 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Revenues

$

72,579

 

 

$

66,051

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of revenues

 

29,212

 

 

 

25,212

 

Sales and marketing

 

23,837

 

 

 

24,500

 

Research and development

 

13,120

 

 

 

13,532

 

General and administrative

 

11,893

 

 

 

11,250

 

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

 

(2,585

)

 

 

(102

)

Total costs and expenses

 

75,477

 

 

 

74,392

 

Loss from operations

 

(2,898

)

 

 

(8,341

)

Other income (expense), net

 

127

 

 

 

192

 

Loss before income taxes

 

(2,771

)

 

 

(8,149

)

Provision for (benefit from) income taxes

 

(97

)

 

 

46

 

Net loss

$

(2,674

)

 

$

(8,195

)

Net loss per share, basic and diluted

$

(0.03

)

 

$

(0.10

)

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

   share, basic and diluted

 

87,490

 

 

 

82,518

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

4


 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Net loss

$

(2,674

)

 

$

(8,195

)

Other comprehensive (income) loss:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

41

 

 

 

1

 

Comprehensive loss

$

(2,633

)

 

$

(8,194

)

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

 

5


 

QUOTIENT TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

$

(2,674

)

 

$

(8,195

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

4,532

 

 

 

5,128

 

Stock-based compensation

 

7,756

 

 

 

7,610

 

Loss on disposal of property and equipment

 

 

 

 

11

 

Allowance for doubtful accounts

 

(268

)

 

 

(56

)

Deferred income taxes

 

(97

)

 

 

20

 

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

 

(2,585

)

 

 

(102

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

264

 

 

 

5,731

 

Prepaid expenses and other current assets

 

(1,295

)

 

 

(3,039

)

Accounts payable and other current liabilities

 

(1,749

)

 

 

(1,039

)

Accrued compensation and benefits

 

(4,843

)

 

 

(6,369

)

Deferred revenues

 

726

 

 

 

486

 

Other

 

 

 

 

1

 

Net cash provided by (used in) operating activities

 

(233

)

 

 

187

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(1,637

)

 

 

(1,684

)

Purchase of short-term investments

 

(25,078

)

 

 

 

Proceeds from maturity of short-term investment

 

50,116

 

 

 

 

Net cash provided by (used in) investing activities

 

23,401

 

 

 

(1,684

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

1,144

 

 

 

1,785

 

Repurchases of common stock

 

 

 

 

(10,963

)

Principal payments on capital lease obligations

 

(9

)

 

 

(13

)

Net cash provided by (used in) financing activities

 

1,135

 

 

 

(9,191

)

Effect of exchange rates on cash and cash equivalents

 

9

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

24,312

 

 

 

(10,688

)

Cash and cash equivalents at beginning of period

 

106,174

 

 

 

134,947

 

Cash and cash equivalents at end of period

$

130,486

 

 

$

124,259

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for income taxes

$

24

 

 

$

 

Cash paid for interest

 

 

 

 

1

 

 

 

 

 

 

 

 

 

Supplemental disclosures of noncash investing and financing activities:

 

 

 

 

 

 

 

Fixed asset purchases not yet paid

 

562

 

 

 

753

 

Computer equipment acquired under promissory note

 

819

 

 

 

 

Property and equipment acquired under capital lease

$

31

 

 

$

 

 

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. (“Quotient” or, the “Company”), is a provider of an industry leading digital platform that enables consumer packaged goods (CPG) brands and retailers to engage shoppers through personalized and targeted promotions and media. Through our platform, CPGs and retailers are able to use online and in-store point-of-sale (POS) shopper data and analytics to drive sales with improved efficiency, as compared to traditional offline promotional and advertising vehicles.

 

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, 2016.

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, 2017 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, except for Company electing to change its accounting policy to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment of $3.4 million recorded to accumulated deficit balance as of January 1, 2017.

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.

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

7


 

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 in the initial stages of its evaluation of the impact of the new standard on its accounting policies, processes, and system requirements. In addition to internal resources, the Company has engaged third-party service providers to assist in the impact evaluation. Furthermore, the Company has made and will continue to make investments in systems to enable timely and accurate reporting under the new standard. The Company currently anticipates adopting the standard using the modified retrospective method and is evaluating the impact of adopting this new accounting guidance on the condensed 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 is 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 condensed 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, which is the first quarter of 2018 for the Company. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on the condensed consolidated financial statements.

Accounting Pronouncements Adopted

In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  The guidance requires all of the tax effects related to share based payments to be recorded through the income statement. The guidance also removes the present requirement to delay recognition of an excess tax benefit (“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 was effective for the Company beginning January 1, 2017, and interim periods within that reporting period. Early adoption was permitted. The Company adopted ASU 2016-09 in the first quarter of 2017. Upon adoption, the Company elected to change its accounting policy to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment of $3.4 million recorded to accumulated deficit balance as of January 1, 2017. The amendments related to accounting for previously unrecognized excess tax benefits as deferred tax assets have been adopted on a modified retrospective basis with a cumulative-effect adjustment to opening retained earnings of $25.5 million, fully offset by a valuation allowance. This adjustment resulted in no impact to retained earnings upon adoption. The amendments related to accounting for excess tax benefits have been adopted prospectively, resulting in no impact as the Company is in a net operating loss position with a full valuation allowance.

3. Fair Value Measurements

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

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

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

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

8


 

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

 

 

March 31,

2017

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of deposit

 

25,260

 

 

 

 

 

 

 

 

 

25,260

 

Short-Term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of deposit

 

 

 

 

44,134

 

 

 

 

 

 

44,134

 

Total

$

25,260

 

 

$

44,134

 

 

$

 

 

$

69,394

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to Shopmium acquisition (1)

 

 

 

 

 

 

 

 

 

 

 

Total

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

2016

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-Term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of deposit

 

 

 

 

69,172

 

 

 

 

 

 

69,172

 

Total

$

 

 

$

69,172

 

 

$

 

 

$

69,172

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to Shopmium acquisition (1)

 

 

 

 

 

 

 

185

 

 

 

185

 

Total

$

 

 

$

 

 

$

185

 

 

$

185

 

 

(1)

Included in contingent consideration related to acquisitions

 

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

 

 

Three Months Ended

 

 

March 31,

2017

 

 

Shopmium

 

 

Level 3

 

Balance as of December 31, 2016

$

185

 

Change in fair value

 

(185

)

Balance as of March 31, 2017

$

 

 

The Company recorded gains due to the change in fair value of the contingent consideration of $0.2 million and $0.1 million during the three months ended March 31, 2017 and 2016, respectively. 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 changes in the fair value of the contingent consideration are included as a component of operations in the accompanying condensed consolidated statements of operations.

9


 

There were no transfers between fair value hierarchies during the three months ended March 31, 2017 and 2016.

 

4. Allowance for Doubtful Accounts  

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

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Balance at the beginning of period

$

1,338

 

 

$

833

 

Bad debt expense (reversal)

 

(268

)

 

 

(56

)

Write-offs, net

 

(11

)

 

 

(66

)

Balance at the end of period

$

1,059

 

 

$

711

 

 

 

5. Balance Sheet Components

Property and Equipment, Net

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

 

 

March 31,

2017

 

 

December 31,

2016

 

Software

$

32,565

 

 

$

32,286

 

Computer equipment

 

23,624

 

 

 

22,664

 

Leasehold improvements

 

8,192

 

 

 

8,141

 

Furniture and fixtures

 

2,293

 

 

 

2,296

 

Total

 

66,674

 

 

 

65,387

 

Accumulated depreciation and amortization

 

(52,301

)

 

 

(50,249

)

Projects in process

 

1,673

 

 

 

1,238

 

Property and equipment, net

$

16,046

 

 

$

16,376

 

 

Depreciation and amortization expense related to property and equipment was $2.1 million and $3.9 million for the three months ended March 31, 2017 and 2016, respectively.

The Company capitalized internal use software development and enhancement costs of $1.0 million and $0.1 million during the three months ended March 31, 2017, and 2016, 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 $0.6 million and $2.7 million during the three months ended March 31, 2017 and 2016, respectively. The unamortized capitalized development and enhancement costs were $1.6 million and $1.2 million as of March 31, 2017 and December 31, 2016, respectively.

Accrued Compensation and Benefits

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

 

 

March 31,

2017

 

 

December 31,

2016

 

Bonus

$

2,398

 

 

$

5,985

 

Commissions

 

1,966

 

 

 

3,572

 

Vacation

 

1,946

 

 

 

1,916

 

Payroll and related expenses

 

2,050

 

 

 

1,729

 

Accrued compensation and benefits

$

8,360

 

 

$

13,202

 

 

10


 

Other Current Liabilities  

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

 

 

March 31,

2017

 

 

December 31,

2016

 

Distribution fees

$

11,055

 

 

$

12,463

 

Marketing expenses

 

1,763

 

 

 

3,383

 

Deferred rent, current

 

470

 

 

 

449

 

Legal and professional fees

 

364

 

 

 

377

 

Other

 

5,855

 

 

 

4,192

 

Other current liabilities

$

19,507

 

 

$

20,864

 

 

6. Intangible Assets

 

Intangible assets consist of the following (in thousands):  

 

 

March 31, 2017

 

 

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

Net

 

 

Weighted

Average

Amortization

Period

(Years)

 

Promotion service rights

$

22,492

 

 

$

(1,995

)

 

$

 

 

$

20,497

 

 

 

6.8

 

Data access rights

 

10,801

 

 

$

(1,250

)

 

 

 

 

 

9,551

 

 

 

5.1

 

Customer relationships

 

8,860

 

 

 

(5,255

)

 

 

(37

)

 

 

3,568

 

 

 

2.8

 

Developed technologies

 

7,187

 

 

 

(3,171

)

 

 

(89

)

 

 

3,927

 

 

 

3.1

 

Media service rights

 

6,383

 

 

 

(739

)

 

 

 

 

 

5,644

 

 

 

5.1

 

Domain names

 

5,948

 

 

 

(4,217

)

 

 

(9

)

 

 

1,722

 

 

 

1.9

 

Patents

 

975

 

 

 

(731

)

 

 

 

 

 

244

 

 

 

5.3

 

Vendor relationships

 

890

 

 

 

(723

)

 

 

 

 

 

167

 

 

 

0.8

 

Registered users

 

420

 

 

 

(143

)

 

 

(11

)

 

 

266

 

 

 

3.0

 

Trade names

 

167

 

 

 

(168

)

 

 

1

 

 

 

 

 

 

 

 

$

64,123

 

 

$

(18,392

)

 

$

(145

)

 

$

45,586

 

 

 

5.4

 

 

As of March 31, 2017, and December 31, 2016, the Company has a domain name with a gross value of $0.4 million with an indefinite useful life that is not subject to amortization.

 

 

December 31, 2016

 

 

Gross

 

 

Accumulated

Amortization

 

 

Foreign

Currency

Translation

 

 

Net

 

 

Weighted

Average

Amortization

Period

(Years)

 

Promotion service rights

$

22,492

 

 

$

(1,256

)

 

$

 

 

$

21,236

 

 

 

7.1

 

Data access rights

 

10,801

 

 

 

(787

)

 

 

 

 

 

10,014

 

 

 

5.3

 

Customer relationships

 

8,860

 

 

 

(4,915

)

 

 

(36

)

 

 

3,909

 

 

 

3.1

 

Developed technologies

 

7,187

 

 

 

(2,837

)

 

 

(89

)

 

 

4,261

 

 

 

3.3

 

Media service rights

 

6,383

 

 

 

(465

)

 

 

 

 

 

5,918

 

 

 

5.3

 

Domain names

 

5,948

 

 

 

(4,061

)

 

 

(9

)

 

 

1,878

 

 

 

2.2

 

Patents

 

975

 

 

 

(718

)

 

 

 

 

 

257

 

 

 

5.6

 

Vendor relationships

 

890

 

 

 

(667

)

 

 

 

 

 

223

 

 

 

1.0

 

Registered users

 

420

 

 

 

(118

)

 

 

(11

)

 

 

291

 

 

 

3.3

 

Trade names

 

167

 

 

 

(168

)

 

 

1

 

 

 

 

 

 

 

 

$

64,123

 

 

$

(15,992

)

 

$

(144

)

 

$

47,987

 

 

 

5.6

 

 

11


 

Amortization expense related to intangible assets subject to amortization was $2.4 million and $1.0 million during the three months ended March 31, 2017 and 2016, respectively. Estimated future amortization expense related to intangible assets as of March 31, 2017 is as follows (in thousands):    

 

 

Total

 

2017, remaining nine months

$

7,295

 

2018

 

9,419

 

2019

 

8,330

 

2020

 

6,908

 

2021

 

6,022

 

2022 and beyond

 

7,260

 

Total estimated amortization expense

$

45,234

 

 

7. Stock-based Compensation

2013 Equity Incentive Plan

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

Stock Options

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

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Expected life (in years)

6.08 - 6.25

 

 

5.93 - 6.08

 

Risk-free interest rate

2.05% - 2.14%

 

 

1.32% - 1.34%

 

Volatility

 

50%

 

 

 

65%

 

Dividend yield

 

 

 

 

The weighted-average grant-date fair value of options granted was $6.44 and $8.51 per share during the three months ended March 31, 2017 and 2016, 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.

12


 

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, 2016

 

3,424,730

 

 

 

5,504,084

 

 

$

12.02

 

 

 

7,746,067

 

 

$

8.83

 

 

 

6.12

 

 

$

30,507

 

Increase in shares authorized

 

3,542,416

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

(1,148,474

)

 

 

 

 

 

 

1,148,474

 

 

$

12.95

 

 

 

 

 

Options exercised

 

 

 

 

 

 

 

(442,007

)

 

$

2.59

 

 

 

 

$

3,813

 

Options canceled or expired

 

29,398

 

 

 

 

 

 

 

(29,398

)

 

$

8.25

 

 

 

 

 

RSUs granted

 

(817,550

)

 

 

817,550

 

 

$

12.82

 

 

 

 

 

 

 

 

 

RSUs vested

 

 

 

(1,264,022

)

 

$

13.15

 

 

 

 

 

 

 

 

 

RSUs canceled or expired

 

102,611

 

 

 

(102,611

)

 

$

12.43

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2017

 

5,133,131

 

 

 

4,955,001

 

 

$

11.98

 

 

 

8,423,136

 

 

$

9.72

 

 

 

6.61

 

 

$

20,407

 

Vested and expected to vest as of

   March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

8,423,136

 

 

$

9.72

 

 

 

6.61

 

 

$

20,407

 

Vested and exercisable as of

   March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

5,476,991

 

 

$

8.67

 

 

 

5.35

 

 

$

19,063

 

 

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

The aggregate total fair value of options which vested was $2.3 million and $0.8 million during the three months ended March 31, 2017 and 2016, respectively.

 

Employee Stock Purchase Plan

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

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

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Expected life (in years)

 

0.50

 

 

 

0.50

 

Risk-free interest rate

 

0.62%

 

 

 

0.33%

 

Volatility

 

50%

 

 

 

72%

 

Dividend yield

 

 

 

 

As of March 31, 2017, a total of 550,090 shares of common stock were issued under the 2013 Employee Stock Purchase Plan (“ESPP”), since inception of the plan. As of March 31, 2017, a total of 1,849,910 shares are available for issuance under the ESPP.

13


 

Stock-based Compensation Expense

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

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Cost of revenues

$

451

 

 

$

497

 

Sales and marketing

 

1,332

 

 

 

1,583

 

Research and development

 

2,011

 

 

 

2,240

 

General and administrative

 

3,962

 

 

 

3,290

 

Total stock-based compensation expense

$

7,756

 

 

$

7,610

 

 

As of March 31, 2017, there was $66.5 million of unrecognized stock-based compensation expense, of which $15.4 million is related to stock options and ESPP shares and $51.1 million is related to RSUs. The total unrecognized stock-based compensation expense related to stock options and ESPP as of March 31, 2017 will be amortized over a weighted-average period of 3.08 years. The total unrecognized stock-based compensation expense related to RSUs as of March 31, 2017 will be amortized over a weighted-average period of 2.56 years.

8. Common Stock Repurchase Program

Our Board of Directors has approved programs for us to repurchase shares of our common stock. During February 2017, the active repurchase program at that time expired. During the three months ended March 31, 2017, the Company did not repurchase any shares of its common stock.

In April 2017, the Company’s Board of Directors authorized a share repurchase program for us to repurchase up to $50.0 million of the Company’s common stock. The Program has a one year duration beginning on May 5, 2017. Stock repurchases may be made from time-to-time and the timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors. The Company may suspend, modify or terminate this repurchase program at any time without prior notice.

9. Income Taxes

The Company recorded an income tax benefit of $0.1 million and an income tax provision of an insignificant amount for the three months ended March 31, 2017, and 2016, respectively. The income tax benefit for the three months ended March 31, 2017 was primarily attributable to foreign tax benefit from the enactment of a lower corporate income tax rate by France’s tax authorities. The income tax provision for the three months ended March 31, 2016 was primarily attributable to the net decrease in deferred tax liabilities associated with the change in fair value of contingent consideration related to an acquisition and a decrease in foreign income taxed at non-US tax rates.

The Internal Revenue Service (IRS) has completed its examination of our Federal income tax returns for calendar years 2013 and 2014, resulting in no changes.

 

14


 

10. Net Loss Per Share

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

 

 

Three Months Ended

March 31,

 

 

2017

 

 

2016

 

Net loss

$

(2,674

)