falsedesktopQUOT2020-09-30000111512820000006{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\nEmerging growth company\t☐\t\t\n", "q10k_tbl_1": "PART I FINANCIAL INFORMATION\t\nItem 1 Financial Statements (unaudited):\t4\nCondensed Consolidated Balance Sheets as of September 30 2020 and December 31 2019\t4\nCondensed Consolidated Statements of Operations for the three and nine months ended September 30 2020 and 2019\t5\nCondensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30 2020 and 2019\t6\nCondensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30 2020 and 2019\t7\nCondensed Consolidated Statements of Cash Flows for the nine months ended September 30 2020 and 2019\t8\nNotes to Condensed Consolidated Financial Statements\t9\nItem 2 Management's Discussion and Analysis of Financial Condition and Results of Operations\t29\nItem 3 Quantitative and Qualitative Disclosures About Market Risk\t42\nItem 4 Controls and Procedures\t42\nPART II OTHER INFORMATION\t\nItem 1-Legal Proceedings\t44\nItem 1A-Risk Factors\t44\nItem 2-Unregistered Sales of Equity Securities and Use of Proceeds\t78\nItem 3-Defaults Upon Senior Securities\t78\nItem 4-Mine Safety Disclosures\t78\nItem 5-Other Information\t78\nItem 6-Exhibits\t79\nSIGNATURES\t80\n", "q10k_tbl_2": "\tSeptember 30 2020\tDecember 31 2019\n\t(unaudited)\t\nAssets\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t209854\t224764\nAccounts receivable net of allowance for credit losses of $2264 and $2021 at September 30 2020 and December 31 2019 respectively\t122148\t125304\nPrepaid expenses and other current assets\t21266\t22026\nTotal current assets\t353268\t372094\nProperty and equipment net\t15628\t13704\nOperating lease right-of-use assets\t17181\t7211\nIntangible assets net\t52677\t69752\nGoodwill\t128427\t128427\nOther assets\t1246\t750\nTotal assets\t568427\t591938\nLiabilities and Stockholders' Equity\t\t\nCurrent liabilities:\t\t\nAccounts payable\t10765\t19116\nAccrued compensation and benefits\t10474\t15232\nOther current liabilities\t63634\t50032\nDeferred revenues\t11353\t10903\nContingent consideration related to acquisitions\t0\t27000\nTotal current liabilities\t96226\t122283\nOther non-current liabilities\t17926\t7119\nContingent consideration related to acquisitions\t15008\t9220\nConvertible senior notes net\t174360\t166157\nDeferred tax liabilities\t1937\t1937\nTotal liabilities\t305457\t306716\nCommitments and contingencies (Note 14)\t\t\nStockholders' equity:\t\t\nPreferred stock $0.00001 par value-10000000 shares authorized and no shares issued or outstanding at September 30 2020 and December 31 2019\t0\t0\nCommon stock $0.00001 par value-250000000 shares authorized; 90799437 and 89371199 shares issued and outstanding at September 30 2020 and December 31 2019 respectively\t1\t1\nAdditional paid-in capital\t689013\t671060\nAccumulated other comprehensive loss\t(1045)\t(916)\nAccumulated deficit\t(424999)\t(384923)\nTotal stockholders' equity\t262970\t285222\nTotal liabilities and stockholders' equity\t568427\t591938\n", "q10k_tbl_3": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues\t121116\t114830\t303358\t317628\nCosts and expenses:\t\t\t\t\nCost of revenues\t73603\t70458\t185445\t191387\nSales and marketing\t24555\t24310\t73403\t73703\nResearch and development\t9744\t9236\t28958\t28305\nGeneral and administrative\t12099\t17643\t39457\t44101\nChange in fair value of contingent consideration\t1562\t999\t5788\t1052\nTotal costs and expenses\t121563\t122646\t333051\t338548\nLoss from operations\t(447)\t(7816)\t(29693)\t(20920)\nInterest expense\t(3646)\t(3507)\t(10830)\t(10416)\nOther income (expense) net\t(59)\t1175\t708\t4214\nLoss before income taxes\t(4152)\t(10148)\t(39815)\t(27122)\nProvision for income taxes\t66\t215\t261\t375\nNet loss\t(4218)\t(10363)\t(40076)\t(27497)\nNet loss per share basic and diluted\t(0.05)\t(0.12)\t(0.44)\t(0.30)\nWeighted-average number of common shares used in computing net loss per share basic and diluted\t90585\t88789\t90113\t91850\n", "q10k_tbl_4": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet loss\t(4218)\t(10363)\t(40076)\t(27497)\nOther comprehensive income (loss):\t\t\t\t\nForeign currency translation adjustments\t115\t(87)\t(129)\t(42)\nComprehensive loss\t(4103)\t(10450)\t(40205)\t(27539)\n", "q10k_tbl_5": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nTotal stockholders' equity beginning balances\t262345\t304982\t285222\t380087\nCommon stock and additional paid-in capital:\t\t\t\t\nBeginning balances\t684286\t665666\t671061\t703023\nStock-based compensation\t6584\t7768\t21374\t24097\nExercise of employee stock options\t45\t50\t529\t1686\nIssuance of common stock for services provided\t228\t0\t456\t0\nIssuance of common stock purchase plan\t0\t0\t1050\t1427\nPayments for taxes related to net share settlement of equity awards\t(2129)\t(1720)\t(5456)\t(8181)\nRetirement of treasury stock\t0\t(9478)\t0\t(59766)\nEnding balance\t689014\t662286\t689014\t662286\nTreasury stock:\t\t\t\t\nBeginning balances\t0\t0\t0\t0\nRepurchase of common stock\t0\t(14593)\t0\t(85539)\nRetirement of treasury stock\t0\t14593\t0\t85539\nEnding balance\t0\t0\t0\t0\nAccumulated other comprehensive loss:\t\t\t\t\nBeginning balances\t(1160)\t(799)\t(916)\t(844)\nOther comprehensive income (loss)\t115\t(87)\t(129)\t(42)\nEnding balance\t(1045)\t(886)\t(1045)\t(886)\nAccumulated deficit:\t\t\t\t\nBeginning balances\t(420781)\t(359885)\t(384923)\t(322093)\nRetirement of treasury stock\t0\t(5115)\t0\t(25773)\nNet loss\t(4218)\t(10363)\t(40076)\t(27497)\nEnding balance\t(424999)\t(375363)\t(424999)\t(375363)\nTotal stockholders' equity ending balances\t262970\t286037\t262970\t286037\n", "q10k_tbl_6": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash flows from operating activities:\t\t\nNet loss\t(40076)\t(27497)\nAdjustments to reconcile net loss to net cash (used in) provided by operating activities:\t\t\nDepreciation and amortization\t26522\t23260\nStock-based compensation\t21021\t23692\nAmortization of debt discount and issuance cost\t8203\t7776\nAllowance for credit losses\t542\t583\nDeferred income taxes\t261\t375\nChange in fair value of contingent consideration\t5788\t1052\nImpairment of capitalized software development costs\t0\t3579\nOther non-cash expenses\t2546\t1872\nChanges in operating assets and liabilities:\t\t\nAccounts receivable\t2615\t(5332)\nPrepaid expenses and other current assets\t158\t(11084)\nAccounts payable and other current liabilities\t4893\t9053\nPayments for contingent consideration and bonuses\t(15418)\t0\nAccrued compensation and benefits\t(4334)\t(1743)\nDeferred revenues\t450\t4405\nNet cash provided by operating activities\t13171\t29991\nCash flows from investing activities:\t\t\nPurchases of property and equipment\t(6648)\t(7412)\nPurchase of intangible assets\t(3000)\t(14811)\nProceeds from maturities of short-term investment\t0\t20738\nNet cash used in investing activities\t(9648)\t(1485)\nCash flows from financing activities:\t\t\nProceeds from issuances of common stock under stock plans\t1579\t3113\nPayments for taxes related to net share settlement of equity awards\t(5456)\t(8181)\nRepurchases and retirement of common stock under share repurchase program\t0\t(87097)\nPrincipal payments on promissory note and capital lease obligations\t(100)\t(236)\nPayments for contingent consideration\t(14582)\t0\nNet cash used in financing activities\t(18559)\t(92401)\nEffect of exchange rates on cash and cash equivalents\t126\t1\nNet decrease in cash and cash equivalents\t(14910)\t(63894)\nCash and cash equivalents at beginning of period\t224764\t302028\nCash and cash equivalents at end of period\t209854\t238134\nSupplemental disclosures of cash flow information:\t\t\nCash paid for income taxes\t149\t240\nCash paid for interest\t1753\t1764\nSupplemental disclosures of noncash investing and financing activities:\t\t\nFixed asset purchases not yet paid\t924\t599\nIntangible asset acquisitions not yet paid\t2250\t0\n", "q10k_tbl_7": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nPromotion\t62376\t62034\t168714\t183152\nMedia\t58740\t52796\t134644\t134476\nTotal Revenue\t121116\t114830\t303358\t317628\n", "q10k_tbl_8": "\tSeptember 30 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\nAssets:\t\t\t\t\nCash equivalents:\t\t\t\t\nMoney market funds\t104944\t0\t0\t104944\nTotal\t104944\t0\t0\t104944\nLiabilities:\t\t\t\t\nContingent consideration related to acquisitions\t0\t0\t15008\t15008\nTotal\t0\t0\t15008\t15008\n", "q10k_tbl_9": "\tDecember 31 2019\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\nAssets:\t\t\t\t\nCash equivalents:\t\t\t\t\nMoney market funds\t124303\t0\t0\t124303\nU.S. Treasury Bills\t15120\t0\t0\t15120\nTotal\t139423\t0\t0\t139423\nLiabilities:\t\t\t\t\nContingent consideration related to acquisitions\t0\t0\t36220\t36220\nTotal\t0\t0\t36220\t36220\n", "q10k_tbl_10": "\tThree Months Ended September 30 2020\t\tNine Months Ended September 30 2020\t\t\n\tUbimo\tElevaate\tUbimo\tElevaate\tAhalogy\n\tLevel 3\tLevel 3\tLevel 3\tLevel 3\tLevel 3\nBalance at the beginning of period\t10239\t3207\t5686\t3534\t27000\nChange in fair value during the period\t4769\t(3207)\t9322\t(3534)\t0\nPayments made during the period\t0\t0\t0\t0\t(27000)\nTotal\t15008\t0\t15008\t0\t0\n", "q10k_tbl_11": "\tThree Months Ended September 30 2019\t\tNine Months Ended September 30 2019\t\n\tElevaate\tAhalogy\tElevaate\tAhalogy\n\tLevel 3\tLevel 3\tLevel 3\tLevel 3\nBalance at the beginning of period\t3015\t26001\t6121\t22842\nChange in fair value during the period\t0\t999\t(3106)\t4158\nTotal\t3015\t27000\t3015\t27000\n", "q10k_tbl_12": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nBalance at the beginning of period\t2079\t1381\t2021\t1200\nProvision for expected credit losses\t279\t217\t542\t583\nWrite-offs charged against the allowance\t(94)\t(221)\t(299)\t(406)\nBalance at the end of period\t2264\t1377\t2264\t1377\n", "q10k_tbl_13": "\tSeptember 30 2020\tDecember 31 2019\nSoftware\t44122\t41876\nComputer equipment\t23365\t25773\nLeasehold improvements\t5867\t5883\nFurniture and fixtures\t2476\t2449\nTotal\t75830\t75981\nAccumulated depreciation and amortization\t(64754)\t(63543)\nProjects in process\t4552\t1266\nTotal property and equipment net\t15628\t13704\n", "q10k_tbl_14": "\tSeptember 30 2020\tDecember 31 2019\nCommissions\t3908\t5996\nPayroll and related expenses\t3622\t2533\nBonus\t2092\t5997\nVacation\t852\t706\nTotal accrued compensation and benefits\t10474\t15232\n", "q10k_tbl_15": "\tSeptember 30 2020\tDecember 31 2019\nDistribution fees\t30692\t20360\nTraffic acquisition cost\t7602\t5278\nPrefunded liability\t5425\t5429\nOperating lease liabilities\t3727\t3168\nLiability related to purchased intangible asset\t2250\t1000\nInterest payable\t1157\t282\nMarketing expenses\t946\t2164\nOther\t11835\t12351\nTotal other current liabilities\t63634\t50032\n", "q10k_tbl_16": "\tPurchase Consideration\tNet Tangible Assets Acquired/ (Liabilities Assumed)\tIdentifiable Intangible Assets\tGoodwill\tGoodwill Deductible for Taxes\t(1) Acquisition Related Expenses\nUbimo\t20740\t384\t10750\t9606\tNot Deductible\t579\nElevaate\t13346\t(60)\t3781\t9625\tNot Deductible\t549\nSavingStar\t7485\t(1126)\t2577\t6034\tNot Deductible\t556\nAhalogy\t36432\t2196\t11580\t22656\tNot Deductible\t684\n\t78003\t1394\t28688\t47921\t\t2368\n", "q10k_tbl_17": "\tUbimo\tEstimated Useful Life (in Years)\tElevaate\tEstimated Useful Life (in Years)\tSavingStar\tEstimated Useful Life (in Years)\tAhalogy\tEstimated Useful Life (in Years)\nDeveloped technologies\t7100\t4.0\t3307\t5.0\t1476\t3.0\t3100\t4.0\nCustomer relationships\t3400\t2.0\t379\t5.0\t1040\t3.0\t6210\t6.0\nTrade names\t250\t4.0\t95\t3.0\t61\t1.5\t650\t4.0\nVendor relationships\t0\t0\t0\t0\t0\t0\t1620\t2.0\nTotal identifiable intangible assets\t10750\t\t3781\t\t2577\t\t11580\t\n", "q10k_tbl_18": "\tSeptember 30 2020\t\t\t\n\tGross\tAccumulated Amortization\tNet\tWeighted Average Amortization Period (Years)\nMedia service rights\t35934\t(23135)\t12799\t1.7\nPromotion service rights\t33548\t(15072)\t18476\t2.7\nDeveloped technologies\t27170\t(17344)\t9826\t2.7\nCustomer relationships\t22690\t(15211)\t7479\t2.8\nData access rights\t10801\t(7825)\t2976\t1.6\nDomain names\t5948\t(5590)\t358\t0.1\nTrade names\t2823\t(2135)\t688\t0.6\nVendor relationships\t2510\t(2510)\t0\t0.0\nPatents\t975\t(900)\t75\t2.1\nRegistered users\t420\t(420)\t0\t0.0\n\t142819\t(90142)\t52677\t2.5\n", "q10k_tbl_19": "\tDecember 31 2019\t\t\t\n\tGross\tAccumulated Amortization\tNet\tWeighted Average Amortization Period (Years)\nMedia service rights\t34684\t(16098)\t18586\t2.2\nPromotion service rights\t30548\t(10682)\t19866\t3.6\nDeveloped technologies\t27170\t(12790)\t14380\t3.2\nCustomer relationships\t22690\t(12267)\t10423\t3.3\nData access rights\t10801\t(6415)\t4386\t2.3\nDomain names\t5948\t(5540)\t408\t0.8\nTrade names\t2823\t(1560)\t1263\t2.2\nVendor relationships\t2510\t(2172)\t338\t0.4\nPatents\t975\t(873)\t102\t2.8\nRegistered users\t420\t(420)\t0\t0.0\n\t138569\t(68817)\t69752\t3.0\n", "q10k_tbl_20": "\tTotal\n2020 remaining three months\t7233\n2021\t22959\n2022\t14739\n2023\t6585\n2024\t809\n2025 and beyond\t0\nTotal estimated amortization expense\t52325\n", "q10k_tbl_21": "\tSeptember 30 2020\tDecember 31 2019\nPrincipal\t200000\t200000\nUnamortized debt discount\t(23623)\t(31132)\nUnamortized debt issuance costs\t(2017)\t(2711)\nNet carrying amount of the liability component\t174360\t166157\n", "q10k_tbl_22": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nContractual interest expense\t875\t875\t2625\t2625\nAmortization of debt discount\t2540\t2396\t7510\t7086\nAmortization of debt issuance costs\t231\t230\t693\t690\nTotal interest expense related to the Notes\t3646\t3501\t10828\t10401\n", "q10k_tbl_23": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nExpected life (in years)\t0\t6.08\t6.02\t6.02 - 6.08\nRisk-free interest rate\t0\t1.42%\t0.96%\t1.42% - 2.66%\nVolatility\t0\t50%\t50%\t50%\nDividend yield\t0\t0\t0\t0\n", "q10k_tbl_24": "\t\tRSUs Outstanding\t\tOptions Outstanding\t\t\t\n\tShares Available for Grant\tNumber of Shares\tWeighted Average Grant Date Fair Value\tNumber of Shares\tWeighted Average Exercise Price\tWeighted Average Remaining Contractual Term (Years)\tAggregate Intrinsic Value (in thousands)\nBalance at December 31 2019\t6036180\t5022675\t10.66\t8600441\t11.40\t5.16\t8811\nIncrease in shares authorized\t3574847\t0\t0\t0\t0\t0\t0\nOptions granted\t(1150178)\t0\t0\t1150178\t8.95\t0\t0\nOptions exercised\t0\t0\t0\t(74307)\t7.11\t0\t220\nOptions canceled or expired\t723824\t0\t0\t(723824)\t11.76\t0\t0\nRSUs granted\t(3304032)\t3304032\t8.33\t0\t0\t0\t0\nRSUs vested\t0\t(1767543)\t10.57\t0\t0\t0\t0\nRSUs canceled or expired\t789849\t(789849)\t10.91\t0\t0\t0\t0\nRSUs vested and withheld for taxes\t631186\t0\t0\t0\t0\t0\t0\nBalance as of September 30 2020\t7301676\t5769315\t9.32\t8952488\t11.09\t5.15\t1559\nVested and exercisable as of September 30 2020\t\t\t\t5871020\t12.13\t3.74\t1526\n", "q10k_tbl_25": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nExpected life (in years)\t0.50\t0.50\t0.50\t0.50\nRisk-free interest rate\t0.15%\t2.43%\t0.15% - 1.59%\t2.43% - 2.50%\nVolatility\t60%\t35%\t55% - 60%\t35%\nDividend yield\t0\t0\t0\t0\n", "q10k_tbl_26": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nCost of revenues\t442\t508\t1264\t1672\nSales and marketing\t1187\t1433\t3912\t4996\nResearch and development\t1003\t1140\t2723\t3579\nGeneral and administrative\t3857\t4527\t13122\t13445\nTotal stock-based compensation expense\t6489\t7608\t21021\t23692\n", "q10k_tbl_27": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet loss\t(4218)\t(10363)\t(40076)\t(27497)\nWeighted-average number of common shares used in computing net loss per share basic and diluted\t90585\t88789\t90113\t91850\nNet loss per share basic and diluted\t(0.05)\t(0.12)\t(0.44)\t(0.30)\n", "q10k_tbl_28": "\tThree and Nine\t\n\tMonths Ended September 30\t\n\t2020\t2019\nStock options and ESPP\t9226\t8770\nRestricted stock units\t5769\t5233\nShares related to convertible senior notes\t11521\t11521\n\t26516\t25524\n", "q10k_tbl_29": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nCash paid for operating lease liabilities\t975\t1500\t2885\t4317\nRight-of-use assets obtained in exchange for lease obligations\t1523\t0\t12297\t12955\n", "q10k_tbl_30": "\tSeptember 30 2020\tDecember 31 2019\nOperating right-of-use assets reported as:\t\t\nOperating lease right-of-use assets\t17181\t7211\nOperating lease liabilities reported as:\t\t\nOther current liabilities\t3727\t3168\nOther non-current liabilities\t16572\t6692\nTotal operating lease liabilities\t20299\t9860\nWeighted average remaining lease term (in years)\t7.2\t3.9\nWeighted average discount rate\t5.8%\t7.9%\n", "q10k_tbl_31": "\tOperating Leases\n2020 remaining three months\t1011\n2021\t4726\n2022\t3561\n2023\t3469\n2024\t2857\n2025 and thereafter\t9988\nTotal lease payments\t25612\nLess: Imputed Interest\t(5313)\nTotal\t20299\n", "q10k_tbl_32": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet loss\t(4218)\t(10363)\t(40076)\t(27497)\nAdjusted EBITDA\t18676\t13577\t28127\t33663\n", "q10k_tbl_33": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet loss\t(4218)\t(10363)\t(40076)\t(27497)\nAdjustments:\t\t\t\t\nStock-based compensation\t6489\t7608\t21021\t23692\nDepreciation amortization and other(1)\t11072\t12786\t31011\t29839\nChange in fair value of contingent consideration\t1562\t999\t5788\t1052\nInterest expense\t3646\t3507\t10830\t10416\nOther (income) expense net\t59\t(1175)\t(708)\t(4214)\nProvision for income taxes\t66\t215\t261\t375\nTotal adjustments\t22894\t23940\t68203\t61160\nAdjusted EBITDA\t18676\t13577\t28127\t33663\n", "q10k_tbl_34": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t\t2019\t\t2020\t\t2019\t\nRevenues\t121116\t100.0%\t114830\t100.0%\t303358\t100.0%\t317628\t100.0%\nCosts and expenses:\t\t\t\t\t\t\t\t\nCost of revenues\t73603\t60.8%\t70458\t61.4%\t185445\t61.1%\t191387\t60.3%\nSales and marketing\t24555\t20.3%\t24310\t21.2%\t73403\t24.2%\t73703\t23.2%\nResearch and development\t9744\t8.0%\t9236\t8.0%\t28958\t9.5%\t28305\t8.9%\nGeneral and administrative\t12099\t10.0%\t17643\t15.4%\t39457\t13.0%\t44101\t13.9%\nChange in fair value of contingent consideration\t1562\t1.3%\t999\t0.9%\t5788\t1.9%\t1052\t0.3%\nTotal cost and expenses\t121563\t100.4%\t122646\t106.8%\t333051\t109.8%\t338548\t106.6%\nLoss from operations\t(447)\t(0.4)%\t(7816)\t(6.8)%\t(29693)\t(9.8)%\t(20920)\t(6.6)%\nInterest expense\t(3646)\t(3.0)%\t(3507)\t(3.1)%\t(10830)\t(3.6)%\t(10416)\t(3.3)%\nOther income (expense) net\t(59)\t-%\t1175\t1.0%\t708\t0.2%\t4214\t1.3%\nLoss before income taxes\t(4152)\t(3.4)%\t(10148)\t(8.9)%\t(39815)\t(13.1)%\t(27122)\t(8.6)%\nProvision for income taxes\t66\t-%\t215\t0.2%\t261\t0.1%\t375\t0.1%\nNet loss\t(4218)\t(3.4)%\t(10363)\t(9.1)%\t(40076)\t(13.2)%\t(27497)\t(8.7)%\n", "q10k_tbl_35": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nPromotion\t62376\t62034\t342\t1%\t168714\t183152\t(14438)\t(8)%\nMedia\t58740\t52796\t5944\t11%\t134644\t134476\t168\t-%\nTotal Revenue\t121116\t114830\t6286\t5%\t303358\t317628\t(14270)\t(4)%\n", "q10k_tbl_36": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nRevenues\t121116\t114830\t6286\t5%\t303358\t317628\t(14270)\t(4)%\n", "q10k_tbl_37": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nCost of revenues\t73603\t70458\t3145\t4%\t185445\t191387\t(5942)\t(3)%\nGross profit\t47513\t44372\t3141\t7%\t117913\t126241\t(8328)\t(7)%\nGross margin\t39%\t39%\t\t\t39%\t40%\t\t\n", "q10k_tbl_38": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nSales and marketing\t24555\t24310\t245\t1%\t73403\t73703\t(300)\t-%\nPercent of revenues\t20%\t21%\t\t\t24%\t23%\t\t\n", "q10k_tbl_39": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nResearch and development\t9744\t9236\t508\t6%\t28958\t28305\t653\t2%\nPercent of revenues\t8%\t8%\t\t\t10%\t9%\t\t\n", "q10k_tbl_40": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nGeneral and administrative\t12099\t17643\t(5544)\t(31)%\t39457\t44101\t(4644)\t(11)%\nPercent of revenues\t10%\t15%\t\t\t13%\t14%\t\t\n", "q10k_tbl_41": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nChange in fair value of contingent consideration\t1562\t999\t563\t56%\t5788\t1052\t4736\t450%\nPercent of revenues\t1%\t1%\t\t\t2%\t-%\t\t\n", "q10k_tbl_42": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nInterest expense\t(3646)\t(3507)\t(139)\t4%\t(10830)\t(10416)\t(414)\t4%\nOther income (expense) net\t(59)\t1175\t(1234)\t(105)%\t708\t4214\t(3506)\t(83)%\n\t(3705)\t(2332)\t(1373)\t59%\t(10122)\t(6202)\t(3920)\t63%\n", "q10k_tbl_43": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t2019\t Change\t% Change\t2020\t2019\t Change\t% Change\nProvision for income taxes\t66\t215\t(149)\t(69)%\t261\t375\t(114)\t(30)%\n", "q10k_tbl_44": "\tNine Months Ended September 30\t\n\t2020\t2019\nNet cash provided by operating activities\t13171\t29991\nNet cash used in investing activities\t(9648)\t(1485)\nNet cash used in financing activities\t(18559)\t(92401)\nEffect of exchange rates on cash and cash equivalents\t126\t1\nNet decrease in cash and cash equivalents\t(14910)\t(63894)\n", "q10k_tbl_45": "\t\tIncorporated by Reference\t\t\t\t\nNumber\tExhibit Title\tForm\tFile No.\tExhibit\tFiling Date\tFiled Herewith\n3.1\tAmended and Restated Certificate of Incorporation of the Registrant as amended effective October 20 2015.\t10-K\t001-36331\t3.1\t3/11/2016\t\n3.2\tAmended and Restated Bylaws of the Registrant.\t8-K\t001-36331\t3.2\t10/6/2015\t\n4.1\tForm of Registrant's Common Stock Certificate.\tS-1/A\t333-193692\t4.1\t2/25/2014\t\n4.2\tEighth Amended and Restated Investors' Rights Agreement among the Registrant and certain holders of its capital stock dated June 1 2011.\tS-1\t333-193692\t4.2\t1/31/2014\t\n31.1\tCertification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n31.2\tCertificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n32.1*\tCertification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n32.2*\tCertification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\t\t\t\t\tX\n101.INS\tInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\t\t\t\t\tX\n101.SCH\tInline XBRL Taxonomy Extension Schema Document.\t\t\t\t\tX\n101.CAL\tInline XBRL Taxonomy Extension Calculation Linkbase Document.\t\t\t\t\tX\n101.DEF\tInline XBRL Taxonomy Extension Definition Linkbase Document.\t\t\t\t\tX\n101.LAB\tInline XBRL Taxonomy Extension Label Linkbase Document.\t\t\t\t\tX\n101.PRE\tInline XBRL Taxonomy Extension Presentation Linkbase Document.\t\t\t\t\tX\n104\tCover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)\t\t\t\t\tX\n*\tThe certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Quotient under the Securities Act of 1933 as amended or the Securities Exchange Act of 1934 as amended whether made before or after the date of this Form 10-Q irrespective of any general incorporation language contained in such filing.\t\t\t\t\t\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_6"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
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 Incorporation or Organization)
(I.R.S. Employer Identification No.)
400 Logue Avenue, Mountain View, CA
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.00001 par value
QUOT
New York Stock Exchange
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 every Interactive Data File required to be submitted 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 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.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
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 November 2, 2020, the registrant had 91,005,558 shares of common stock outstanding.
Accounts receivable, net of allowance for credit losses of $2,264 and $2,021 at
September 30, 2020 and December 31, 2019, respectively
122,148
125,304
Prepaid expenses and other current assets
21,266
22,026
Total current assets
353,268
372,094
Property and equipment, net
15,628
13,704
Operating lease right-of-use assets
17,181
7,211
Intangible assets, net
52,677
69,752
Goodwill
128,427
128,427
Other assets
1,246
750
Total assets
$
568,427
$
591,938
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
10,765
$
19,116
Accrued compensation and benefits
10,474
15,232
Other current liabilities
63,634
50,032
Deferred revenues
11,353
10,903
Contingent consideration related to acquisitions
—
27,000
Total current liabilities
96,226
122,283
Other non-current liabilities
17,926
7,119
Contingent consideration related to acquisitions
15,008
9,220
Convertible senior notes, net
174,360
166,157
Deferred tax liabilities
1,937
1,937
Total liabilities
305,457
306,716
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.00001 par value—10,000,000 shares authorized and no shares
issued or outstanding at September 30, 2020 and December 31, 2019
—
—
Common stock, $0.00001 par value—250,000,000 shares authorized; 90,799,437
and 89,371,199 shares issued and outstanding at September 30, 2020 and
December 31, 2019, respectively
1
1
Additional paid-in capital
689,013
671,060
Accumulated other comprehensive loss
(1,045)
(916)
Accumulated deficit
(424,999)
(384,923)
Total stockholders’ equity
262,970
285,222
Total liabilities and stockholders’ equity
$
568,427
$
591,938
See Accompanying Notes to Condensed Consolidated Financial Statements
4
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,
2020
2019
2020
2019
Revenues
$
121,116
$
114,830
$
303,358
$
317,628
Costs and expenses:
Cost of revenues
73,603
70,458
185,445
191,387
Sales and marketing
24,555
24,310
73,403
73,703
Research and development
9,744
9,236
28,958
28,305
General and administrative
12,099
17,643
39,457
44,101
Change in fair value of contingent consideration
1,562
999
5,788
1,052
Total costs and expenses
121,563
122,646
333,051
338,548
Loss from operations
(447)
(7,816)
(29,693)
(20,920)
Interest expense
(3,646)
(3,507)
(10,830)
(10,416)
Other income (expense), net
(59)
1,175
708
4,214
Loss before income taxes
(4,152)
(10,148)
(39,815)
(27,122)
Provision for income taxes
66
215
261
375
Net loss
$
(4,218)
$
(10,363)
$
(40,076)
$
(27,497)
Net loss per share, basic and diluted
$
(0.05)
$
(0.12)
$
(0.44)
$
(0.30)
Weighted-average number of common shares used in computing net loss per share, basic and diluted
90,585
88,789
90,113
91,850
See Accompanying Notes to Condensed Consolidated Financial Statements
5
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Net loss
$
(4,218)
$
(10,363)
$
(40,076)
$
(27,497)
Other comprehensive income (loss):
Foreign currency translation adjustments
115
(87)
(129)
(42)
Comprehensive loss
$
(4,103)
$
(10,450)
$
(40,205)
$
(27,539)
See Accompanying Notes to Condensed Consolidated Financial Statements
6
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Total stockholders' equity, beginning balances
$
262,345
$
304,982
$
285,222
$
380,087
Common stock and additional paid-in capital:
Beginning balances
$
684,286
$
665,666
$
671,061
$
703,023
Stock-based compensation
6,584
7,768
21,374
24,097
Exercise of employee stock options
45
50
529
1,686
Issuance of common stock for services provided
228
—
456
—
Issuance of common stock, purchase plan
—
—
1,050
1,427
Payments for taxes related to net share settlement of equity awards
(2,129)
(1,720)
(5,456)
(8,181)
Retirement of treasury stock
—
(9,478)
—
(59,766)
Ending balance
$
689,014
$
662,286
$
689,014
$
662,286
Treasury stock:
Beginning balances
$
—
$
—
$
—
$
—
Repurchase of common stock
—
(14,593)
—
(85,539)
Retirement of treasury stock
—
14,593
—
85,539
Ending balance
$
—
$
—
$
—
$
—
Accumulated other comprehensive loss:
Beginning balances
$
(1,160)
$
(799)
$
(916)
$
(844)
Other comprehensive income (loss)
115
(87)
(129)
(42)
Ending balance
$
(1,045)
$
(886)
$
(1,045)
$
(886)
Accumulated deficit:
Beginning balances
$
(420,781)
$
(359,885)
$
(384,923)
$
(322,093)
Retirement of treasury stock
—
(5,115)
—
(25,773)
Net loss
(4,218)
(10,363)
(40,076)
(27,497)
Ending balance
$
(424,999)
$
(375,363)
$
(424,999)
$
(375,363)
Total stockholders' equity, ending balances
$
262,970
$
286,037
$
262,970
$
286,037
See Accompanying Notes to Condensed Consolidated Financial Statements
7
QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2020
2019
Cash flows from operating activities:
Net loss
$
(40,076)
$
(27,497)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization
26,522
23,260
Stock-based compensation
21,021
23,692
Amortization of debt discount and issuance cost
8,203
7,776
Allowance for credit losses
542
583
Deferred income taxes
261
375
Change in fair value of contingent consideration
5,788
1,052
Impairment of capitalized software development costs
—
3,579
Other non-cash expenses
2,546
1,872
Changes in operating assets and liabilities:
Accounts receivable
2,615
(5,332)
Prepaid expenses and other current assets
158
(11,084)
Accounts payable and other current liabilities
4,893
9,053
Payments for contingent consideration and bonuses
(15,418)
—
Accrued compensation and benefits
(4,334)
(1,743)
Deferred revenues
450
4,405
Net cash provided by operating activities
13,171
29,991
Cash flows from investing activities:
Purchases of property and equipment
(6,648)
(7,412)
Purchase of intangible assets
(3,000)
(14,811)
Proceeds from maturities of short-term investment
—
20,738
Net cash used in investing activities
(9,648)
(1,485)
Cash flows from financing activities:
Proceeds from issuances of common stock under stock plans
1,579
3,113
Payments for taxes related to net share settlement of equity awards
(5,456)
(8,181)
Repurchases and retirement of common stock under share repurchase program
—
(87,097)
Principal payments on promissory note and capital lease obligations
(100)
(236)
Payments for contingent consideration
(14,582)
—
Net cash used in financing activities
(18,559)
(92,401)
Effect of exchange rates on cash and cash equivalents
126
1
Net decrease in cash and cash equivalents
(14,910)
(63,894)
Cash and cash equivalents at beginning of period
224,764
302,028
Cash and cash equivalents at end of period
$
209,854
$
238,134
Supplemental disclosures of cash flow information:
Cash paid for income taxes
$
149
$
240
Cash paid for interest
$
1,753
$
1,764
Supplemental disclosures of noncash investing and financing activities:
Fixed asset purchases not yet paid
$
924
$
599
Intangible asset acquisitions not yet paid
$
2,250
$
—
See Accompanying Notes to Condensed Consolidated Financial Statements
8
QUOTIENT TECHNOLOGY INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business
Quotient Technology Inc. (together with its subsidiaries, the “Company”), provides an industry leading digital marketing platform, providing technology and services that power integrated digital promotions and media programs for customers such as consumer packaged goods (“CPG”s) brands and retailers. These programs are delivered across the Company’s network, including its flagship consumer brand Coupons.com and retail partners. This network provides the Company with proprietary and licensed data, including online behaviors, purchase intent, and retailers’ in-store point-of-sale (“POS”) shopper data, to target shoppers with the most relevant digital coupons and ads. The Company also delivers digital promotions and media programs to third party publishing properties outside of its network. Customers and partners use the Company to influence shoppers via digital channels, integrate marketing and merchandising programs, and leverage shopper data and insights to drive measurable sales results.
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, 2019.
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, 2020 or for any other period. Certain prior period amounts on the condensed consolidated balance sheets have been reclassified to conform to the current period’s presentation.
There have been no significant 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, coupon code sales return reserve, valuation of assets acquired and liabilities assumed in a business combination, useful lives of intangible assets, estimates related to recovery of long-lived assets and goodwill, measurement of contingent consideration, restructuring accruals, debt discounts, stock-based compensation, deferred income tax assets and associated valuation allowances and distribution fee commitments. These estimates generally require judgments, may involve the analysis of historical and prediction of future trends, and are subject to change from period to period. Actual results may differ from the Company’s estimates, and such differences may be material to the accompanying condensed consolidated financial statements.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, whichmay cause further business slowdowns or shutdowns, depress demand for the Company’s advertising business, and adversely impact the Company’s results of operations.The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. The Company’s estimates may change as new events occur and
9
additional information emerges, and such changes are recognized or disclosed in its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The guidance simplifies an issuer's accounting for convertible debt instruments and its application of the derivatives scope exception for contracts in its own entity. The guidance eliminates two of the three models in ASC 470-20 that require separate accounting for embedded conversion features. The standard is effective for the Company beginning January 1, 2021, and interim periods within that reporting period. The Company is currently evaluating the impact of adopting this new accounting guidance on the condensed consolidated financial statements.
Accounting Pronouncements Adopted
Credit Losses
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of a broader range of information to estimate credit losses.
The Company adopted ASU 2016-13 on January 1, 2020 and the impact of the adoption was not material to the Company’s condensed consolidated financial statements and related disclosures.
Revenue Recognition
The Company primarily generates revenue by providing digital promotions and media solutions to its customers and partners. Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
•Identification of the contract, or contracts, with a customer
•Identification of the performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, we satisfy a performance obligation
The Company provides digital promotions, including digital coupons, and/or media programs to its customers which consists of CPG customers, retail partners and advertising agencies whereby it uses its proprietary technology platforms to create, target, and deliver these programs. The Company typically generates revenue from its customers through the use of these programs on a cost-per-click, cost-per-impression, or cost-per-acquisition basis. Programs usually include a limit on the number of clicks and/or impressions and are billed monthly.
The pricing of digital promotions programs typically includes both promotion setup fees and promotion campaign fees. Promotion setup fees are related to the creation of digital promotions and set up of the underlying campaign on Quotient’s proprietary platforms for tracking of the related clicks. The Company recognizes revenues related to promotion setup fees over time, proportionally, on a per click basis, using the number of authorized clicks, per insertion order, commencing on the date of the first click. A click refers to the consumers action of activating a digital promotion through the Company’s proprietary technology platform by either saving it to a retailer’s loyalty account for automatic digital redemption, or printing it for physical redemption at a retailer. Promotion campaign fees
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are usually determined on a per click basis. The Company typically recognizes revenues for digital promotion campaign fees as clicks occur.
The Company’s media programs enable CPGs and retailers to distribute digital media to promote their brands and products on its retailers’ websites, and mobile apps, and through a network of affiliate publishers and non-publisher third parties that display its media offerings on their websites or mobile apps. Pricing for media campaigns is usually determined on a cost-per-impression, cost-per-click or cost-per-acquisition basis. The Company recognizes revenue each time a digital media ad is displayed or each time a user clicks on the media ad displayed on the Company’s websites, mobile apps or on third-party websites.
Digital promotion programs also include the Company’s Specialty Retail business, in which specialty stores including clothing, electronics, home improvement and many others offer coupon codes that we distribute. Each time a consumer makes a purchase using a coupon code, a fee is typically paid to the Company. The Company usually generates revenues when a consumer makes a purchase using a coupon code from its platform and completion of the order is reported to the Company. In the same period that the Company recognizes revenues for the delivery of coupon codes, it also estimates and records a reserve, based upon historical experience, to provide for end-user cancellations or product returns which may not be reported until a subsequent date.
Gross Versus Net Revenue Reporting
In the normal course of business and through its distribution network, the Company delivers digital promotions and media on retailers’ websites through retailers’ loyalty programs, and on the websites of digital publishers. In these situations, the Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). The Company reports certain digital promotion and media advertising revenues for campaigns placed on third-party owned properties on a gross basis, that is, the amounts billed to its customers are recorded as revenues, and distribution fees paid to retailers or digital publishers are recorded as cost of revenues. The Company is the principal because it controls the digital promotion and media advertising inventory before it is transferred to its customers. The Company’s control is evidenced by its sole ability to monetize the digital coupon and media advertising inventory, being primarily responsible to its customers, having discretion in establishing pricing for the delivery of the digital promotions and media, or a combination of these.
In other cases, the Company reports certain digital media advertising revenues on a net basis, that is, the costs for digital advertising inventory and third-party data paid to suppliers are deducted from gross revenues to arrive at net revenues. The Company’s performance obligation in these arrangements is to provide the use of its platforms that enables customers to bid on digital advertising inventory, which is determined based on real-time bidding, use of data and other add-on features in designing and executing their campaigns. The Company charges its customers a platform fee based on a percentage of the digital advertising inventory and data costs purchased through the use of its platforms. The platform fee is not contingent on the results of a digital media advertising campaign. The Company has determined that it’s an agent in these arrangements because it does not have control of the digital advertising inventory before it is transferred to the customer and does not set prices agreed upon within the auction marketplace.
Arrangements with Multiple Performance Obligations
The Company’s contracts with customers may include multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines its best estimate of its standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts and characteristics of targeted customers.
Accounts Receivables, Net of Allowance for Credit Losses
Trade and other receivables are included in accounts receivables and primarily comprised of trade receivables that are recorded at invoiced amounts, net of an allowance for credit losses and do not bear interest. Other receivables included unbilled receivables related to digital promotions and media advertising contracts with customers. The Company generally does not require collateral and performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. The Company maintains an allowance for credit losses based upon the expected collectability of its accounts receivable. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis
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when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company reviewed credit profiles of its customers, contractual terms and conditions, current economic trends, reasonable and supportable forecasts of future economic conditions, and historical payment experience.
For the three and nine months ended September 30, 2020, the Company’s assessment considered business and market disruptions caused by COVID-19 and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.
Deferred Revenues
Deferred revenues consist of promotion setup fees, promotion campaign fees and digital media fees that are expected to be recognized upon click, or delivery of media impressions, which generally occur within the next twelve months. The Company records deferred revenues, including amounts which are refundable, when cash payments are received or become due in advance of the Company satisfying its performance obligations. The increase in the deferred revenue balance for the nine months ended September 30, 2020 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations of $20.5 million, partially offset by $20.1 million of recognized revenue.
The Company’s payment terms vary by the type and size of its customers. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.
Disaggregated Revenue
The following table presents the Company’s revenues disaggregated by type of services (in thousands, unaudited). The majority of the Company’s revenue is generated from sales in the United States.
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Promotion
$
62,376
$
62,034
$
168,714
$
183,152
Media
58,740
52,796
134,644
134,476
Total Revenue
$
121,116
$
114,830
$
303,358
$
317,628
Practical Expedients and Exemptions
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue for an amount where it has the right to invoice for services performed.
Sales Commissions
The Company generally incurs and expenses sales commissions upon recognition of revenue for related goods and services, which typically occurs within one year or less. Sales commissions earned related to revenues for initial contracts are commensurate with sales commissions related to renewal contracts. These costs are recorded within sales and marketing expenses on the condensed consolidated statements of operations.
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 (unadjusted) in active markets for identical assets or liabilities.
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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.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
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, 2020
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
$
104,944
—
—
$
104,944
Total
$
104,944
$
—
$
—
$
104,944
Liabilities:
Contingent consideration related to acquisitions
—
—
15,008
15,008
Total
$
—
$
—
$
15,008
$
15,008
December 31, 2019
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market funds
$
124,303
—
—
$
124,303
U.S. Treasury Bills
15,120
—
—
15,120
Total
$
139,423
$
—
$
—
$
139,423
Liabilities:
Contingent consideration related to acquisitions
—
—
36,220
36,220
Total
$
—
$
—
$
36,220
$
36,220
The valuation technique used to measure the fair value of money market funds and U.S. Treasury Bills includes using quoted prices in active markets. The money market funds have a fixed net asset value (NAV) of $1.0.
The contingent consideration relates to the acquisitions of MLW Squared Inc. (“Ahalogy”), Elevaate Ltd. (“Elevaate”) and Ubimo Ltd. (“Ubimo”). The fair values of contingent consideration are based on the expected achievement of certain revenue targets as defined under the acquisition agreements and were estimated using an option pricing method with significant inputs that are not observable in the market, thus classified as a Level 3 instrument. The inputs included the expected achievement of certain financial metrics over the contingent consideration period, volatility and discount rate. The fair-value of the contingent consideration is classified as a liability and is re-measured each reporting period. Refer to Note 6 for further details related to the acquisitions.
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The following table represents the change in the contingent consideration (in thousands):
Three Months Ended September 30, 2020
Nine Months Ended September 30, 2020
Ubimo
Elevaate
Ubimo
Elevaate
Ahalogy
Level 3
Level 3
Level 3
Level 3
Level 3
Balance at the beginning of period
$
10,239
$
3,207
$
5,686
$
3,534
$
27,000
Change in fair value during the period
4,769
(3,207)
9,322
(3,534)
—
Payments made during the period
—
—
—
—
(27,000)
Total
$
15,008
$
—
$
15,008
$
—
$
—
Three Months Ended September 30, 2019
Nine Months Ended September 30, 2019
Elevaate
Ahalogy
Elevaate
Ahalogy
Level 3
Level 3
Level 3
Level 3
Balance at the beginning of period
$
3,015
$
26,001
$
6,121
$
22,842
Change in fair value during the period
—
999
(3,106)
4,158
Total
$
3,015
$
27,000
$
3,015
$
27,000
The Company recorded a charge of $1.6 million and $5.8 million during the three and nine months ended September 30, 2020, respectively, and $1.0 million and $1.1 million during the three and nine months ended September 30, 2019, respectively, for the re-measurement of the fair values of contingent consideration related to acquisitions, as a component of operating expenses in the accompanying condensed consolidated statements of operations.
During the nine months ended September 30, 2020, the Company paid $27.0 million related to Ahalogy’s achievement of financial metrics subject to contingent consideration during the measurement period ending December 31, 2019, and as a result, no liability exists as of September 30, 2020. Out of the total consideration paid, $14.6 million was originally measured and recorded on the acquisition date and $12.4 million was recorded subsequent to the acquisition date through changes in fair value of contingent consideration within the condensed consolidated statements of operations.
Fair Value Measurements of Other Financial Instruments
As of September 30, 2020 and December 31, 2019, the fair value of the Company’s 1.75% convertible senior notes due 2022 was $190.4 million and $195.4 million, respectively. The fair value was determined based on a quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period. Accordingly, these convertible senior notes are classified within Level 2 in the fair value hierarchy. Refer to Note 8 for additional information related to the Company’s convertible debt.
4. Allowance for Credit Losses
The summary of activity in the allowance for credit losses is as follows (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Balance at the beginning of period
$
2,079
$
1,381
$
2,021
$
1,200
Provision for expected credit losses
279
217
542
583
Write-offs charged against the allowance
(94)
(221)
(299)
(406)
Balance at the end of period
$
2,264
$
1,377
$
2,264
$
1,377
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5. Balance Sheet Components
Property and Equipment, Net
Property and equipment consist of the following (in thousands):
September 30, 2020
December 31, 2019
Software
$
44,122
$
41,876
Computer equipment
23,365
25,773
Leasehold improvements
5,867
5,883
Furniture and fixtures
2,476
2,449
Total
75,830
75,981
Accumulated depreciation and amortization
(64,754)
(63,543)
Projects in process
4,552
1,266
Total property and equipment, net
$
15,628
$
13,704
Depreciation and amortization expense related to property and equipment was $1.8 million and $5.2 million for the three and nine months ended September 30, 2020, respectively, and $1.9 million and $5.6 million for the three and nine months ended September 30, 2019, respectively.
The Company capitalized internal use software development and enhancement costs of $1.7 million and $5.3 million during the three and nine months ended September 30, 2020, respectively, and $1.9 million and $4.9 million during the three and nine months ended September 30, 2019, respectively. During the three and nine months ended September 30, 2020, the Company had $0.8 million and $2.3 million, respectively, in amortization expense related to internal use software, which is included in property and equipment depreciation and amortization expense, and recorded as cost of revenues, as compared to $0.7 million and $1.9 million during the three and nine months ended September 30, 2019, respectively. The unamortized capitalized development costs were $8.8 million and $5.8 million as of September 30, 2020 and December 31, 2019, respectively.
Accrued Compensation and Benefits
Accrued compensation and benefits consist of the following (in thousands):
September 30, 2020
December 31, 2019
Commissions
$
3,908
$
5,996
Payroll and related expenses
3,622
2,533
Bonus
2,092
5,997
Vacation
852
706
Total accrued compensation and benefits
$
10,474
$
15,232
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Other Current Liabilities
Other current liabilities consist of the following (in thousands):
September 30, 2020
December 31, 2019
Distribution fees
$
30,692
$
20,360
Traffic acquisition cost
7,602
5,278
Prefunded liability
5,425
5,429
Operating lease liabilities
3,727
3,168
Liability related to purchased intangible asset
2,250
1,000
Interest payable
1,157
282
Marketing expenses
946
2,164
Other
11,835
12,351
Total other current liabilities
$
63,634
$
50,032
6. Acquisitions
Acquisition of Ubimo
On November 19, 2019, the Company acquired all outstanding shares of Ubimo, a leading data and media activation company.
The total preliminary acquisition consideration of $20.7 million consisted of $15.0 million in cash and contingent consideration of up to $24.8 million payable in cash with an estimated fair value of $5.7 million as of the acquisition date. The contingent consideration payout is based on Ubimo achieving certain financial metrics between the date of the acquisition through December 31, 2021. The acquisition date fair value was determined using an option pricing model. The fair value of the contingent consideration will be re-measured through earnings every reporting period. Refer to Note 3 for the fair value of contingent consideration at September 30, 2020.
Acquisition of Elevaate
On October 26, 2018, the Company acquired all the outstanding shares of Elevaate, a sponsored search company for retail partners and CPG brands.
The total preliminary acquisition consideration of $13.3 million consisted of $7.2 million in cash and contingent consideration of up to $18.5 million payable in cash with an estimated fair value of $6.1 million as of the acquisition date. The contingent consideration payout is based on Elevaate achieving certain financial metrics between February 1, 2019 through January 31, 2021. The acquisition date fair value of the contingent consideration was determined by using an option pricing model. The fair value of the contingent consideration will be re-measured every reporting period. Refer to Note 3 for the fair value of contingent consideration at September 30, 2020.
Acquisition of SavingStar, Inc.
On August 27, 2018, the Company acquired all the outstanding shares of SavingStar, Inc. (“SavingStar”), a digital promotions company with a CRM platform designed to help brands build and track loyalty programs with their consumers.
The total preliminary acquisition consideration at closing consisted of $7.5 million in cash. In addition, SavingStar may receive potential contingent consideration of up to $10.6 million payable in all cash, subject to achieving certain financial metrics between closing through February 29, 2020. At the date of acquisition, the contingent consideration’s fair value was determined to be zero using an option pricing model. As of February 29, 2020, the date that the contingent consideration period ended, SavingStar did not achieve certain financial metrics for payout and the fair value was concluded to be zero. Accordingly, the Company determined that no payout was required when the contingent consideration period ended.
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Acquisition of Ahalogy
On June 1, 2018, the Company acquired all the outstanding shares of Ahalogy, an influencer marketing firm that delivers premium content across social media channels for CPG brands. The acquisition enhances the Company’s performance media solutions for CPGs and retailers, adding social media expertise and a roster of influencers.
The total preliminary acquisition consideration of $36.4 million consisted of $21.8 million in cash and contingent consideration of up to $30.0 million payable in all cash with an estimated fair value of $14.6 million as of the acquisition date. The contingent consideration payout is based on Ahalogy achieving certain financial metrics between closing through December 31, 2019. The acquisition date fair value of the contingent consideration was determined by using an option pricing model. The fair value of the contingent consideration is re-measured every reporting period. As of December 31, 2019, the date that the contingent consideration period ended, Ahalogy earned the full payout of the contingent consideration by achieving certain financial metrics. The Company paid out $30.0 million during the nine months ended September 30, 2020, of which $27.0 million related to contingent consideration and $3.0 million related to certain bonuses; and as a result, no liability exists as of September 30, 2020. Of the total $30.0 million that was paid, $14.6 million is classified within financing activity and the remaining $15.4 million is classified within operating activity on the Company’s condensed consolidated statements of cash flows. Refer to Note 3 for the fair value of contingent consideration at September 30, 2020.
Each of these acquisitions were accounted for as a business combination. Accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date when control was obtained. The Company expensed all transaction costs in the period in which they were incurred. The Company acquired various intangible assets resulting from these acquisitions, such as, customer relationships, vendor relationships, developed technologies and trade names. The fair value of the customer relationships was determined by using a discounted cash flow model. The fair value of the vendor relationships was determined by using a cost approach. The fair value of developed technologies was determined by using the relief from royalty method or the with-and-without method. The fair value of trade names was determined by using the relief from royalty method. The excess of the consideration paid over the fair value of the net tangible assets and liabilities and identifiable intangible assets acquired is recorded as goodwill. The goodwill arising from the acquisitions are largely attributable to the synergies expected to be realized. None of the goodwill recorded from the acquisitions will be deductible for income tax purposes.
For each of these transactions, the fair value of the consideration transferred and the assets acquired and liabilities assumed was determined by the Company and in doing so management engaged a third-party valuation specialist to measure the fair value of identifiable intangible assets and obligations related to deferred revenue and contingent consideration. The estimated fair value of the identifiable assets acquired and liabilities assumed in the relevant acquisition is based on management’s best estimates. As the Company finalizes certain valuation assumptions, the provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to the acquisition of Ubimo are subject to change and the final purchase price accounting could be different from the amounts presented herein.
The following table summarizes the preliminary acquisition consideration and the related fair values of the assets acquired and liabilities assumed (in thousands):
Purchase Consideration
Net Tangible Assets Acquired/ (Liabilities Assumed)
Identifiable Intangible Assets
Goodwill
Goodwill Deductible for Taxes
(1) Acquisition Related Expenses
Ubimo
$
20,740
$
384
$
10,750
$
9,606
Not Deductible
$
579
Elevaate
13,346
(60)
3,781
9,625
Not Deductible
549
SavingStar
7,485
(1,126)
2,577
6,034
Not Deductible
556
Ahalogy
36,432
2,196
11,580
22,656
Not Deductible
684
$
78,003
$
1,394
$
28,688
$
47,921
$
2,368
(1)Expensed as general and administrative
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The following sets forth each component of identifiable intangible assets acquired in connection with the acquisitions (in thousands):
Ubimo
Estimated Useful Life (in Years)
Elevaate
Estimated Useful Life (in Years)
SavingStar
Estimated Useful Life (in Years)
Ahalogy
Estimated Useful Life (in Years)
Developed technologies
$
7,100
4.0
$
3,307
5.0
$
1,476
3.0
$
3,100
4.0
Customer relationships
3,400
2.0
379
5.0
1,040
3.0
6,210
6.0
Trade names
250
4.0
95
3.0
61
1.5
650
4.0
Vendor relationships
—
—
—
—
—
—
1,620
2.0
Total identifiable intangible assets
$
10,750
$
3,781
$
2,577
$
11,580
7. Intangible Assets
The following table summarizes the gross carrying amount and accumulated amortization for the intangible assets (in thousands):