LOGMEIN, INC., 10-Q filed on 7/27/2016
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2016
Jul. 22, 2016
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
LOGM 
 
Entity Registrant Name
LogMeIn, Inc. 
 
Entity Central Index Key
0001420302 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
25,306,647 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Current assets:
 
 
Cash and cash equivalents
$ 139,882 
$ 123,143 
Marketable securities
85,515 
85,284 
Accounts receivable (net of allowance for doubtful accounts of $274 and $271 as of December 31, 2015 and June 30, 2016, respectively)
14,536 
16,011 
Prepaid expenses and other current assets
14,260 
11,997 
Total current assets
254,193 
236,435 
Property and equipment, net
26,088 
21,711 
Restricted cash
2,504 
2,467 
Intangibles, net
66,297 
71,590 
Goodwill
117,545 
117,545 
Other assets
5,091 
5,753 
Deferred tax assets
196 
198 
Total assets
471,914 
455,699 
Current liabilities:
 
 
Accounts payable
12,333 
10,327 
Accrued liabilities
33,072 
31,674 
Deferred revenue, current portion
161,830 
134,297 
Total current liabilities
207,235 
176,298 
Long-term debt
45,000 
60,000 
Deferred revenue, net of current portion
2,061 
2,692 
Deferred tax liabilities
5,872 
5,812 
Other long-term liabilities
6,675 
3,086 
Total liabilities
266,843 
247,888 
Commitments and contingencies (Note 10)
   
   
Preferred stock, $0.01 par value - 5,000 shares authorized, 0 shares outstanding as of December 31, 2015 and June 30, 2016
   
   
Equity:
 
 
Common stock, $0.01 par value - 75,000 shares authorized as of December 31, 2015 and June 30, 2016; 27,540 and 28,105 shares issued as of December 31, 2015 and June 30, 2016, respectively; 25,130 and 25,324 outstanding as of December 31, 2015 and June 30, 2016, respectively
281 
275 
Additional paid-in capital
292,048 
276,793 
Retained earnings
22,507 
21,074 
Accumulated other comprehensive loss
(5,313)
(5,216)
Treasury stock, at cost - 2,410 and 2,781 shares as of December 31, 2015 and June 30, 2016, respectively
(104,452)
(85,115)
Total equity
205,071 
207,811 
Total liabilities and equity
$ 471,914 
$ 455,699 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 271 
$ 274 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
75,000,000 
75,000,000 
Common stock, shares issued
28,105,000 
27,540,000 
Common stock, shares outstanding
25,324,000 
25,130,000 
Treasury stock, shares
2,781,000 
2,410,000 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Income Statement [Abstract]
 
 
 
 
Revenue
$ 83,266 
$ 64,834 
$ 163,000 
$ 125,943 
Cost of revenue
11,436 
8,535 
22,636 
16,517 
Gross profit
71,830 
56,299 
140,364 
109,426 
Operating expenses
 
 
 
 
Research and development
14,046 
10,256 
29,410 
19,379 
Sales and marketing
41,663 
34,604 
83,905 
68,990 
General and administrative
11,404 
8,608 
21,656 
15,314 
Legal settlements
 
 
 
3,600 
Amortization of acquired intangibles
1,357 
282 
2,740 
558 
Total operating expenses
68,470 
53,750 
137,711 
107,841 
Income from operations
3,360 
2,549 
2,653 
1,585 
Interest income
186 
179 
369 
353 
Interest expense
(367)
(114)
(759)
(151)
Other income (expense)
(92)
258 
(496)
1,520 
Income before income taxes
3,087 
2,872 
1,767 
3,307 
Provision for income taxes
(581)
(484)
(334)
(547)
Net income
$ 2,506 
$ 2,388 
$ 1,433 
$ 2,760 
Net income per share:
 
 
 
 
Basic
$ 0.10 
$ 0.10 
$ 0.06 
$ 0.11 
Diluted
$ 0.10 
$ 0.09 
$ 0.06 
$ 0.11 
Weighted average shares outstanding:
 
 
 
 
Basic
25,135 
24,703 
25,144 
24,620 
Diluted
25,828 
25,673 
25,841 
25,615 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 2,506 
$ 2,388 
$ 1,433 
$ 2,760 
Other comprehensive (loss) gain:
 
 
 
 
Net unrealized (losses) gains on marketable securities, (net of tax benefit of $8 and tax provision of $12 for the three months ended June 30, 2015 and 2016; and net of tax provision of $57 and $60 for the six months ended June 30, 2015 and 2016)
21 
(15)
105 
99 
Net translation gains (losses)
(644)
231 
(202)
(1,301)
Total other comprehensive gain (loss)
(623)
216 
(97)
(1,202)
Comprehensive income
$ 1,883 
$ 2,604 
$ 1,336 
$ 1,558 
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net unrealized (losses) gains on marketable securities, tax (benefit) provision
$ 12 
$ (8)
$ 60 
$ 57 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Cash flows from operating activities
 
 
Net income
$ 1,433 
$ 2,760 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
10,704 
5,934 
Amortization of premium on investments
257 
137 
Change in fair value of contingent consideration liability
502 
Amortization of debt issuance costs
144 
78 
Provision for bad debts
26 
38 
Stock-based compensation
18,328 
12,567 
Other, net
(3)
(17)
Changes in assets and liabilities:
 
 
Accounts receivable
1,562 
3,494 
Prepaid expenses and other current assets
(2,306)
(2,491)
Other assets
949 
207 
Accounts payable
2,523 
4,381 
Accrued liabilities
342 
(3,772)
Deferred revenue
26,073 
34,341 
Other long-term liabilities
3,460 
905 
Net cash provided by operating activities
63,994 
58,565 
Cash flows from investing activities
 
 
Purchases of marketable securities
(31,573)
(57,170)
Proceeds from sale or disposal or maturity of marketable securities
31,250 
57,000 
Purchases of property and equipment
(8,812)
(6,569)
Intangible asset additions
(715)
(1,884)
Cash paid for acquisition
(61)
 
Increase in restricted cash and deposits
(31)
(51)
Net cash used in investing activities
(9,942)
(8,674)
Cash flows from financing activities
 
 
Repayments of borrowings under credit facility
(15,000)
 
Proceeds from issuance of common stock upon option exercises
5,404 
12,284 
Payments of withholding taxes in connection with restricted stock unit vesting
(8,617)
(6,885)
Payment of debt issuance costs
(349)
(774)
Payment of contingent consideration
 
(226)
Purchase of treasury stock
(19,337)
(14,732)
Net cash used in financing activities
(37,899)
(10,333)
Effect of exchange rate changes on cash and cash equivalents
586 
(4,376)
Net increase in cash and cash equivalents
16,739 
35,182 
Cash and cash equivalents, beginning of period
123,143 
100,960 
Cash and cash equivalents, end of period
139,882 
136,142 
Supplemental disclosure of cash flow information
 
 
Cash paid for interest
547 
Cash paid for income taxes
127 
1,094 
Noncash investing and financing activities
 
 
Acquisition of property and equipment through capital lease
178 
 
Purchases of property and equipment included in accounts payable and accrued liabilities
3,219 
1,221 
Fair value of contingent consideration in connection with acquisition included in accrued liabilities and other long term liabilities
2,530 
26 
Debt issuance costs included in accounts payable and accrued liabilities
 
215 
Receivable for proceeds from issuance of common stock upon option exercises
$ 148 
 
Nature of the Business
Nature of the Business

1. Nature of the Business

LogMeIn, Inc. (the “Company”) provides a portfolio of cloud-based service offerings which make it possible for people and businesses to simply and securely connect to their workplace, colleagues and customers. The Company’s product line includes AppGuru™, BoldChat®, Cubby™, join.me®, LastPass®, LogMeIn Pro®, LogMeIn® Central™, LogMeIn Rescue®, LogMeIn® Rescue+Mobile™, LogMeIn Backup®, LogMeIn for iOS, LogMeIn Hamachi®, Meldium™, Xively™ and RemotelyAnywhere®. The Company is headquartered in Boston, Massachusetts with wholly-owned subsidiaries located in Australia, Bermuda, Brazil, Hungary, India, Ireland, Japan, the Netherlands and the United Kingdom.

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Unaudited Interim Condensed Consolidated Financial Statements — The accompanying condensed consolidated financial statements and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited and have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read along with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 19, 2016. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results for the interim periods presented are not necessarily indicative of future results. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

Use of Estimates — The preparation of condensed consolidated financial statements in conformity with 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 financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates.

Marketable Securities — The Company’s marketable securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of earnings based on the specific identification method. Fair value is determined based on quoted market prices. At December 31, 2015 and June 30, 2016, marketable securities consisted of U.S. government agency securities and corporate bonds that have remaining maturities within two years and have an aggregate amortized cost of $85.3 million and $85.4 million, respectively. The securities have an aggregate fair value of $85.3 million and $85.5 million, including $10,000 and $133,000 of unrealized gains and $53,000 and $11,000 of unrealized losses, at December 31, 2015 and June 30, 2016, respectively.

Revenue Recognition — The Company derives revenue primarily from subscription fees related to its premium subscription software services and to a lesser extent, the delivery of professional services, primarily related to its Internet of Things business. Revenues are reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction.

Revenue from the Company’s premium services is recognized on a daily basis over the subscription term as the services are delivered, provided that there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured. Subscription periods range from monthly to ten years, but are generally one year in duration. The Company’s software cannot be run on another entity’s hardware and customers do not have the right to take possession of the software and use it on their own or another entity’s hardware.

 

The Company’s multi-element arrangements typically include subscription and professional services, which may include development services. The Company evaluates each element within the arrangement to determine if they can be accounted for as separate units of accounting. If the delivered item or items have value to the customer on a standalone basis, either because they are sold separately by any vendor or the customer could resell the delivered item or items on a standalone basis, the Company has determined that the deliverables within these arrangements qualify for treatment as separate units of accounting. Accordingly, the Company recognizes revenue for each delivered item or items as a separate earnings process commencing when all of the significant performance obligations have been performed and when all of the revenue recognition criteria have been met. Professional services revenue recognized as a separate earnings process under multi-element arrangements has been immaterial to date.

In cases where the Company has determined that the delivered items within its multi-element arrangements do not have value to the customer on a stand-alone basis, the arrangement is accounted for as a single unit of accounting and the related consideration is recognized ratably over the estimated customer life, commencing when all of the significant performance obligations have been delivered and when all of the revenue recognition criteria have been met. Revenue from multi-element arrangements accounted for as a single unit of accounting which do not have value to the customer has been immaterial to date.

Concentrations of Credit Risk and Significant Customers — The Company’s principal credit risk relates to its cash, cash equivalents, marketable securities, restricted cash and accounts receivable. Cash, cash equivalents and restricted cash are deposited primarily with financial institutions that management believes to be of high-credit quality and custody of its marketable securities is with an accredited financial institution. To manage accounts receivable credit risk, the Company regularly evaluates the creditworthiness of its customers and maintains allowances for potential credit losses. To date, losses resulting from uncollected receivables have not exceeded management’s expectations.

For the three and six months ended June 30, 2015 and 2016, no customers accounted for more than 10% of revenue. As of December 31, 2015 and June 30, 2016, no customers accounted for more than 10% of accounts receivable.

Goodwill — Goodwill is the excess of the acquisition price over the fair value of the tangible and identifiable intangible net assets acquired. The Company does not amortize goodwill, but performs an impairment test of goodwill annually or whenever events and circumstances indicate that the carrying amount of goodwill may exceed its fair value. The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. As of December 31, 2015, the fair value of the Company as a whole significantly exceeded the carrying amount of the Company. Through June 30, 2016, no impairments have occurred.

Long-Lived Assets and Intangible Assets — The Company records intangible assets at their respective estimated fair values at the date of acquisition. Intangible assets are being amortized based upon the pattern in which their economic benefit will be realized, or if this pattern cannot be reliably determined, using the straight-line method over their estimated useful lives, which range up to eleven years.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. Through June 30, 2016, the Company recorded no material impairments.

Foreign Currency Translation — The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiaries are translated into United States dollars using the period-end exchange rate and income and expense items are translated using the average exchange rate during the period. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction gains and losses are charged to operations. The Company had foreign currency gains of $0.3 million and $1.5 million for the three and six months ended June 30, 2015, respectively, and foreign currency losses of $0.1 million and $0.5 million for the three and six months ended June 30, 2016, respectively, included in other income (expense), net in the condensed consolidated statements of operations.

Stock-Based Compensation — The Company values all stock-based compensation, including grants of stock options and restricted stock units, at fair value on the date of grant and recognizes the expense over the requisite service period, which is generally the vesting period of the award, for those awards expected to vest, on a straight-line basis. The Company uses the with-or-without method to determine when it will realize excess tax benefits from stock-based compensation. Under this method, the Company will realize these excess tax benefits only after it realizes the tax benefits of net operating losses from operations.

 

Income Taxes — Deferred income taxes are provided for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss carry-forwards and credits using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. At each balance sheet date, the Company assesses the likelihood that deferred tax assets will be realized and recognizes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction.

The Company evaluates its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be realized. Potential interest and penalties associated with any uncertain tax positions are recorded as a component of income tax expense. As of December 31, 2015 and June 30, 2016, the Company has provided a liability for $0.9 million and $1.1 million, respectively, for uncertain tax positions. These uncertain tax positions would impact the Company’s effective tax rate if recognized.

Segment Data — Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker or decision making group when making decisions regarding resource allocation and assessing performance. The Company, whose management uses consolidated financial information in determining how to allocate resources and assess performance, has determined that it operates in one segment.

The Company’s revenue by geography (based on customer address) is as follows (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Revenues:

           

United States

   $ 45,844       $ 59,476       $ 88,473       $ 116,727   

United Kingdom

     5,124         6,523         10,009         12,709   

International—all other

     13,866         17,267         27,461         33,564   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 64,834       $ 83,266       $ 125,943       $ 163,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s revenue by service cloud (product grouping) is as follows (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Revenues:

           

Collaboration cloud

   $ 21,055       $ 28,849       $ 40,218       $ 55,597   

Identity and Access Management cloud

     21,802         29,292         41,999         57,744   

Service and Support cloud

     21,206         24,451         42,420         48,362   

Other

     771         674         1,306         1,297   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 64,834       $ 83,266       $ 125,943       $ 163,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Guarantees and Indemnification Obligations — As permitted under Delaware law, the Company has agreements whereby the Company indemnifies certain of its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. As permitted under Delaware law, the Company also has similar indemnification obligations under its certificate of incorporation and by-laws. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director’s and officer’s insurance coverage that the Company believes limits its exposure and enables it to recover a portion of any future amounts paid.

In the ordinary course of business, the Company enters into agreements with certain customers that contractually obligate the Company to provide indemnifications of varying scope and terms with respect to certain matters including, but not limited to, losses arising out of the breach of such agreements, from the services provided by the Company or claims alleging that the Company’s products infringe third-party patents, copyrights, or trademarks. The term of these indemnification obligations is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is, in many cases, unlimited. Through June 30, 2016, the Company has not experienced any losses related to these indemnification obligations.

 

Net Income Per Share — Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed by dividing net income by the sum of the weighted average number of common shares outstanding during the period and the weighted average number of potential common shares outstanding from the assumed exercise of stock options and the vesting of restricted stock units.

The Company excluded the following options to purchase common shares and restricted stock units from the computation of diluted net income per share because they had an anti-dilutive impact (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Options to purchase common shares

     —          —          26         —    

Restricted stock units

     473         337         489         429   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total options and restricted stock units

     473         337         515         429   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic and diluted net income per share was calculated as follows (in thousands, except per share data):

 

     Three months ended June 30,      Six months ended June 30,  
     2015      2016      2015      2016  

Basic:

           

Net income

   $ 2,388       $ 2,506       $ 2,760       $ 1,433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding, basic

     24,703         25,135         24,620         25,144   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share, basic

   $ 0.10       $ 0.10       $ 0.11       $ 0.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted:

           

Net income

   $ 2,388       $ 2,506       $ 2,760       $ 1,433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding

     24,703         25,135         24,620         25,144   

Add: Common stock equivalents

     970         693         995         697   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding, diluted

     25,673         25,828         25,615         25,841   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share, diluted

   $ 0.09       $ 0.10       $ 0.11       $ 0.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

Recently Issued Accounting Pronouncements — On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), its final standard on revenue from contracts with customers. ASU 2014-9 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract and recognizes revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers that are within the scope of other topics in the FASB Accounting Standards Codification. Certain of ASU 2014-09’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (i.e., property plant and equipment, real estate or intangible assets). Existing accounting guidance applicable to these transfers has been amended or superseded. ASU 2014-09 also requires significantly expanded disclosures about revenue recognition. ASU 2014-09 is effective for the Company on January 1, 2018, with early adoption permitted, but not earlier than January 1, 2017. The Company is currently assessing the potential impact of the adoption of ASU 2014-09 on its consolidated financial statements.

 

On February 25, 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) , which will require lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases will be classified as either operating or finance, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of the adoption of ASU 2016-02 on its consolidated financial statements.

On March 30, 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, and is expected to impact net income, EPS, and the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of the adoption of ASU 2016-09 on its consolidated financial statements.

Fair Value of Financial Instruments
Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

The carrying value of the Company’s financial instruments, including cash equivalents, restricted cash, accounts receivable and accounts payable, approximate their fair values due to their short maturities. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

 

    Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company at the measurement date.

 

    Level 2: Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

    Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the basis used to measure certain of the Company’s financial assets and contingent consideration liability that are carried at fair value (in thousands):

 

     Fair Value Measurements at December 31, 2015  
     Level 1      Level 2      Level 3      Total  

Cash equivalents — money market funds

   $ 10,138       $ —         $ —         $ 10,138   

Cash equivalents — bank deposits

     —           1         —           1   

Short-term marketable securities:

           

U.S. government agency securities

     50,237         17,994         —           68,231   

Corporate bond securities

     —           17,053         —           17,053   

Contingent consideration liability

     —           —           2,028         2,028   
     Fair Value Measurements at June 30, 2016  
     Level 1      Level 2      Level 3      Total  
           

Cash equivalents — money market funds

   $ 10,364       $ —         $ —         $ 10,364   

Short-term marketable securities:

           

U.S. government agency securities

     58,709         9,512         —           68,221   

Corporate bond securities

     —           17,294         —           17,294   

Contingent consideration liability

     —           —           2,530         2,530   

Bank deposits, corporate bonds and certain U.S. government agency securities are classified within the second level of the fair value hierarchy as the fair value of those assets are determined based upon quoted prices for similar assets.

 

The Company’s Level 3 liability consists of contingent consideration payable in connection with the September 5, 2014 acquisition of Zamurai Corporation and the October 15, 2015 acquisition of Marvasol, Inc. (d/b/a “LastPass”), as described in Note 4 below. Up to $2.5 million of the LastPass contingent consideration is based on the achievement of certain bookings goals, the fair value of which was estimated at $2.0 million as of December 31, 2015. The fair value of contingent consideration is estimated by applying a probability based model, which utilizes inputs that are unobservable in the market. Changes in the fair value of the contingent consideration liability will be reflected in acquisition-related costs in general and administrative expense until the liability is fully settled. As of June 30, 2016, the fair value of the LastPass contingent consideration liability was $2.5 million, which is included in accrued liabilities in the condensed consolidated balance sheet. A reconciliation of the beginning and ending Level 3 liability is as follows:

 

     Six Months Ended
June 30, 2016
 

Balance beginning of period

   $ 2,028   

Change in fair value of contingent consideration liability

     502   
  

 

 

 

Balance end of period

   $ 2,530   
  

 

 

 

 

Acquisitions
Acquisitions

4. Acquisitions

In the six months ended June 30, 2015 and 2016, acquisition-related costs were $2.5 million and $6.2 million, respectively, including $2.5 million and $4.8 million, respectively, of contingent retention-based bonus payment expense related to the Company’s 2014 and 2015 acquisitions, which are typically earned over the first two years following the acquisition and a $0.5 million charge recorded in the six months ended June 30, 2016 for the change in fair value of contingent consideration liability primarily related to the LastPass acquisition.

LastPass

On October 15, 2015, the Company acquired all of the outstanding equity interests in LastPass, a Fairfax, Virginia-based provider of an identity and password management service, for $107.6 million, net of cash acquired, plus contingent payments totaling up to $15.0 million which are expected to be paid over a two year period following the date of acquisition. The operating results of LastPass, which are included in the condensed consolidated financial statements beginning on the acquisition date, are comprised of $4.3 million and $8.2 million of revenue and $5.6 million and $11.1 million of expenses for the three and six months ended June 30, 2016, including amortization of acquired intangible assets of $1.5 million and $3.1 million, contingent retention-based bonuses of $1.7 million and $3.4 million and a contingent consideration fair value adjustment of $0.2 million and $0.5 million for the three and six months ended June 30, 2016, respectively.

The following table summarizes the fair value (in thousands) of the assets acquired and liabilities assumed at the date of acquisition:

 

Cash

   $ 2,518  

Accounts receivable

     639  

Property and equipment

     40  

Deferred tax asset

     3,050  

Current and other assets

     134  

Intangible assets:

  

Completed technology

     29,400  

Customer relationships

     23,900  

Trade name and trademark

     3,000  

Deferred revenue

     (6,600

Accrued expenses

     (66

Deferred tax liability

     (23,478

Goodwill

     79,617  
  

 

 

 

Total purchase price

     112,154  

Liability for contingent consideration

     (2,000
  

 

 

 

Total cash paid

   $ 110,154  
  

 

 

 

The allocation of the purchase price related to income taxes is preliminary, including the Company finalizing the valuation of the acquired net operating loss carryforwards. The Company expects to complete this review in the third quarter of 2016.

The LastPass stock purchase agreement obligates the Company to make additional contingent and retention-based bonus payments totaling up to $12.5 million to employees and former LastPass stockholders now employed by the Company on the first and second anniversaries of the acquisition date, contingent upon their continued employment and, for the first anniversary payment only, the achievement of certain bookings goals. The Company has concluded that the contingent payment arrangement is a compensation arrangement and is accruing the maximum payout ratably over the performance period, as it believes it is probable that the criteria will be met. The stock purchase agreement also includes non-retention based payments of $2.5 million to LastPass stockholders which are contingent on the achievement of certain bookings goals, which the Company has concluded is contingent consideration and is being accounted for as part of the purchase price. This contingent consideration liability was recorded at its fair value of $2.0 million at the acquisition date. The Company assesses the probability of the bookings goals being met and at what level each reporting period. As of June 30, 2016, the contingent consideration liability was $2.5 million.

The goodwill recorded in connection with this transaction is primarily related to the expected synergies to be achieved related to the Company’s ability to leverage its IT management offerings, customer base, sales force and IT management business plan with LastPass’ product, technical expertise and customer base. All goodwill and intangible assets acquired are not deductible for income tax purposes.

The Company recorded a long-term deferred tax asset of $3.1 million primarily related to net operating losses that were acquired as a part of the acquisition. The Company recorded a long-term deferred tax liability of $23.5 million primarily related to the amortization of intangible assets which cannot be deducted for tax purposes.

The unaudited financial information in the table below summarizes the combined results of operations of the Company and LastPass, on a pro forma basis, as though the companies had been combined. The pro forma information for the period presented includes the effects of business combination accounting resulting from the acquisition as though the acquisition had been consummated as of the beginning of 2014, including amortization charges from acquired intangible assets; interest expense on borrowings and lower interest income in connection with the Company funding the acquisition with existing cash and investments and borrowings under its credit facility; the exclusion of acquisition-related costs of the Company and LastPass; the inclusion of expense related to contingent and retention-based bonuses assuming full achievement of the financial metric and retention requirements ($7.0 million in 2014 and $5.5 million in 2015), offset by the exclusion of LastPass historical bonuses paid to LastPass non-stockholder employees in 2015 in connection with the acquisition close of $6.1 million; and the related tax effects. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2014.

 

Unaudited Pro Forma Financial Information

 


     Three Months Ended
June 30, 2015
     Six Months Ended
June 30, 2015
 
     Pro Forma      As Reported      Pro Forma      As Reported  
     (in thousands, except
per share amounts)
     (in thousands, except
per share amounts)
 

Revenue

   $ 68,059       $ 64,834       $ 132,045       $ 125,943   

Net income

   $ 1,518       $ 2,388       $ 899       $ 2,760   

Earnings per share—Basic

   $ 0.06       $ 0.10       $ 0.04       $ 0.11   

Earnings per share—Diluted

   $ 0.06       $ 0.09       $ 0.04       $ 0.11
Goodwill and Intangible Assets
Goodwill and Intangible Assets

5. Goodwill and Intangible Assets

There was no change in the carrying amount of goodwill for the six months ended June 30, 2016.

Intangible assets consist of the following (in thousands):

 

          December 31, 2015      June 30, 2016  
     Estimated
Useful
Life
   Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
 

Identifiable intangible assets:

                    

Trade names and trademarks

   1-11 years    $ 3,806       $ 824       $ 2,982       $ 3,806       $ 890       $ 2,916   

Customer relationships

   5-8 years      29,129         4,089         25,040         29,129         6,655         22,474   

Customer backlog

   4 months      120         120         —           120         120         —     

Domain names

   5 years      915         665         250         915         731         184   

Software

   4 years      299         299         —           299         299         —     

Completed technology

   3-9 years      46,503         6,893         39,610         46,503         9,182         37,321   

Technology and know-how

   3 years      3,176         3,176         —           3,176         3,176         —     

Documented know-how

   4 years      280         127         153         280         162         118   

Non-Compete agreements

   5 years      162         114         48         162         138         24   

Internally developed software

   3 years      6,754         3,247         3,507         7,469         4,209         3,260   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
      $ 91,144       $ 19,554       $ 71,590       $ 91,859       $ 25,562       $ 66,297   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The Company capitalized $0.7 million and $0.3 million during the three months ended June 30, 2015 and 2016, respectively, and $1.7 million and $0.7 million during the six months ended June 30, 2015 and 2016, respectively, of costs related to internally developed computer software to be sold as a service incurred during the application development stage and is amortizing these costs over the expected lives of the related services.

The Company is amortizing its intangible assets over the estimated lives noted above based upon the pattern in which their economic benefit will be realized, or if this pattern cannot be reliably determined, using the straight-line method over their estimated useful lives. The intangible assets have estimated useful lives which range from four months to eleven years. Amortization expense for intangible assets was $1.3 million and $2.9 million for the three months ended June 30, 2015 and 2016, respectively, and $2.5 million and $6.0 million for the six months ended June 30, 2015 and 2016, respectively. Amortization relating to software, completed technology, technology and know-how, documented know-how and internally developed software is recorded within cost of revenues and the amortization of trade name and trademark, customer relationships, customer backlog, domain names and non-compete agreements is recorded within operating expenses.

 

Future estimated amortization expense for intangible assets at June 30, 2016 is as follows (in thousands):

 

Amortization Expense (Years Ending December 31)

   Amount  

2016 (Six months ending December 31)

   $ 5,800   

2017

     11,592   

2018

     11,142   

2019

     8,425   

2020

     7,616   

Thereafter

     21,722   
  

 

 

 

Total

   $ 66,297   
  

 

 

 

 

Accrued Liabilities
Accrued Liabilities

6. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

     December 31,
2015
     June 30,
2016
 

Marketing programs

   $ 4,323       $ 6,029   

Payroll and payroll-related liabilities

     18,239         15,638   

Professional fees

     1,944         2,855   

Other accrued liabilities

     7,168         8,550   
  

 

 

    

 

 

 

Total accrued liabilities

   $ 31,674       $ 33,072   
  

 

 

    

 

 

 

 

Income Taxes
Income Taxes

7. Income Taxes

For the three months ended June 30, 2015 and 2016, the Company’s effective tax rate was 17%, or $0.5 million, on pre-tax earnings of $2.9 million and 19%, or $0.6 million, on pre-tax earnings of $3.1 million, respectively. For the six months ended June 30, 2015 and 2016, the Company’s effective tax rate was 17%, or $0.5 million, on pre-tax earnings of $3.3 million, and 19%, or $0.3 million, on pre-tax earnings of $1.8 million, respectively. The effective income tax rates for the six months ended June 30, 2015 and 2016 are lower than the U.S. federal statutory rate of 35% primarily due to profits earned in certain foreign jurisdictions, primarily the Company’s Irish subsidiaries, which are subject to significantly lower tax rates than the U.S. federal statutory rate.

As of December 31, 2015 and June 30, 2016, the Company maintained a full valuation allowance related to the deferred tax assets of its Hungarian subsidiary. This entity has historical losses and the Company concluded it was not more likely than not that these deferred tax assets are realizable.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company’s income tax returns from 2010 are open to examination by federal, state, and/or foreign tax authorities. In the normal course of business, the Company and its subsidiaries are examined by various taxing authorities. The Company regularly assesses the likelihood of additional assessments by tax authorities and provides for these matters as appropriate. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, limitations on net operating losses and tax credits.

In connection with a tax audit of a foreign subsidiary, the Company received an assessment in the second quarter of 2016 challenging a tax position taken by the entity. The Company believes that it is more likely than not that its position will be upheld. If the Company’s position is not upheld, its potential liability could be up to $2 million.

Although the Company believes its tax estimates are appropriate, the final determination of tax audits could result in material changes in its estimates. The Company has recorded a liability related to uncertain tax positions of $0.9 million and $1.1 million as of December 31, 2015 and June 30, 2016, respectively. The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision. The Company recognized $7,000 and $15,000 of interest expense for the six months ended June 30, 2015 and 2016, respectively.

Common Stock and Equity/ Accumulated Other Comprehensive Loss

8. Common Stock and Equity

The Company’s Board of Directors approved a $75 million share repurchase program on October 20, 2014. Share repurchases are made from time-to-time in the open market, in privately negotiated transactions or otherwise, in accordance with applicable securities laws and regulations. The timing and amount of any share repurchases are determined by the Company’s management based on its evaluation of market conditions, the trading price of the stock, regulatory requirements and other factors. The share repurchase program may be suspended, modified or discontinued at any time at the Company’s discretion without prior notice.

For the three months ended June 30, 2015 and 2016, the Company repurchased 156,000 and 206,785 shares of its common stock at an average price of $61.97 and $53.05 per share for a total cost of $9.7 million and $11.0 million, respectively. For the six months ended June 30, 2015 and 2016, the Company repurchased 249,400 and 370,912 shares of its common stock at an average price of $59.07 and $52.13 per share for a total cost of $14.7 million and $19.3 million, respectively. At June 30, 2016, $37.0 million remained available under the Company’s share repurchase program.

11. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of foreign currency translation adjustments and changes in unrealized losses and gains (net of tax) on marketable securities. For the purposes of comprehensive income disclosures, the Company does not record tax provisions or benefits for the net changes in the foreign currency translation adjustment, as the Company intends to reinvest permanently undistributed earnings of its foreign subsidiaries. Accumulated other comprehensive loss is reported as a component of stockholders’ equity and, as of December 31, 2015 and June 30, 2016, was comprised of cumulative translation adjustment losses of $5.2 million and $5.3 million, respectively, and unrealized losses (net of tax) on marketable securities of $27,000 and unrealized gains (net of tax) of $0.1 million, respectively. There were no material reclassifications to earnings in the six months ended June 30, 2016.

Stock Incentive Plan
Stock Incentive Plan

9. Stock Incentive Plan

The Company’s 2009 Stock Incentive Plan (“2009 Plan”) is administered by the Board of Directors and Compensation Committee, which have the authority to designate participants and determine the number and type of awards to be granted and any other terms or conditions of the awards. The Company awards restricted stock units as the principal equity incentive award. Restricted stock units with time-based vesting conditions generally vest over a three-year period while restricted stock units with market-based vesting conditions generally vest over two or three-year periods. Until 2012, the Company generally granted stock options as the principal equity incentive award. Options generally vest over a four-year period and expire ten years from the date of grant. Certain stock-based awards provide for accelerated vesting if the Company experiences a change in control. As of June 30, 2016, there were 3.4 million shares available for grant under the 2009 Plan.

The following table summarizes stock option activity (shares and intrinsic value in thousands):

 

     Number
of Options
     Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Term
(Years)
     Aggregate
Intrinsic
Value
 

Outstanding, January 1, 2016

     768       $ 30.74         5.4       $ 27,942   
           

 

 

 

Granted

     —           —           

Exercised

     (239      23.29          $ 8,489   
           

 

 

 

Forfeited

     (2      21.63         
  

 

 

    

 

 

       

Outstanding, June 30, 2016

     527       $ 34.17         5.3       $ 15,404   
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable at December 31, 2015

     598       $ 30.54         5.0       $ 21,881   
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable at June 30, 2016

     463       $ 35.05         5.0       $ 13,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

The aggregate intrinsic value was calculated based on the positive differences between the fair value of the Company’s common stock of $67.10 per share on December 31, 2015 and $63.43 per share on June 30, 2016 or at time of exercise and the exercise price of the options.

During the three and six months ended June 30, 2016, the Company granted 358,704 and 644,398 restricted stock units, respectively, of which 341,704 and 589,898 have time-based vesting conditions and 17,000 and 54,500 have market-based vesting conditions, respectively. Restricted stock units with time-based vesting conditions are valued on the grant date using the grant date closing price of the underlying shares. The Company recognizes the expense on a straight-line basis over the requisite service period of the restricted stock unit, which is generally three years. An additional 9,200 market-based restricted stock units were earned and issued during the three months ended June 30, 2016.

 

In August 2013, May 2014, May 2015, February 2016 and May 2016, the Company granted to certain key executives restricted stock unit awards with market-based vesting conditions, which are tied to the individual executive’s continued employment with the Company throughout the applicable performance period and the level of the Company’s achievement of a pre-established relative total shareholder return, or TSR, goal, as measured over an applicable performance period ranging from two to three years as compared to the TSR realized for that same period by the Russell 2000 Index (the “TSR Units”). The target number of shares underlying the February 2016 and May 2016 TSR Units is 37,500 and 17,000 shares, respectively, but the actual number of shares that may be earned under these TSR Units can range from 0% to 200% of the target number of shares awarded, or up to 75,000 and 34,000 shares, respectively, based on the Company’s level of achievement of its relative TSR goal for the applicable performance period. Compensation cost for TSR Units is recognized on a straight-line basis over the requisite service period and is recognized regardless of the actual number of awards that are earned based on the market condition.

The assumptions used in the Monte Carlo simulation model include (but are not limited to) the following:

 

     February 2016 Grant     May 2016 Grant  

Risk-free interest rate

     0.89 %     1.02

Volatility

     40 %     37

The following table summarizes restricted stock unit activity, including performance-based TSR Units (shares in thousands):

 

     Number of shares
Underlying Restricted
Stock Units
     Weighted Average
Grant Date Fair
Value
 

Unvested as of January 1, 2016

     1,438       $ 54.37   

Restricted stock units granted

     654         58.29   

Restricted stock units vested

     (479      46.06   

Restricted stock units forfeited

     (56      55.01   
  

 

 

    

 

 

 

Unvested as of June 30, 2016

     1,557       $ 58.54   
  

 

 

    

 

 

 

The Company recognized stock based compensation expense within the accompanying condensed consolidated statements of operations as summarized in the following table (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Cost of revenue

   $ 464       $ 690       $ 818       $ 1,238   

Research and development

     1,530         1,728         2,858         3,226   

Sales and marketing

     2,825         4,651         4,855         8,478   

General and administrative

     2,895         2,667         4,036         5,386   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 7,714       $ 9,736       $ 12,567       $ 18,328   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2016, there was $68.5 million of total unrecognized share-based compensation cost, net of estimated forfeitures, related to unvested stock awards which are expected to be recognized over a weighted average period of 2.2 years. The total unrecognized share-based compensation cost will be adjusted for future changes in estimated forfeitures.

Commitments and Contingencies
Commitments and Contingencies

10. Commitments and Contingencies

Operating Leases — The Company has operating lease agreements for offices in the United States, Hungary, Australia, the United Kingdom, Ireland and India that expire at various dates through 2028.

In December 2015, the Company amended its current lease for its Budapest, Hungary office space to provide for an expansion of leased space and to extend the term of the lease. The term of the amended lease began in June 2016 and extends through June 2021. The aggregate amount of minimum lease payments to be made over the term of the lease is approximately $8.3 million (EUR 7.5 million). The lease agreement required a bank guarantee of $0.5 million (EUR 0.5 million). The bank guarantee is classified as restricted cash.

 

In December 2014, the Company entered into a lease for new office space in Boston, Massachusetts which began in December 2015 and extends through June 2028. The aggregate amount of minimum lease payments to be made over the term of the lease is approximately $47.0 million. Pursuant to the terms of the lease, the landlord was responsible for making certain improvements to the leased space up to an agreed upon cost to the landlord. Any excess costs for these improvements will be billed by the landlord to the Company as additional rent. These excess costs total $3.4 million, all of which were paid as of June 30, 2016. The lease required a security deposit of $3.3 million in the form of an irrevocable, unsecured standby letter of credit. The lease includes an option to extend the original term of the lease for two successive five year periods.

Rent expense under all leases was $1.9 million and $3.0 million for the three months ended June 30, 2015 and 2016, respectively, and $3.8 million and $5.9 million for the six months ended June 30, 2015 and 2016, respectively. The Company records rent expense on a straight-line basis for leases with scheduled escalation clauses or free rent periods.

The Company also enters into hosting services agreements with third-party data centers and internet service providers that are subject to annual renewal. The aggregate hosting fees incurred under these arrangements totaled $1.6 million and $2.4 million for the three months ended June 30, 2015 and 2016, respectively and $3.0 million and $4.6 million for the six months ended June 30, 2015 and 2016, respectively.

Future minimum lease payments under non-cancelable operating leases including commitments associated with the Company’s hosting services arrangements are approximately as follows at June 30, 2016 (in thousands):

 

Years Ending December 31

      

2016 (Six months ending December 31)

   $ 9,146   

2017

     13,376   

2018

     11,054   

2019

     10,917   

2020

     10,686   

Thereafter

     45,329   
  

 

 

 

Total minimum lease payments

   $ 100,508   
  

 

 

 

Litigation — The Company routinely assesses its current litigation and/or threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where the Company assesses the likelihood of loss as probable.

On April 24, 2015, the Company entered into a Settlement Agreement with Sensory Technologies, LLC, or Sensory, whereby Sensory agreed to assign its JOIN® trademark to the Company and the parties agreed to mutually release each other from any and all claims related to the complaint filed by Sensory against the Company in the U.S. District Court for the Southern District of Indiana on August 26, 2014. In the second quarter of 2015, the Company paid Sensory a one-time fee of $8.3 million, $4.7 million of which was reimbursed by the Company’s insurance provider, in connection with the Settlement Agreement. The Company believed that the JOIN® trademark had de minimis value and therefore expensed $3.6 million in the first quarter of 2015 as legal settlement expense, which was paid in the second quarter of 2015.

The Company is from time to time subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these other claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material adverse effect on the Company’s condensed consolidated financial statements.

Credit Facility
Credit Facility

12. Credit Facility

On February 18, 2015, the Company entered into a multi-currency credit agreement with a syndicate of banks, financial institutions and other lending entities (the “Credit Agreement”), pursuant to which a secured revolving credit facility of up to $100.0 million in the aggregate was made available to the Company. On January 22, 2016, the Company entered into the First Amendment to the Credit Agreement, pursuant to which the Company exercised its option to increase the credit facility to up to $150.0 million in the aggregate with the existing lenders and an additional lender and amended the Credit Agreement to provide the Company with an option to further increase the credit facility by an additional $50.0 million, which, if exercised, would provide the Company with access to a secured revolving credit facility of up to $200.0 million. The credit facility is available to the Company on a revolving basis during the period from February 18, 2015 through February 18, 2020. The Company may prepay the loans or terminate or reduce the commitments in whole or in part at any time, without premium or penalty, subject to certain conditions and costs in the case of Eurodollar rate loans. The Company repaid $7.5 million in both March and April 2016 reducing its outstanding debt balance from $60.0 million to $45.0 million as of June 30, 2016. On July 22, 2016, the Company repaid an additional $7.5 million of outstanding borrowings. The Company and its subsidiaries expect to use the credit facility for general corporate purposes, including, but not limited to, the potential acquisition of complementary products or businesses, share repurchases, as well as for working capital.

Loans under the credit facility bear interest at variable rates which reset every 30 to 180 days depending on the rate and period selected by the Company as described below. As of June 30, 2016, the annual rate on the $45.0 million revolving loan was 2.0% and was renewed at 2.0% on July 21, 2016. The average interest rate on borrowings outstanding for the period ending June 30, 2016 was 1.96%. The quarterly commitment fee on the undrawn portion of the credit facility ranges from 0.20% to 0.30% per annum, based upon the Company’s total leverage ratio. As of June 30, 2016, the fair value of the credit facility approximated its book value.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company and its subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, change the nature of its business, make investments and acquisitions, pay dividends or make distributions, or enter into certain transactions with affiliates, in each case subject to customary and other exceptions for a credit facility of this size and type, each as further described in the Credit Agreement. The Credit Agreement also imposes limits on capital expenditures of the Company and its subsidiaries and requires the Company to maintain a maximum total leverage ratio (not greater than 2.75:1.00) and a minimum interest coverage ratio (not less than 3.00:1.00), each as further defined in the Credit Agreement. As of June 30, 2016, the total leverage ratio was 0.59:1.00, the minimum interest coverage ratio was 70.8:1.00 and the Company was in compliance with all financial and operating covenants of the Credit Agreement.

Any failure to comply with the financial or operating covenants of the Credit Agreement would prevent the Company from being able to borrow additional funds, and would constitute a default, permitting the lenders to, among other things, accelerate the amounts outstanding, including all accrued interest and unpaid fees, under the credit facility and to terminate the credit facility.

As of June 30, 2016, the Company had $1.0 million of origination costs recorded in other assets. The Company incurred $1.0 million of origination costs for the period ending December 31, 2015 in connection with entering into the Credit Agreement. The Company incurred an additional $0.3 million of origination costs in connection with the First Amendment to the Credit Agreement for the period ending June 30, 2016. As permitted by FASB issued ASU 2015-15, the Company has elected to present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the credit facility.

Subsequent Events
Subsequent Events

13. Subsequent Events

On July 26, 2016, the Company announced the signing of a definitive merger agreement with Citrix Systems, Inc. for the Company to combine with Citrix Systems, Inc.’s GoTo business in a Reverse Morris Trust transaction. Following the transaction, Citrix Systems, Inc.’s equity will own approximately 50.1% of all outstanding shares of the Company on a fully diluted basis, while the Company’s existing stockholders will own approximately 49.9%. While the final value of the transaction will be determined at closing, based on the Company’s stock price and outstanding shares and equity grants as of July 25, 2016, the value of the transaction is approximately $1.8 billion. The transaction, which has been unanimously approved by the Board of Directors of Citrix Systems, Inc. and the Company, is expected to be tax-free to Citrix Systems, Inc. and its stockholders for U.S. federal income tax purposes.

The issuance of shares by the Company in connection with the transaction requires approval by the Company’s stockholders and is subject to certain regulatory approvals and other customary closing conditions, including receipt of opinions of counsel with respect to the tax-free nature of the proposed transaction. The transaction is expected to close during the first quarter of 2017. If the merger agreement is terminated under certain circumstances the Company may be required to pay Citrix Systems, Inc. a termination fee of $62 million or may under other circumstances be required to reimburse Citrix Systems, Inc. up to $10 million for certain expenses in connection with the merger.

The Company expects to incur significant one-time costs in connection with the merger during the remainder of 2016 and into 2017, including approximately $16 million of transaction-related fees and expenses, including legal, accounting and other professional fees and transition and integration-related expenses expected to be incurred over the second half of 2016.

On July 26, 2016, the Company also announced that its Board of Directors declared a cash dividend of $0.50 per share of common stock. The dividend is payable to the Company’s stockholders of record as of August 8, 2016, and is expected to be paid on August 26, 2016. Although the Company has not adopted any plan or policy relating to paying dividends, the Company further announced that it intends to declare and pay two additional cash dividends, as permitted by the merger agreement. One dividend is expected to be declared and paid prior to the consummation of the transaction and the other dividend would be expected to be declared and paid in connection with the consummation of the transaction, subject to the merger agreement being in effect and the consummation of the transaction contemplated thereby.

Summary of Significant Accounting Policies (Policies)

Principles of Consolidation — The accompanying condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Unaudited Interim Condensed Consolidated Financial Statements — The accompanying condensed consolidated financial statements and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited and have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read along with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 19, 2016. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results for the interim periods presented are not necessarily indicative of future results. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

Use of Estimates — The preparation of condensed consolidated financial statements in conformity with 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 financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates.

Marketable Securities — The Company’s marketable securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of earnings based on the specific identification method. Fair value is determined based on quoted market prices. At December 31, 2015 and June 30, 2016, marketable securities consisted of U.S. government agency securities and corporate bonds that have remaining maturities within two years and have an aggregate amortized cost of $85.3 million and $85.4 million, respectively. The securities have an aggregate fair value of $85.3 million and $85.5 million, including $10,000 and $133,000 of unrealized gains and $53,000 and $11,000 of unrealized losses, at December 31, 2015 and June 30, 2016, respectively.

Revenue Recognition — The Company derives revenue primarily from subscription fees related to its premium subscription software services and to a lesser extent, the delivery of professional services, primarily related to its Internet of Things business. Revenues are reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction.

Revenue from the Company’s premium services is recognized on a daily basis over the subscription term as the services are delivered, provided that there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured. Subscription periods range from monthly to ten years, but are generally one year in duration. The Company’s software cannot be run on another entity’s hardware and customers do not have the right to take possession of the software and use it on their own or another entity’s hardware.

 

The Company’s multi-element arrangements typically include subscription and professional services, which may include development services. The Company evaluates each element within the arrangement to determine if they can be accounted for as separate units of accounting. If the delivered item or items have value to the customer on a standalone basis, either because they are sold separately by any vendor or the customer could resell the delivered item or items on a standalone basis, the Company has determined that the deliverables within these arrangements qualify for treatment as separate units of accounting Accordingly, the Company recognizes revenue for each delivered item or items as a separate earnings process commencing when all of the significant performance obligations have been performed and when all of the revenue recognition criteria have been met. Professional services revenue recognized as a separate earnings process under multi-element arrangements has been immaterial to date.

In cases where the Company has determined that the delivered items within its multi-element arrangements do not have value to the customer on a stand-alone basis, the arrangement is accounted for as a single unit of accounting and the related consideration is recognized ratably over the estimated customer life, commencing when all of the significant performance obligations have been delivered and when all of the revenue recognition criteria have been met. Revenue from multi-element arrangements accounted for as a single unit of accounting which do not have value to the customer has been immaterial to date.

Concentrations of Credit Risk and Significant Customers — The Company’s principal credit risk relates to its cash, cash equivalents, marketable securities, restricted cash and accounts receivable. Cash, cash equivalents and restricted cash are deposited primarily with financial institutions that management believes to be of high-credit quality and custody of its marketable securities is with an accredited financial institution. To manage accounts receivable credit risk, the Company regularly evaluates the creditworthiness of its customers and maintains allowances for potential credit losses. To date, losses resulting from uncollected receivables have not exceeded management’s expectations.

For the three and six months ended June 30, 2015 and 2016, no customers accounted for more than 10% of revenue. As of December 31, 2015 and June 30, 2016, no customers accounted for more than 10% of accounts receivable.

Goodwill — Goodwill is the excess of the acquisition price over the fair value of the tangible and identifiable intangible net assets acquired. The Company does not amortize goodwill, but performs an impairment test of goodwill annually or whenever events and circumstances indicate that the carrying amount of goodwill may exceed its fair value. The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. As of December 31, 2015, the fair value of the Company as a whole significantly exceeded the carrying amount of the Company. Through June 30, 2016, no impairments have occurred.

Long-Lived Assets and Intangible Assets — The Company records intangible assets at their respective estimated fair values at the date of acquisition. Intangible assets are being amortized based upon the pattern in which their economic benefit will be realized, or if this pattern cannot be reliably determined, using the straight-line method over their estimated useful lives, which range up to eleven years.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. Through June 30, 2016, the Company recorded no material impairments.

Foreign Currency Translation — The functional currency of operations outside the United States of America is deemed to be the currency of the local country, unless otherwise determined that the United States dollar would serve as a more appropriate functional currency given the economic operations of the entity. Accordingly, the assets and liabilities of the Company’s foreign subsidiaries are translated into United States dollars using the period-end exchange rate and income and expense items are translated using the average exchange rate during the period. Cumulative translation adjustments are reflected as a separate component of equity. Foreign currency transaction gains and losses are charged to operations. The Company had foreign currency gains of $0.3 million and $1.5 million for the three and six months ended June 30, 2015, respectively, and foreign currency losses of $0.1 million and $0.5 million for the three and six months ended June 30, 2016, respectively, included in other income (expense), net in the condensed consolidated statements of operations.

Stock-Based Compensation — The Company values all stock-based compensation, including grants of stock options and restricted stock units, at fair value on the date of grant and recognizes the expense over the requisite service period, which is generally the vesting period of the award, for those awards expected to vest, on a straight-line basis. The Company uses the with-or-without method to determine when it will realize excess tax benefits from stock-based compensation. Under this method, the Company will realize these excess tax benefits only after it realizes the tax benefits of net operating losses from operations.

Income Taxes — Deferred income taxes are provided for the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss carry-forwards and credits using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. At each balance sheet date, the Company assesses the likelihood that deferred tax assets will be realized and recognizes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction.

The Company evaluates its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be realized. Potential interest and penalties associated with any uncertain tax positions are recorded as a component of income tax expense. As of December 31, 2015 and June 30, 2016, the Company has provided a liability for $0.9 million and $1.1 million, respectively, for uncertain tax positions. These uncertain tax positions would impact the Company’s effective tax rate if recognized.

Segment Data — Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker or decision making group when making decisions regarding resource allocation and assessing performance. The Company, whose management uses consolidated financial information in determining how to allocate resources and assess performance, has determined that it operates in one segment.

The Company’s revenue by geography (based on customer address) is as follows (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Revenues:

           

United States

   $ 45,844       $ 59,476       $ 88,473       $ 116,727   

United Kingdom

     5,124         6,523         10,009         12,709   

International—all other

     13,866         17,267         27,461         33,564   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 64,834       $ 83,266       $ 125,943       $ 163,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s revenue by service cloud (product grouping) is as follows (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Revenues:

           

Collaboration cloud

   $ 21,055       $ 28,849       $ 40,218       $ 55,597   

Identity and Access Management cloud

     21,802         29,292         41,999         57,744   

Service and Support cloud

     21,206         24,451         42,420         48,362   

Other

     771         674         1,306         1,297   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 64,834       $ 83,266       $ 125,943       $ 163,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Guarantees and Indemnification Obligations — As permitted under Delaware law, the Company has agreements whereby the Company indemnifies certain of its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. As permitted under Delaware law, the Company also has similar indemnification obligations under its certificate of incorporation and by-laws. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director’s and officer’s insurance coverage that the Company believes limits its exposure and enables it to recover a portion of any future amounts paid.

In the ordinary course of business, the Company enters into agreements with certain customers that contractually obligate the Company to provide indemnifications of varying scope and terms with respect to certain matters including, but not limited to, losses arising out of the breach of such agreements, from the services provided by the Company or claims alleging that the Company’s products infringe third-party patents, copyrights, or trademarks. The term of these indemnification obligations is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is, in many cases, unlimited. Through June 30, 2016, the Company has not experienced any losses related to these indemnification obligations.

Net Income Per Share — Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed by dividing net income by the sum of the weighted average number of common shares outstanding during the period and the weighted average number of potential common shares outstanding from the assumed exercise of stock options and the vesting of restricted stock units.

The Company excluded the following options to purchase common shares and restricted stock units from the computation of diluted net income per share because they had an anti-dilutive impact (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Options to purchase common shares

     —          —          26         —    

Restricted stock units

     473         337         489         429   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total options and restricted stock units

     473         337         515         429   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic and diluted net income per share was calculated as follows (in thousands, except per share data):

 

     Three months ended June 30,      Six months ended June 30,  
     2015      2016      2015      2016  

Basic:

           

Net income

   $ 2,388       $ 2,506       $ 2,760       $ 1,433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding, basic

     24,703         25,135         24,620         25,144   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share, basic

   $ 0.10       $ 0.10       $ 0.11       $ 0.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted:

           

Net income

   $ 2,388       $ 2,506       $ 2,760       $ 1,433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding

     24,703         25,135         24,620         25,144   

Add: Common stock equivalents

     970         693         995         697   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding, diluted

     25,673         25,828         25,615         25,841   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share, diluted

   $ 0.09       $ 0.10       $ 0.11       $ 0.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

Recently Issued Accounting Pronouncements — On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), its final standard on revenue from contracts with customers. ASU 2014-9 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract and recognizes revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers that are within the scope of other topics in the FASB Accounting Standards Codification. Certain of ASU 2014-09’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities (i.e., property plant and equipment, real estate or intangible assets). Existing accounting guidance applicable to these transfers has been amended or superseded. ASU 2014-09 also requires significantly expanded disclosures about revenue recognition. ASU 2014-09 is effective for the Company on January 1, 2018, with early adoption permitted, but not earlier than January 1, 2017. The Company is currently assessing the potential impact of the adoption of ASU 2014-09 on its consolidated financial statements.

 

On February 25, 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) , which will require lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases will be classified as either operating or finance, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of the adoption of ASU 2016-02 on its consolidated financial statements.

On March 30, 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, and is expected to impact net income, EPS, and the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of the adoption of ASU 2016-09 on its consolidated financial statements.

Summary of Significant Accounting Policies (Tables)

The Company’s revenue by geography (based on customer address) is as follows (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Revenues:

           

United States

   $ 45,844       $ 59,476       $ 88,473       $ 116,727   

United Kingdom

     5,124         6,523         10,009         12,709   

International—all other

     13,866         17,267         27,461         33,564   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 64,834       $ 83,266       $ 125,943       $ 163,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s revenue by service cloud (product grouping) is as follows (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Revenues:

           

Collaboration cloud

   $ 21,055       $ 28,849       $ 40,218       $ 55,597   

Identity and Access Management cloud

     21,802         29,292         41,999         57,744   

Service and Support cloud

     21,206         24,451         42,420         48,362   

Other

     771         674         1,306         1,297   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 64,834       $ 83,266       $ 125,943       $ 163,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company excluded the following options to purchase common shares and restricted stock units from the computation of diluted net income per share because they had an anti-dilutive impact (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Options to purchase common shares

     —          —          26         —    

Restricted stock units

     473         337         489         429   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total options and restricted stock units

     473         337         515         429   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Basic and diluted net income per share was calculated as follows (in thousands, except per share data):

 

     Three months ended June 30,      Six months ended June 30,  
     2015      2016      2015      2016  

Basic:

           

Net income

   $ 2,388       $ 2,506       $ 2,760       $ 1,433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding, basic

     24,703         25,135         24,620         25,144   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share, basic

   $ 0.10       $ 0.10       $ 0.11       $ 0.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted:

           

Net income

   $ 2,388       $ 2,506       $ 2,760       $ 1,433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding

     24,703         25,135         24,620         25,144   

Add: Common stock equivalents

     970         693         995         697   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding, diluted

     25,673         25,828         25,615         25,841   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share, diluted

   $ 0.09       $ 0.10       $ 0.11       $ 0.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Fair Value of Financial Instruments (Tables)

The following table summarizes the basis used to measure certain of the Company’s financial assets and contingent consideration liability that are carried at fair value (in thousands):

 

     Fair Value Measurements at December 31, 2015  
     Level 1      Level 2      Level 3      Total  

Cash equivalents — money market funds

   $ 10,138       $ —         $ —         $ 10,138   

Cash equivalents — bank deposits

     —           1         —           1   

Short-term marketable securities:

           

U.S. government agency securities

     50,237         17,994         —           68,231   

Corporate bond securities

     —           17,053         —           17,053   

Contingent consideration liability

     —           —           2,028         2,028   
     Fair Value Measurements at June 30, 2016  
     Level 1      Level 2      Level 3      Total  
           

Cash equivalents — money market funds

   $ 10,364       $ —         $ —         $ 10,364   

Short-term marketable securities:

           

U.S. government agency securities

     58,709         9,512         —           68,221   

Corporate bond securities

     —           17,294         —           17,294   

Contingent consideration liability

     —           —           2,530         2,530   

 

A reconciliation of the beginning and ending Level 3 liability is as follows:

 

     Six Months Ended
June 30, 2016
 

Balance beginning of period

   $ 2,028   

Change in fair value of contingent consideration liability

     502   
  

 

 

 

Balance end of period

   $ 2,530   
  

 

 

 

 

Acquisitions (Tables)

 

Unaudited Pro Forma Financial Information

 

     Three Months Ended
June 30, 2015
     Six Months Ended
June 30, 2015
 
     Pro Forma      As Reported      Pro Forma      As Reported  
     (in thousands, except
per share amounts)
     (in thousands, except
per share amounts)
 

Revenue

   $ 68,059       $ 64,834       $ 132,045       $ 125,943   

Net income

   $ 1,518       $ 2,388       $ 899       $ 2,760   

Earnings per share—Basic

   $ 0.06       $ 0.10       $ 0.04       $ 0.11   

Earnings per share—Diluted

   $ 0.06       $ 0.09       $ 0.04       $ 0.11   

The following table summarizes the fair value (in thousands) of the assets acquired and liabilities assumed at the date of acquisition:

 

Cash

   $ 2,518  

Accounts receivable

     639  

Property and equipment

     40  

Deferred tax asset

     3,050  

Current and other assets

     134  

Intangible assets:

  

Completed technology

     29,400  

Customer relationships

     23,900  

Trade name and trademark

     3,000  

Deferred revenue

     (6,600

Accrued expenses

     (66

Deferred tax liability

     (23,478

Goodwill

     79,617  
  

 

 

 

Total purchase price

     112,154  

Liability for contingent consideration

     (2,000
  

 

 

 

Total cash paid

   $ 110,154  
  

 

 

 
Goodwill and Intangible Assets (Tables)

Intangible assets consist of the following (in thousands):

 

          December 31, 2015      June 30, 2016  
     Estimated
Useful
Life
   Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
 

Identifiable intangible assets:

                    

Trade names and trademarks

   1-11 years    $ 3,806       $ 824       $ 2,982       $ 3,806       $ 890       $ 2,916   

Customer relationships

   5-8 years      29,129         4,089         25,040         29,129         6,655         22,474   

Customer backlog

   4 months      120         120         —           120         120         —     

Domain names

   5 years      915         665         250         915         731         184   

Software

   4 years      299         299         —           299         299         —     

Completed technology

   3-9 years      46,503         6,893         39,610         46,503         9,182         37,321   

Technology and know-how

   3 years      3,176         3,176         —           3,176         3,176         —     

Documented know-how

   4 years      280         127         153         280         162         118   

Non-Compete agreements

   5 years      162         114         48         162         138         24   

Internally developed software

   3 years      6,754         3,247         3,507         7,469         4,209         3,260   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
      $ 91,144       $ 19,554       $ 71,590       $ 91,859       $ 25,562       $ 66,297   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Future estimated amortization expense for intangible assets at June 30, 2016 is as follows (in thousands):

 

Amortization Expense (Years Ending December 31)

   Amount  

2016 (Six months ending December 31)

   $ 5,800   

2017

     11,592   

2018

     11,142   

2019

     8,425   

2020

     7,616   

Thereafter

     21,722   
  

 

 

 

Total

   $ 66,297   
  

 

 

 
Accrued Liabilities (Tables)
Summary of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

     December 31,
2015
     June 30,
2016
 

Marketing programs

   $ 4,323       $ 6,029   

Payroll and payroll-related liabilities

     18,239         15,638   

Professional fees

     1,944         2,855   

Other accrued liabilities

     7,168         8,550   
  

 

 

    

 

 

 

Total accrued liabilities

   $ 31,674       $ 33,072   
  

 

 

    

 

 

 

 

Stock Incentive Plan (Tables)

The following table summarizes stock option activity (shares and intrinsic value in thousands):

 

     Number
of Options
     Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Term
(Years)
     Aggregate
Intrinsic
Value
 

Outstanding, January 1, 2016

     768       $ 30.74         5.4       $ 27,942   
           

 

 

 

Granted

     —           —           

Exercised

     (239      23.29          $ 8,489   
           

 

 

 

Forfeited

     (2      21.63         
  

 

 

    

 

 

       

Outstanding, June 30, 2016

     527       $ 34.17         5.3       $ 15,404   
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable at December 31, 2015

     598       $ 30.54         5.0       $ 21,881   
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable at June 30, 2016

     463       $ 35.05         5.0       $ 13,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The following table summarizes restricted stock unit activity, including performance-based TSR Units (shares in thousands):

 

     Number of shares
Underlying Restricted
Stock Units
     Weighted Average
Grant Date Fair
Value
 

Unvested as of January 1, 2016

     1,438       $ 54.37   

Restricted stock units granted

     654         58.29   

Restricted stock units vested

     (479      46.06   

Restricted stock units forfeited

     (56      55.01   
  

 

 

    

 

 

 

Unvested as of June 30, 2016

     1,557       $ 58.54   
  

 

 

    

 

 

 

The Company recognized stock based compensation expense within the accompanying condensed consolidated statements of operations as summarized in the following table (in thousands):

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2016      2015      2016  

Cost of revenue

   $ 464       $ 690       $ 818       $ 1,238   

Research and development

     1,530         1,728         2,858         3,226   

Sales and marketing

     2,825         4,651         4,855         8,478   

General and administrative

     2,895         2,667         4,036         5,386   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 7,714       $ 9,736       $ 12,567       $ 18,328   
  

 

 

    

 

 

    

 

 

    

 

 

 

The assumptions used in the Monte Carlo simulation model include (but are not limited to) the following:

 

     February 2016 Grant     May 2016 Grant  

Risk-free interest rate

     0.89 %     1.02

Volatility

     40 %     37

 

Commitments and Contingencies (Tables)
Schedule of Minimum Future Lease Payments Receivable

Future minimum lease payments under non-cancelable operating leases including commitments associated with the Company’s hosting services arrangements are approximately as follows at June 30, 2016 (in thousands):

 

Years Ending December 31

      

2016 (Six months ending December 31)

   $ 9,146   

2017

     13,376   

2018

     11,054   

2019

     10,917   

2020

     10,686   

Thereafter

     45,329   
  

 

 

 

Total minimum lease payments

   $ 100,508   
  

 

 

 
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2016
Segment
Dec. 31, 2015
Jun. 30, 2016
Indemnification Agreement [Member]
Jun. 30, 2016
Accounts Receivable [Member]
Customer
Dec. 31, 2015
Accounts Receivable [Member]
Customer
Jun. 30, 2016
Sales Revenue, Net [Member]
Customer
Jun. 30, 2015
Sales Revenue, Net [Member]
Customer
Jun. 30, 2016
Sales Revenue, Net [Member]
Customer
Jun. 30, 2015
Sales Revenue, Net [Member]
Customer
Jun. 30, 2016
Other Income (Expense),Net [Member]
Jun. 30, 2015
Other Income (Expense),Net [Member]
Jun. 30, 2016
Other Income (Expense),Net [Member]
Jun. 30, 2015
Other Income (Expense),Net [Member]
Jun. 30, 2016
Minimum [Member]
Jun. 30, 2016
Maximum [Member]
Jun. 30, 2016
Weighted Average [Member]
Jun. 30, 2016
Credit Concentration Risk [Member]
Minimum [Member]
Accounts Receivable [Member]
Dec. 31, 2015
Credit Concentration Risk [Member]
Minimum [Member]
Accounts Receivable [Member]
Jun. 30, 2016
Customer Concentration Risk [Member]
Minimum [Member]
Sales Revenue, Net [Member]
Jun. 30, 2015
Customer Concentration Risk [Member]
Minimum [Member]
Sales Revenue, Net [Member]
Jun. 30, 2016
Customer Concentration Risk [Member]
Minimum [Member]
Sales Revenue, Net [Member]
Jun. 30, 2015
Customer Concentration Risk [Member]
Minimum [Member]
Sales Revenue, Net [Member]
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities, maturities remaining
2 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities, amortized cost
$ 85,400,000 
$ 85,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities
85,515,000 
85,284,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities, unrealized gains
133,000 
10,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities, unrealized losses
11,000 
53,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue subscription period
 
 
 
 
 
 
 
 
 
 
 
 
 
1 month 
10 years 
1 year 
 
 
 
 
 
 
Revenue, number of customers accounted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage outstanding for major customer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
Accounts receivable, number of major customers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of reporting unit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of operating segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill impairments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets, estimated useful life
 
 
 
 
 
 
 
 
 
 
 
 
 
4 months 
11 years 
 
 
 
 
 
 
 
Long-lived asset impairment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains
 
 
 
 
 
 
 
 
 
 
300,000 
 
1,500,000 
 
 
 
 
 
 
 
 
 
Foreign currency losses
 
 
 
 
 
 
 
 
 
100,000 
 
500,000 
 
 
 
 
 
 
 
 
 
 
Uncertain tax positions
1,100,000 
900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses related to indemnification obligations
 
 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of Significant Accounting Policies - Schedule of Revenue and Long-lived Assets by Geographic Areas (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
$ 83,266 
$ 64,834 
$ 163,000 
$ 125,943 
United States [Member]
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
59,476 
45,844 
116,727 
88,473 
International - All Other [Member]
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
17,267 
13,866 
33,564 
27,461 
United Kingdom [Member]
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
Revenues
$ 6,523 
$ 5,124 
$ 12,709 
$ 10,009 
Summary of Significant Accounting Policies - Schedule of Revenue by Service Cloud (Product Grouping) (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Revenue from External Customer [Line Items]
 
 
 
 
Revenues
$ 83,266 
$ 64,834 
$ 163,000 
$ 125,943 
Collaboration Cloud [Member]
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
Revenues
28,849 
21,055 
55,597 
40,218 
Identity and Access Management Cloud [Member]
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
Revenues
29,292 
21,802 
57,744 
41,999 
Service and Support Cloud [Member]
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
Revenues
24,451 
21,206 
48,362 
42,420 
Other [Member]
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
Revenues
$ 674 
$ 771 
$ 1,297 
$ 1,306 
Summary of Significant Accounting Policies - Schedule of Options to Purchase Common Shares and Restricted Stock Units (Detail)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Total options and restricted stock units
337 
473 
429 
515 
Stock Options [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Total options and restricted stock units
 
 
 
26 
Restricted Stock Units [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Total options and restricted stock units
337 
473 
429 
489 
Summary of Significant Accounting Policies - Reconciliation of Basic and Diluted Net Income per Share (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Basic:
 
 
 
 
Net income
$ 2,506 
$ 2,388 
$ 1,433 
$ 2,760 
Weighted average common shares outstanding, basic
25,135 
24,703 
25,144 
24,620 
Net income per share, basic
$ 0.10 
$ 0.10 
$ 0.06 
$ 0.11 
Diluted:
 
 
 
 
Net income
$ 2,506 
$ 2,388 
$ 1,433 
$ 2,760 
Weighted average common shares outstanding
25,135 
24,703 
25,144 
24,620 
Add: Common stock equivalents
693 
970 
697 
995 
Weighted average common shares outstanding, diluted
25,828 
25,673 
25,841 
25,615 
Net income per share, diluted
$ 0.10 
$ 0.09 
$ 0.06 
$ 0.11 
Fair Value of Financial Instruments - Summary of Company's Financial Assets and Contingent Consideration Liability Carried at Fair Value (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Short-term marketable securities
$ 85,515 
$ 85,284 
Contingent consideration liability
2,530 
2,028 
Significant Unobservable Inputs (Level 3) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Contingent consideration liability
2,530 
2,028 
Money Market Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
10,364 
10,138 
Bank Deposits [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
 
U.S. Government Agency Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Short-term marketable securities
68,221 
68,231 
Corporate Bond Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Short-term marketable securities
17,294 
17,053 
Recurring [Member] |
Significant Unobservable Inputs (Level 3) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Contingent consideration liability
2,530 
2,028 
Recurring [Member] |
Money Market Funds [Member] |
Quoted Prices in Active Markets for Identical Items (Level 1) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
10,364 
10,138 
Recurring [Member] |
Bank Deposits [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
 
Recurring [Member] |
U.S. Government Agency Securities [Member] |
Quoted Prices in Active Markets for Identical Items (Level 1) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Short-term marketable securities
58,709 
50,237 
Recurring [Member] |
U.S. Government Agency Securities [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Short-term marketable securities
9,512 
17,994 
Recurring [Member] |
Corporate Bond Securities [Member] |
Significant Other Observable Inputs (Level 2) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Short-term marketable securities
$ 17,294 
$ 17,053 
Fair Value of Financial Instruments - Additional Information (Detail) (USD $)
Jun. 30, 2016
Dec. 31, 2015
Oct. 15, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Contingent consideration liability
$ 2,530,000 
$ 2,028,000 
 
LastPass [Member]
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Range of contingent payments, Maximum
2,500,000 
 
 
Contingent consideration liability
$ 2,500,000 
$ 2,000,000 
$ 15,000,000 
Fair Value of Financial Instruments - Reconciliation of Beginning and Ending Level 3 Liability (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Significant Unobservable Inputs (Level 3) [Member]
Dec. 31, 2015
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
 
 
 
 
Balance beginning of period
$ 2,028 
 
$ 2,530 
$ 2,028 
Change in fair value of contingent consideration liability
502 
 
 
Balance end of period
$ 2,530 
 
$ 2,530 
$ 2,028 
Acquisitions - Additional Information (Detail) (USD $)
0 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Oct. 15, 2015
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Oct. 15, 2015
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Acquisition-related costs
 
 
 
$ 6,200,000 
$ 2,500,000 
 
 
 
Acquisition related retention-based bonus payment expense
 
 
 
4,800,000 
2,500,000 
 
 
 
Change in fair value of contingent consideration liability
 
 
 
502,000 
3,000 
 
 
 
Cash payable in contingent consideration
 
2,530,000 
 
2,530,000 
 
2,028,000 
 
 
Operating revenues
 
83,266,000 
64,834,000 
163,000,000 
125,943,000 
 
 
 
Operating expenses
 
68,470,000 
53,750,000 
137,711,000 
107,841,000 
 
 
 
Amortization of acquired intangibles
 
1,357,000 
282,000 
2,740,000 
558,000 
 
 
 
LastPass [Member]
 
 
 
 
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Change in fair value of contingent consideration liability
 
200,000 
 
502,000 
 
 
 
 
Cash paid for acquisition, net of cash acquired
107,600,000 
 
 
 
 
 
 
 
Cash payable in contingent consideration
 
2,500,000 
 
2,500,000 
 
2,000,000 
 
15,000,000 
Maturity period for contingent payment
2 years 
 
 
 
 
 
 
 
Operating revenues
 
4,300,000 
64,834,000 
8,200,000 
125,943,000 
 
 
 
Operating expenses
 
5,600,000 
 
11,100,000 
 
 
 
 
Amortization of acquired intangibles
 
1,500,000 
 
3,100,000 
 
 
 
 
Range of contingent payments, Maximum
 
2,500,000 
 
2,500,000 
 
 
 
 
Deferred tax asset
 
 
 
 
 
 
 
3,050,000 
Deferred tax liability
 
 
 
 
 
 
 
23,478,000 
Proforma contingent consideration and retention requirement payments
 
 
 
 
 
5,500,000 
7,000,000 
 
Payment to non-stockholder employees
 
 
 
 
 
6,100,000 
 
 
LastPass [Member] |
Retention Bonus [Member]
 
 
 
 
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Acquisition related retention-based bonus payment expense
 
1,700,000 
 
3,400,000 
 
 
 
 
Range of contingent payments, Maximum
 
12,500,000 
 
12,500,000 
 
 
 
 
LastPass [Member] |
Non Retention Bonus [Member]
 
 
 
 
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Range of contingent payments, Maximum
 
2,500,000 
 
2,500,000 
 
 
 
 
LastPass [Member] |
Accrued Liabilities [Member]
 
 
 
 
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Cash payable in contingent consideration
$ 2,000,000 
 
 
 
 
 
 
$ 2,000,000 
Acquisitions - Purchase Price Allocation (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 0 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Oct. 15, 2015
LastPass [Member]
Oct. 15, 2015
LastPass [Member]
Oct. 15, 2015
LastPass [Member]
Completed Technology [Member]
Oct. 15, 2015
LastPass [Member]
Customer Relationships [Member]
Oct. 15, 2015
LastPass [Member]
Trade Name and Trademark [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Cash
 
 
 
$ 2,518 
 
 
 
Accounts receivable
 
 
 
639 
 
 
 
Property and equipment
 
 
 
40 
 
 
 
Deferred tax asset
 
 
 
3,050 
 
 
 
Current and other assets
 
 
 
134 
 
 
 
Business acquisition, Intangible assets
 
 
 
 
29,400 
23,900 
3,000 
Deferred revenue
 
 
 
(6,600)
 
 
 
Accrued expenses
 
 
 
(66)
 
 
 
Deferred tax liability
 
 
 
(23,478)