Company Quick10K Filing
Quotient Technology
Price7.96 EPS-0
Shares92 P/E-23
MCap731 P/FCF24
Net Debt-238 EBIT-18
TEV493 TEV/EBIT-28
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-05
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-02-27
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-02-16
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-16
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-11
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-14
10-K 2014-12-31 Filed 2015-03-19
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
8-K 2020-11-05 Earnings, Exhibits
8-K 2020-08-04 Earnings, Exhibits
8-K 2020-06-03
8-K 2020-05-05
8-K 2020-03-18
8-K 2020-02-12
8-K 2019-10-31
8-K 2019-08-09
8-K 2019-08-02
8-K 2019-06-03
8-K 2019-05-07
8-K 2019-02-12
8-K 2019-01-22
8-K 2018-11-19
8-K 2018-11-07
8-K 2018-07-31
8-K 2018-07-24
8-K 2018-06-05
8-K 2018-05-01
8-K 2018-02-13

QUOT 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 quot-20200930x10qexx311.htm
EX-31.2 quot-20200930x10qexx312.htm
EX-32.1 quot-20200930x10qexx321.htm
EX-32.2 quot-20200930x10qexx322.htm

Quotient Technology Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
0.70.60.40.30.10.02014201620182020
Assets, Equity
0.20.10.10.0-0.0-0.12014201620182020
Rev, G Profit, Net Income
0.20.10.10.0-0.0-0.12014201620182020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________________________
FORM 10-Q
___________________________________________________________

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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)
Delaware77-0485123
(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 filerAccelerated filer
Non-accelerated filerSmaller 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.


QUOTIENT TECHNOLOGY INC.
INDEX
REPORT ON
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2020
 

3


PART I - FINANCIAL INFORMATION

Item 1.         Financial Statements.

QUOTIENT TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 September 30,
2020
December 31,
2019
(unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$209,854 $224,764 
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 assets21,266 22,026 
Total current assets353,268 372,094 
Property and equipment, net15,628 13,704 
Operating lease right-of-use assets17,181 7,211 
Intangible assets, net52,677 69,752 
Goodwill128,427 128,427 
Other assets1,246 750 
Total assets$568,427 $591,938 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$10,765 $19,116 
Accrued compensation and benefits10,474 15,232 
Other current liabilities63,634 50,032 
Deferred revenues11,353 10,903 
Contingent consideration related to acquisitions 27,000 
Total current liabilities96,226 122,283 
Other non-current liabilities17,926 7,119 
Contingent consideration related to acquisitions15,008 9,220 
Convertible senior notes, net174,360 166,157 
Deferred tax liabilities1,937 1,937 
Total liabilities305,457 306,716 
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 capital689,013 671,060 
Accumulated other comprehensive loss(1,045)(916)
Accumulated deficit(424,999)(384,923)
Total stockholders’ equity262,970 285,222 
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,
 2020201920202019
Revenues$121,116 $114,830 $303,358 $317,628 
Costs and expenses:
Cost of revenues73,603 70,458 185,445 191,387 
Sales and marketing24,555 24,310 73,403 73,703 
Research and development9,744 9,236 28,958 28,305 
General and administrative12,099 17,643 39,457 44,101 
Change in fair value of contingent consideration1,562 999 5,788 1,052 
Total costs and expenses121,563 122,646 333,051 338,548 
Loss from operations(447)(7,816)(29,693)(20,920)
Interest expense(3,646)(3,507)(10,830)(10,416)
Other income (expense), net(59)1,175 708 4,214 
Loss before income taxes(4,152)(10,148)(39,815)(27,122)
Provision for income taxes66 215 261 375 
Net loss$(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,
 2020201920202019
Net loss$(4,218)$(10,363)$(40,076)$(27,497)
Other comprehensive income (loss):
Foreign currency translation adjustments115 (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,
 2020201920202019
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 compensation6,584 7,768 21,374 24,097 
Exercise of employee stock options45 50 529 1,686 
Issuance of common stock for services provided228 — 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,
 20202019
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 amortization26,522 23,260 
Stock-based compensation21,021 23,692 
Amortization of debt discount and issuance cost8,203 7,776 
Allowance for credit losses542 583 
Deferred income taxes261 375 
Change in fair value of contingent consideration5,788 1,052 
Impairment of capitalized software development costs  3,579 
Other non-cash expenses2,546 1,872 
Changes in operating assets and liabilities:
Accounts receivable2,615 (5,332)
Prepaid expenses and other current assets158 (11,084)
Accounts payable and other current liabilities4,893 9,053 
Payments for contingent consideration and bonuses(15,418) 
Accrued compensation and benefits(4,334)(1,743)
Deferred revenues450 4,405 
Net cash provided by operating activities13,171 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 plans1,579 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 equivalents126 1 
Net decrease in cash and cash equivalents(14,910)(63,894)
Cash and cash equivalents at beginning of period224,764 302,028 
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, which may 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
10


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
11


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,
 2020201920202019
Promotion$62,376 $62,034 $168,714 $183,152 
Media58,740 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.
12


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 1Level 2Level 3Total
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 1Level 2Level 3Total
Assets:    
Cash equivalents:    
Money market funds$124,303   $124,303 
U.S. Treasury Bills15,120   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.
13


The following table represents the change in the contingent consideration (in thousands):
 Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
 UbimoElevaateUbimoElevaateAhalogy
 Level 3Level 3Level 3Level 3Level 3
Balance at the beginning of period$10,239 $3,207 $5,686 $3,534 $27,000 
Change in fair value during the period4,769 (3,207)9,322 (3,534) 
Payments made during the period    (27,000)
Total$15,008 $ $15,008 $ $ 
 Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
 ElevaateAhalogyElevaateAhalogy
 Level 3Level 3Level 3Level 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,
 2020201920202019
Balance at the beginning of period$2,079 $1,381 $2,021 $1,200 
Provision for expected credit losses279 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 equipment23,365 25,773 
Leasehold improvements5,867 5,883 
Furniture and fixtures2,476 2,449 
Total75,830 75,981 
Accumulated depreciation and amortization(64,754)(63,543)
Projects in process4,552 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 expenses3,622 2,533 
Bonus2,092 5,997 
Vacation852 706 
Total accrued compensation and benefits$10,474 $15,232 
 
15


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 cost7,602 5,278 
Prefunded liability5,425 5,429 
Operating lease liabilities3,727 3,168 
Liability related to purchased intangible asset2,250 1,000 
Interest payable1,157 282 
Marketing expenses946 2,164 
Other11,835 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.
16


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
GoodwillGoodwill
Deductible
for Taxes
(1)
Acquisition
Related
Expenses
Ubimo$20,740 $384 $10,750 $9,606 Not Deductible$579 
Elevaate13,346 (60)3,781 9,625 Not Deductible549 
SavingStar7,485 (1,126)2,577 6,034 Not Deductible556 
Ahalogy36,432 2,196 11,580 22,656 Not Deductible684 
 $78,003 $1,394 $28,688 $47,921  $2,368 
(1)Expensed as general and administrative
17


The following sets forth each component of identifiable intangible assets acquired in connection with the acquisitions (in thousands):
 
 UbimoEstimated
Useful
Life
(in Years)
ElevaateEstimated
Useful
Life
(in Years)
SavingStarEstimated
Useful
Life
(in Years)
AhalogyEstimated
Useful
Life
(in Years)
Developed technologies$7,100 4.0$3,307 5.0$1,476 3.0$3,100 4.0
Customer relationships3,400 2.0379 5.01,040 3.06,210 6.0
Trade names250 4.095 3.061 1.5650 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):  
 
 September 30, 2020
 GrossAccumulated
Amortization
NetWeighted
Average
Amortization
Period
(Years)
Media service rights$35,934 $(23,135)$12,799 1.7
Promotion service rights33,548 (15,072)18,476 2.7
Developed technologies27,170 (17,344)9,826 2.7
Customer relationships22,690 (15,211)7,479 2.8
Data access rights10,801 (7,825)2,976 1.6