evbg-10q_20170331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2017

OR

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

For the transition period from                      to                     

Commission File Number: 001-37874

 

Everbridge, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

26-2919312

(State or other jurisdiction of

incorporation or organization)

 

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

 

 

 

25 Corporate Drive, Suite 400

Burlington, Massachusetts

 

01803

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (818) 230-9700

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions 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

 

  (Do not check if a small reporting company)

  

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

As of May 8, 2017, the registrant had 27,862,873 shares of common stock issued and outstanding.

 

 

 

 

 


 

EVERBRIDGE, INC. AND SUBSIDIARIES

 

 

 

 

Page

 

 

 

 

PART I.

FINANCIAL INFORMATION

 

3

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

 

3

 

 

 

 

 

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

 

3

 

 

 

 

 

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

 

4

 

 

 

 

 

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

 

5

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2017 and the Year Ended December 31, 2016

 

6

 

 

 

 

 

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

 

7

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

 

8

 

 

 

 

Item 2.

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

 

22

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

 

 

 

Item 4.

Controls and Procedures

 

34

 

 

 

 

PART II.

OTHER INFORMATION

 

35

 

 

 

 

Item 1.

Legal Proceedings

 

35

 

 

 

 

Item 1A.

Risk Factors

 

35

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

35

 

 

 

 

Item 4.

Mine Safety Disclosures

 

35

 

 

 

 

Item 5.

Other Information

 

35

 

 

 

 

Item 6.

Exhibits

 

36

 

 

 

Signatures

 

37

 

 

 

Exhibit Index

 

38

 

 

2


 

PART I—FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (Unaudited).

EVERBRIDGE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(unaudited)

 

 

 

As of

March 31,

2017

 

 

As of

December 31,

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,679

 

 

$

60,765

 

Accounts receivable, net

 

 

14,988

 

 

 

17,812

 

Prepaid expenses

 

 

3,083

 

 

 

1,770

 

Other current assets

 

 

2,650

 

 

 

2,536

 

Total current assets

 

 

60,400

 

 

 

82,883

 

Property and equipment, net

 

 

2,687

 

 

 

2,923

 

Capitalized software development costs, net

 

 

8,796

 

 

 

8,792

 

Goodwill

 

 

30,932

 

 

 

9,676

 

Intangible assets, net

 

 

11,023

 

 

 

3,940

 

Other assets

 

 

121

 

 

 

108

 

Total assets

 

$

113,959

 

 

$

108,322

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,630

 

 

$

2,434

 

Accrued payroll and employee related liabilities

 

 

8,403

 

 

 

7,456

 

Accrued expenses

 

 

2,438

 

 

 

1,957

 

Deferred revenue

 

 

54,496

 

 

 

51,388

 

Contingent liabilities

 

 

5,417

 

 

 

 

Other current liabilities

 

 

613

 

 

 

548

 

Total current liabilities

 

 

73,997

 

 

 

63,783

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Deferred revenue, noncurrent

 

 

1,382

 

 

 

1,246

 

Deferred tax liabilities

 

 

501

 

 

 

494

 

Other long term liabilities

 

 

54

 

 

 

447

 

Total liabilities

 

 

75,934

 

 

 

65,970

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001, 10,000,000 shares authorized, no shares issued or outstanding as of

   March 31, 2017 and December 31, 2016, respectively

 

 

 

 

 

 

Common stock, $0.001 par value, 100,000,000 shares authorized, 27,235,785 and 27,150,674

   shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively

 

 

27

 

 

 

27

 

Additional paid-in capital

 

 

134,080

 

 

 

132,246

 

Accumulated deficit

 

 

(95,820

)

 

 

(89,618

)

Accumulated other comprehensive loss

 

 

(262

)

 

 

(303

)

Total stockholders’ equity

 

 

38,025

 

 

 

42,352

 

Total liabilities and stockholders’ equity

 

$

113,959

 

 

$

108,322

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3


 

EVERBRIDGE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31, 2017

 

 

March 31, 2016

 

Revenue

 

$

22,844

 

 

$

17,069

 

Cost of revenue

 

 

7,654

 

 

 

5,475

 

Gross profit

 

 

15,190

 

 

 

11,594

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

10,906

 

 

 

8,205

 

Research and development

 

 

5,277

 

 

 

3,180

 

General and administrative

 

 

5,200

 

 

 

3,458

 

Total operating expenses

 

 

21,383

 

 

 

14,843

 

Operating loss

 

 

(6,193

)

 

 

(3,249

)

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest income

 

 

51

 

 

 

 

Interest expense

 

 

(1

)

 

 

(137

)

Other income (expense), net

 

 

(32

)

 

 

6

 

Total other expense, net

 

 

18

 

 

 

(131

)

Loss before income taxes

 

 

(6,175

)

 

 

(3,380

)

(Provision for) benefit from income taxes

 

 

(27

)

 

 

155

 

Net loss

 

$

(6,202

)

 

$

(3,225

)

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

Basic

 

$

(0.23

)

 

$

(0.26

)

Diluted

 

$

(0.23

)

 

$

(0.26

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

27,170,827

 

 

 

12,273,023

 

Diluted

 

 

27,170,827

 

 

 

12,273,023

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

4


 

EVERBRIDGE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2017

 

 

March 31,

2016

 

Net loss

 

$

(6,202

)

 

$

(3,225

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of taxes

 

 

41

 

 

 

(259

)

Total comprehensive loss

 

$

(6,161

)

 

$

(3,484

)

 

See the accompanying notes to condensed consolidated financial statements.

 

 

 

5


 

EVERBRIDGE, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands)

(unaudited)

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Accumulated—

other

comprehensive

 

 

 

 

 

 

 

Shares

 

 

Par value

 

 

capital

 

 

deficit

 

 

income (loss)

 

 

Total

 

Balance at December 31, 2016

 

 

27,150,674

 

 

$

27

 

 

$

132,246

 

 

$

(89,618

)

 

$

(303

)

 

$

42,352

 

Stock-based compensation

 

 

 

 

 

 

 

 

968

 

 

 

 

 

 

 

 

 

968

 

Exercise of stock options

 

 

1,321

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

Issuance of shares under employee stock purchase plan

 

 

83,790

 

 

 

 

 

 

854

 

 

 

 

 

 

 

 

 

854

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41

 

 

 

41

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,202

)

 

 

 

 

 

(6,202

)

Balance at March 31, 2017

 

 

27,235,785

 

 

$

27

 

 

$

134,080

 

 

$

(95,820

)

 

$

(262

)

 

$

38,025

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

6


 

EVERBRIDGE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months

Ended March 31,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,202

)

 

$

(3,225

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,933

 

 

 

1,793

 

Non-cash interest expense on line of credit and term loan

 

 

 

 

 

5

 

Provision for doubtful accounts and sales reserve

 

 

80

 

 

 

87

 

Stock-based compensation

 

 

955

 

 

 

657

 

Increase (decrease) in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

4,277

 

 

 

1,417

 

Prepaid expenses

 

 

(1,071

)

 

 

(815

)

Other assets

 

 

338

 

 

 

(1,202

)

Accounts payable

 

 

(4

)

 

 

589

 

Accrued payroll and employee related liabilities

 

 

888

 

 

 

1,264

 

Accrued expenses

 

 

94

 

 

 

2

 

Deferred revenue

 

 

(816

)

 

 

826

 

Other liabilities

 

 

(13

)

 

 

(2

)

Net cash provided by operating activities

 

 

1,459

 

 

 

1,396

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(223

)

 

 

(203

)

Payments for acquisition of business, net of acquired cash

 

 

(21,235

)

 

 

 

Additions to capitalized software development costs

 

 

(1,487

)

 

 

(1,612

)

Net cash used in investing activities

 

 

(22,945

)

 

 

(1,815

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from line of credit

 

 

 

 

 

7,000

 

Payments on line of credit

 

 

 

 

 

(7,000

)

Principal payments on capital leases

 

 

 

 

 

(32

)

Payments of public offering costs

 

 

(298

)

 

 

(1,099

)

Payments on notes payable

 

 

 

 

 

(2,018

)

Proceeds from employee stock purchase plan

 

 

854

 

 

 

 

Proceeds from option exercises

 

 

12

 

 

 

58

 

Net cash provided by (used in) financing activities

 

 

568

 

 

 

(3,091

)

Effect of exchange rates on cash and cash equivalents

 

 

(168

)

 

 

27

 

Net decrease in cash and cash equivalents

 

 

(21,086

)

 

 

(3,483

)

Cash and cash equivalents—beginning of year

 

 

60,765

 

 

 

8,578

 

Cash and cash equivalents—end of year

 

$

39,679

 

 

$

5,095

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

 

 

$

150

 

Taxes, net of refunds received

 

 

(3

)

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Capitalized assets included in accounts payable and accrued expenses

 

 

195

 

 

 

87

 

Deferred offering costs in accounts payable and accrued expenses

 

 

465

 

 

 

127

 

Stock-based compensation capitalized for software development

 

 

13

 

 

 

14

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

7


 

Everbridge, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(1) Business and Nature of Operations

Everbridge, Inc., a Delaware corporation (together with its wholly-owned subsidiaries, referred to as “Everbridge” or the “Company”), is a global software company that provides critical event management and enterprise safety applications that enable customers to automate and accelerate the process of keeping people safe and businesses running during critical events. The Company’s SaaS-based platform enables the Company’s customers to quickly and reliably deliver messaging to a large group of people during critical situations. The Company’s enterprise applications, such as Mass Notification, Incident Management, IT Alerting, Safety Connection, Community Engagement, CareConverge, Crisis Commander and Visual Command Center, automate numerous critical event management and enterprise safety processes. The Company generates revenue primarily from subscription fees to the Company’s enterprise applications. The Company has operations in the United States, Sweden, the United Kingdom and China.

Initial Public Offering

On September 21, 2016, the Company completed an initial public offering (“IPO”) in which the Company sold 6,250,000 shares of its common stock at the public offering price of $12.00 per share. The Company received net proceeds of $66.1 million, after deducting underwriting discounts and commissions and offering expenses paid and payable by the Company, from sales of its shares in the IPO.   

As of March 31, 2017, 27,235,785 shares of the Company’s common stock were outstanding.

 

 

(2) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“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. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The condensed consolidated balance sheet as of December 31, 2016, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis.

In the opinion of management, 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 2017 or any future period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Assets and liabilities which are subject to judgment and use of estimates include allowances for doubtful accounts, the fair value of assets acquired and liabilities assumed in business combinations, the recoverability of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and intangible assets, contingencies, and the valuation and assumptions underlying stock-based compensation. On an ongoing basis, the Company evaluates

8


 

its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engaged valuation specialists to assist with management’s determination of the valuation of its fair values of assets acquired and liabilities assumed in business combinations.

Concentrations of Credit and Business Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable.

The Company maintains cash balances at several banks. Accounts located in the United States are insured by the Federal Deposit Insurance Corporation, or FDIC, up to $250,000. From time to time, balances may exceed amounts insured by the FDIC. The Company has not experienced any losses in such amounts.

The Company’s accounts receivable are generally unsecured and are derived from revenue earned from customers located in the United States, Sweden and the United Kingdom and are generally denominated in U.S. dollars, Swedish kronor or British pounds. Each reporting period, the Company reevaluates each customer’s ability to satisfy credit obligations and maintains an allowance for doubtful accounts based on the evaluations. No single customer comprised more than 10% of the Company’s total revenue or accounts receivable for the three months ended March 31, 2017 and 2016.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. As of March 31, 2017, $35.6 million of the Company’s cash equivalents were invested in money market funds.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Recently Issued Accounting Guidance, Not Yet Adopted

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company expects to adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This guidance narrows the definition of a business. This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. The Company expects to adopt this guidance effective January 1, 2018. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. As a result, restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance is to be applied retrospectively. The Company does not expect the adoption of this guidance to have a material impact on its cash flows.

9


 

In September 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance clarifies the presentation requirements of eight specific issues within the statement of cash flows. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements, as the Company's treatment of the relevant affected items within its consolidated statement of cash flows is consistent with the requirements of this guidance.

In February 2016, the FASB issued ASU 2016-02, Leases, to require lessees to recognize most leases on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. Adoption of the ASU is modified retrospective. We are still in the process of evaluating the ASU but currently plan to adopt the ASU on January 1, 2019

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new revenue recognition standard will be effective for the Company in the first quarter of 2018, with the option to adopt it in the first quarter of 2017. The Company currently anticipates adopting the new standard effective January 1, 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company currently anticipates adopting the standard using the modified retrospective method. The Company is still in the process of completing its analysis on the impact this guidance will have on its consolidated financial statements and related disclosures.

 

 

(3) Accounts Receivable, Net

Accounts receivable, net is as follows (in thousands):

 

 

 

As of

 

 

As of

 

 

 

March 31,

2017

 

 

December 31,

2016

 

Accounts receivable

 

$

15,472

 

 

$

18,231

 

Allowance for doubtful accounts and sales reserve

 

 

(484

)

 

 

(419

)

Net accounts receivable

 

$

14,988

 

 

$

17,812

 

 

Bad debt expense and sales credits reserve were $0.1 million and $0.1 million for the three months ended March 31, 2017 and 2016, respectively.  

The following table summarizes the changes in the allowance for doubtful accounts (in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2017

 

 

2016

 

Balance, beginning of period

 

$

(374

)

 

$

(336

)

Additions

 

 

 

 

 

(87

)

Write-offs

 

 

15

 

 

 

49

 

Balance, end of period

 

$

(359

)

 

$

(374

)

 

10


 

The following table summarizes the changes in the sales reserve (in thousands):

 

 

Three Months Ended

March 31,

 

 

 

2017

 

 

2016

 

Balance, beginning of period

 

$

(45

)

 

$

(45

)

Additions

 

 

(80

)

 

 

 

Write-offs

 

 

 

 

 

 

Balance, end of period

 

$

(125

)

 

$

(45

)

 

 

(4) Property and Equipment

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

 

 

 

 

 

 

 

As of

 

 

As of

 

 

 

Useful life

in years

 

 

March 31,

2017

 

 

December 31,

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Furniture and equipment

 

 

5

 

 

$

1,267

 

 

$

928

 

System hardware

 

 

5

 

 

 

3,320

 

 

 

3,320

 

Office computers

 

 

3

 

 

 

1,938

 

 

 

1,777

 

Computer and system software

 

 

3

 

 

 

1,502

 

 

 

1,478

 

 

 

 

 

 

 

 

8,027

 

 

 

7,503

 

Less accumulated depreciation and amortization

 

 

 

 

 

 

(5,340

)

 

 

(4,580

)

Property and equipment, net

 

 

 

 

 

$

2,687

 

 

$

2,923

 

 

Depreciation and amortization expense for property and equipment was $0.8 million and $0.4 million for the three months ended March 31, 2017 and 2016, respectively.  

 

 

(5) Capitalized Software Development Costs

Capitalized software development costs consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

As of March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

carrying

amount

 

 

Amortization

period

 

Accumulated

amortization

 

 

Net

carrying

amount

 

 

 

 

 

Capitalized software development costs

 

$

32,155

 

 

3 years

 

$

(23,359

)

 

$

8,796

 

Total capitalized software development costs

 

$

32,155

 

 

 

 

$

(23,359

)

 

$

8,796

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

Gross

carrying

amount

 

 

Amortization

period

 

Accumulated

amortization

 

 

Net

carrying

amount

 

 

 

 

 

Capitalized software development costs

 

$

30,658

 

 

3 years

 

$

(21,866

)

 

$

8,792

 

Total capitalized software development costs

 

$

30,658

 

 

 

 

$

(21,866

)

 

$

8,792

 

 

The Company capitalized software development costs of $1.5 million and $5.5 million for the three months ended March 31, 2017 and the year ended December 31, 2016, respectively.

Amortization expense for capitalized software development costs was $1.5 million and $1.0 million for the three months ended March 31, 2017 and 2016, respectively. Amortization of capitalized software development costs is classified within cost of revenue in the consolidated statements of operations.

11


 

The expected amortization of capitalized software development costs, as of March 31, 2017, for each of the following years is as follows (in thousands):

 

 

 

Amounts

 

2017 (for the remaining nine months)

 

$

3,242

 

2018

 

 

3,218

 

2019

 

 

1,961

 

2020

 

 

375

 

 

 

$

8,796

 

 

 

(6) Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, capital leases and accrued liabilities approximate fair value because of the short maturity of these items.

Certain assets, including long-lived assets, goodwill and intangible assets are also subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review. For the three months ended March 31, 2017 and year ended December 31, 2016, no impairments were identified.

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016 by level within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

 

 

 

At March 31, 2017

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

Total Fair

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Value

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (included in cash and cash equivalents)

 

$

35,582

 

 

 

 

 

 

 

 

$

35,582

 

Total financial assets

 

$

35,582

 

 

$

 

 

$

 

 

$

35,582

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

 

 

 

 

 

 

$

5,417

 

 

$

5,417

 

Total financial liabilities

 

$

 

 

$

 

 

$

5,417

 

 

$

5,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

Total Fair

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Value

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (included in cash and cash equivalents)

 

$

57,032

 

 

 

 

 

 

 

 

$

57,032

 

Total financial assets

 

$

57,032

 

 

$

 

 

$

 

 

$

57,032

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

 

 

 

 

 

 

$

388

 

 

$

388

 

Total financial liabilities

 

$

 

 

$

 

 

$

388

 

 

$

388

 

12


 

The following table summarizes the changes in Level 3 financial instruments (in thousands).

 

 

 

Amount

 

Fair Value at December 31, 2016

 

$

388

 

      Foreign currency translation

 

 

9

 

Contingent consideration from IDV acquisition

 

 

5,020

 

Balance at March 31, 2017

 

$

5,417

 

 

 

(7) Goodwill and Intangible Assets

Goodwill was $30.9 million and $9.7 million as of March 31, 2017 and December 31, 2016, respectively. There were no impairments recorded against goodwill during the three months ended March 31, 2017 and for the year ended December 31, 2016. The following table displays the changes in the gross carrying amount of goodwill (in thousands):

 

 

 

Amount

 

Balance at December 31, 2016

 

$

9,676

 

      Foreign currency translation

 

 

149

 

IDV acquisition

 

 

21,107

 

Balance at March 31, 2017

 

$

30,932

 

Intangible assets consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

As of March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

carrying

amount

 

 

Weighted average life (years)

 

Accumulated

amortization

 

 

Net

carrying

amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developed technology

 

$

3,993

 

 

3.04

 

$

(1,102

)

 

$

2,891

 

Trade names and patents

 

 

2,476

 

 

5.30

 

 

(339

)

 

$

2,137

 

Customer relationships

 

 

8,224

 

 

5.00

 

 

(2,449

)

 

$

5,775

 

Non-compete arrangement

 

 

240

 

 

2.00

 

 

(20

)

 

$

220

 

Total intangible assets

 

$

14,933

 

 

 

 

$

(3,910

)

 

$

11,023

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

Gross

carrying

amount

 

 

Weighted average life (years)

 

Accumulated

amortization

 

 

Net

carrying

amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developed technology

 

$

1,490

 

 

3.60

 

$

(878

)

 

$

612

 

Trade names and patents

 

 

883

 

 

6.08

 

 

(254

)

 

$

629

 

Customer relationships

 

 

4,779

 

 

5.00

 

 

(2,080

)

 

$

2,699

 

Total intangible assets

 

$

7,152

 

 

 

 

$

(3,212

)

 

$

3,940

 

 

Amortization expense for intangible assets was $0.7 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively.  

13


 

The expected amortization of the intangible assets, as of March 31, 2017, for each of the next five years and thereafter is as follows (in thousands):

 

 

 

Amounts

 

2017 (for the remaining nine months)

 

$

2,548

 

2018

 

 

3,221

 

2019

 

 

2,560

 

2020

 

 

1,340

 

2021

 

 

1,223

 

2022 and thereafter