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1. Organization
GrubHub Inc., a Delaware corporation, and its wholly-owned subsidiaries (collectively referred to as the “Company”) provide an online and mobile platform for restaurant pick-up and delivery orders. Diners enter their delivery address or use geo-location within the mobile applications and the Company displays the menus and other relevant information for restaurants in its network. Orders may be placed directly online, via mobile applications or over the phone at no cost to the diner. The Company charges the restaurant a per order commission that is largely fee based. In certain markets, the Company also provides delivery services to a small percentage of restaurants on its platform.
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2. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of GrubHub Inc. and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements include all wholly-owned subsidiaries and reflect all normal and recurring adjustments, as well as any other than normal adjustments, that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and accompany notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 5, 2015 (the “2014 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, goodwill, depreciable lives of property and equipment, recoverability of intangible assets with definite lives and other long-lived assets, stock-based compensation and income taxes. Actual results could differ from these estimates.
There have been no material changes to the Company’s significant accounting policies described in the 2014 Form 10-K.
Recently Issued Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-05, “Intangibles -Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU 2015-05”), which provides guidance on accounting for fees paid in a cloud computing arrangement. Under ASU 2015-05, if a cloud computing arrangement includes a software license, the software license element should be accounted for consistent with the purchase of other software licenses. If the cloud computing arrangement does not include a software license, it should be accounted for as a service contract. ASU 2015-05 will be effective for the Company in the first quarter of 2016 and may be applied either prospectively or retrospectively. The Company has elected to apply ASU 2015-05 prospectively, however, its adoption is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASU 2014-09 will be effective for the Company in the first quarter of 2017. Management is currently evaluating the impact the adoption of ASU 2014-09 will have on the Company’s condensed consolidated financial position, results of operations or cash flows. The Company currently anticipates applying the modified retrospective approach when adopting the standard. On April 29, 2015, the FASB issued an exposure draft proposing a one-year deferral of the effective date of ASU 2014-09. The proposal, which would defer the effective date for the Company to the first quarter of 2018, was affirmed during the FASB board meeting on July 9, 2015.
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3. Acquisitions
On February 4, 2015, the Company acquired assets of DiningIn.com, Inc. and certain of its affiliates (collectively, “DiningIn”), and, on February 27, 2015, the Company acquired the membership units of Restaurants on the Run, LLC (“Restaurants on the Run”). Aggregate consideration for the two acquisitions was approximately $55.7 million in cash and 407,812 restricted shares of the Company’s common stock, or an estimated total transaction value of approximately $71.7 million based on the Company’s closing share price on the respective closing dates, net of cash acquired of $0.7 million. DiningIn and Restaurants on the Run provide delivery options for individual diners, group orders and corporate catering. The acquisitions will expand and enhance the Company’s service offerings for its customers, particularly in the delivery space.
The excess of the consideration transferred in the acquisitions over the net amounts assigned to the fair value of the assets acquired was recorded as goodwill, which represents the opportunity to expand restaurant delivery services and enhance the breadth and depth of the Company’s restaurant networks. The goodwill related to these acquisitions is not expected to be deductible for income tax purposes.
During the three and six months ended June 30, 2015, the Company incurred certain expenses directly and indirectly related to the acquisitions of $0.1 million and $0.7 million, respectively, which were recognized in general and administrative expenses within the condensed consolidated statements of operations.
The assets acquired and liabilities assumed of DiningIn and Restaurants on the Run were recorded at their estimated fair values as of the closing dates of February 4, 2015 and February 27, 2015, respectively. The following table summarizes the final purchase price allocation acquisition-date fair values of the assets and liabilities acquired in connection with the acquisitions:
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(in thousands) |
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|
Cash and cash equivalents |
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|
$ |
698 |
|
Accounts receivable |
|
|
|
1,978 |
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Prepaid expenses and other assets |
|
|
|
266 |
|
Customer and vendor relationships |
|
|
|
35,604 |
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Property and equipment |
|
|
|
161 |
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Developed technology |
|
|
|
3,295 |
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Goodwill |
|
|
|
34,778 |
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Trademarks |
|
|
|
372 |
|
Accounts payable and accrued expenses |
|
|
|
(4,787 |
) |
Total purchase price plus cash acquired |
|
|
|
72,365 |
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Cash acquired |
|
|
|
(698 |
) |
Fair value of common stock issued |
|
|
|
(15,980 |
) |
Net cash paid |
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|
$ |
55,687 |
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The estimated fair values of the intangible assets acquired were determined based on a combination of the income, cost, and market approaches to measure the fair value of the customer (restaurant) relationships, developed technology and trademarks. The fair value of the trademarks was measured based on the relief from royalty method. The cost approach, specifically the cost to recreate method, was used to value the developed technology. The income approach, specifically the multi-period excess earnings method, was used to value the customer (restaurant) relationships. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy.
The results of operations of DiningIn and Restaurants on the Run have been included in the Company’s financial statements since February 4, 2015 and February 27, 2015, respectively. The total amount of revenues and net loss from the acquisitions included in the Company’s operating results since the respective acquisition dates through June 30, 2015 were $10.2 million and $0.3 million, respectively.
The following unaudited pro forma information presents a summary of the operating results of the Company for the three and six months ended June 30, 2015 and 2014 as if the acquisitions had occurred on January 1, 2014:
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2015 |
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2014 |
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2015 |
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2014 |
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(in thousands) |
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(in thousands) |
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Revenues |
$ |
87,955 |
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$ |
66,320 |
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|
$ |
179,965 |
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|
$ |
131,490 |
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Net income |
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9,660 |
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|
2,554 |
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|
20,770 |
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|
|
6,784 |
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The unaudited pro forma revenues and net income are not intended to represent or be indicative of the Company’s condensed consolidated results of operations or financial condition that would have been reported had the acquisitions been completed as of the beginning of the periods presented and should not be taken as indicative of the Company’s future consolidated results of operations or financial condition.
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4. Marketable Securities
The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of June 30, 2015 and December 31, 2014 were as follows:
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June 30, 2015 |
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Amortized Cost |
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Unrealized Gains |
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Unrealized Losses |
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Estimated Fair Value |
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||||
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(in thousands) |
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Cash and cash equivalents |
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|
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|
|
|
|
|
|
|
|
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Commercial paper |
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$ |
2,250 |
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|
$ |
— |
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|
$ |
(1 |
) |
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$ |
2,249 |
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Corporate bonds |
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|
252 |
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|
|
— |
|
|
|
(1 |
) |
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|
251 |
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Short term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial paper |
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|
35,149 |
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|
|
— |
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(25 |
) |
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|
35,124 |
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Corporate bonds |
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|
76,687 |
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|
|
712 |
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|
|
(723 |
) |
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|
76,676 |
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Total |
|
$ |
114,338 |
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|
$ |
712 |
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|
$ |
(750 |
) |
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$ |
114,300 |
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|
|
December 31, 2014 |
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Amortized Cost |
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Unrealized Gains |
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Unrealized Losses |
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|
Estimated Fair Value |
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||||
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(in thousands) |
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|||||||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
1,882 |
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|
$ |
1 |
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|
$ |
(1 |
) |
|
$ |
1,882 |
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Short term investments |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
38,081 |
|
|
|
— |
|
|
|
(26 |
) |
|
|
38,055 |
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Corporate bonds |
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|
73,260 |
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|
|
2 |
|
|
|
(64 |
) |
|
|
73,198 |
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Total |
|
$ |
113,223 |
|
|
$ |
3 |
|
|
$ |
(91 |
) |
|
$ |
113,135 |
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All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year of June 30, 2015.
The gross unrealized losses, estimated fair value and length of time the individual marketable securities were in a continuous loss position for those marketable securities in an unrealized loss position as of June 30, 2015 and December 31, 2014 were as follows:
|
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June 30, 2015 |
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|||||||||||||||||||||
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Less Than 12 Months |
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12 Months or Greater |
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Total |
|
|||||||||||||||
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|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
||||||
|
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(in thousands) |
|
|||||||||||||||||||||
Commercial paper |
|
$ |
37,373 |
|
|
$ |
(26 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
37,373 |
|
|
$ |
(26 |
) |
Corporate bonds |
|
|
46,227 |
|
|
|
(724 |
) |
|
|
— |
|
|
|
— |
|
|
|
46,227 |
|
|
|
(724 |
) |
Total |
|
$ |
83,600 |
|
|
$ |
(750 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
83,600 |
|
|
$ |
(750 |
) |
|
|
December 31, 2014 |
|
|||||||||||||||||||||
|
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Commercial paper |
|
$ |
38,055 |
|
|
$ |
(26 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
38,055 |
|
|
$ |
(26 |
) |
Corporate bonds |
|
|
64,557 |
|
|
|
(65 |
) |
|
|
— |
|
|
|
— |
|
|
|
64,557 |
|
|
|
(65 |
) |
Total |
|
$ |
102,612 |
|
|
$ |
(91 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
102,612 |
|
|
$ |
(91 |
) |
During the three and six months ended June 30, 2015, the Company did not recognize any other-than-temporary impairment losses related to its marketable securities. The Company did not have any marketable securities prior to July 1, 2014.
The Company’s marketable securities are classified within Level 2 of the fair value hierarchy (see Note 12, Fair Value Measurement, for further details).
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5. Goodwill and Acquired Intangible Assets
The components of acquired intangible assets as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Developed technology |
|
$ |
8,438 |
|
|
$ |
(4,174 |
) |
|
$ |
4,264 |
|
|
$ |
5,143 |
|
|
$ |
(2,392 |
) |
|
$ |
2,751 |
|
Customer and vendor relationships, databases |
|
|
227,583 |
|
|
|
(36,985 |
) |
|
|
190,598 |
|
|
|
191,979 |
|
|
|
(30,067 |
) |
|
|
161,912 |
|
Trademarks |
|
|
372 |
|
|
|
(89 |
) |
|
|
283 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total amortizable intangible assets |
|
|
236,393 |
|
|
|
(41,248 |
) |
|
|
195,145 |
|
|
|
197,122 |
|
|
|
(32,459 |
) |
|
|
164,663 |
|
Indefinite-lived trademarks |
|
|
89,676 |
|
|
|
— |
|
|
|
89,676 |
|
|
|
89,676 |
|
|
|
— |
|
|
|
89,676 |
|
Total acquired intangible assets |
|
$ |
326,069 |
|
|
$ |
(41,248 |
) |
|
$ |
284,821 |
|
|
$ |
286,798 |
|
|
$ |
(32,459 |
) |
|
$ |
254,339 |
|
Amortization expense for acquired intangible assets was $4.7 million and $3.5 million for the three months ended June 30, 2015 and 2014, respectively, and $8.8 million and $7.0 million for the six months ended June 30, 2015 and 2014, respectively.
Changes in the carrying amount of goodwill for the six months ended June 30, 2015 were as follows:
|
|
Goodwill |
|
|
Accumulated Impairment Losses |
|
|
Net Book Value |
|
|||
|
|
(in thousands) |
|
|||||||||
Balance as of December 31, 2014 |
|
$ |
352,788 |
|
|
|
— |
|
|
$ |
352,788 |
|
Acquisitions |
|
|
34,778 |
|
|
|
— |
|
|
|
34,778 |
|
Balance as of June 30, 2015 |
|
$ |
387,566 |
|
|
$ |
— |
|
|
$ |
387,566 |
|
During the six months ended June 30, 2015, the Company recorded additions to acquired intangible assets of $39.3 million as a result of the acquisitions of DiningIn and Restaurants on the Run. The components of the acquired intangibles assets added during the six months ended June 30, 2015 were as follows:
|
|
Six Months Ended June 30, 2015 |
|
|
Weighted-Average Amortization Period |
|
||
|
|
|
(in thousands) |
|
|
|
(years) |
|
Customer and vendor relationships |
|
$ |
35,604 |
|
|
|
18.4 |
|
Developed technology |
|
|
3,295 |
|
|
|
1.5 |
|
Trademarks |
|
|
372 |
|
|
|
1.7 |
|
Total |
|
$ |
39,271 |
|
|
|
|
|
Estimated future amortization expense of acquired intangible assets as of June 30, 2015 was as follows:
|
|
(in thousands) |
|
|
The remainder of 2015 |
|
$ |
9,347 |
|
2016 |
|
|
16,461 |
|
2017 |
|
|
14,193 |
|
2018 |
|
|
14,022 |
|
2019 |
|
|
12,610 |
|
Thereafter |
|
|
128,512 |
|
Total |
|
$ |
195,145 |
|
|
6. Property and Equipment
The components of the Company’s property and equipment as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||
|
|
(in thousands) |
|
|||||
Computer equipment |
|
$ |
10,436 |
|
|
$ |
12,114 |
|
Furniture and fixtures |
|
|
1,964 |
|
|
|
1,876 |
|
Developed software |
|
|
6,686 |
|
|
|
12,378 |
|
Purchased software |
|
|
262 |
|
|
|
2,149 |
|
Leasehold improvements |
|
|
5,949 |
|
|
|
5,900 |
|
Property and equipment |
|
|
25,297 |
|
|
|
34,417 |
|
Accumulated amortization and depreciation |
|
|
(10,322 |
) |
|
|
(18,414 |
) |
Property and equipment, net |
|
$ |
14,975 |
|
|
$ |
16,003 |
|
The gross carrying amount and accumulated amortization and depreciation of the Company’s property and equipment as of June 30, 2015 have been adjusted for certain fully depreciated developed and purchased software and computer equipment assets that were disposed of with the migration of nearly all of the Seamless consumer diner traffic to a new web and mobile platform during the second quarter of 2015. During the three and six months ended June 30, 2015, the Company recorded approximately $1.9 million of accelerated depreciation and amortization expense related to these retired assets.
The Company recorded depreciation and amortization expense for property and equipment other than developed software for the three months ended June 30, 2015 and 2014 of $2.0 million and $1.4 million, respectively, and $3.4 million and $2.7 million for the six months ended June 30, 2015 and 2014, respectively.
The Company capitalized developed software costs of $2.0 million and $0.7 million for the three months ended June 30, 2015 and 2014, respectively, and $3.5 million and $1.1 million for the six months ended June 30, 2015 and 2014, respectively. Amortization expense for developed software costs, recognized in depreciation and amortization in the condensed consolidated statements of operations, for the three months ended June 30, 2015 and 2014 was $2.2 million and $0.7 million, respectively, and $2.9 million and $1.4 million for the six months ended June 30, 2015 and 2014, respectively.
|
7. Commitments and Contingencies
Legal
In August 2011, Ameranth filed a patent infringement action against a number of defendants, including GrubHub Holdings Inc., in the U.S. District Court for the Southern District of California (the “Court”), Case No. 3:11-cv-1810 (“’1810 action”). In September 2011, Ameranth amended its complaint in the ’1810 action to also accuse Seamless North America, LLC of patent infringement. Ameranth alleged that the GrubHub Holdings Inc. and Seamless North America, LLC ordering systems, products and services infringe claims 12 through 15 of U.S. Patent No. 6,384,850 (“’850 patent”) and claims 11 and 15 of U.S. Patent No. 6,871,325 (“’325 patent”).
In March 2012, Ameranth initiated eight additional actions for infringement of a third, related patent, U.S. Patent No. 8,146,077 (“’077 patent”), in the same forum, including separate actions against GrubHub Holdings Inc., Case No. 3:12-cv-739 (“’739 action”), and Seamless North America, LLC, Case No. 3:12-cv-737 (“’737 action”). In August 2012, the Court severed the claims against GrubHub Holdings Inc. and Seamless North America, LLC in the ’1810 action and consolidated them with the ’739 action and the ’737 action, respectively. Later, the Court consolidated these separate cases against GrubHub Holdings Inc. and Seamless North America, LLC, along with the approximately 40 other cases Ameranth filed in the same district, with the original ’1810 action. In their answers, GrubHub Holdings Inc. and Seamless North America, LLC denied infringement and interposed various defenses, including non-infringement, invalidity, unenforceability and inequitable conduct.
On November 26, 2013, the consolidated case was stayed pending the disposition of petitions for post-grant review of all the patents in the suit. These petitions were filed in the United States Patent and Trademark Office (the “PTO”) under the new Transitional Program for Covered Business Method Patents (the “CBM proceedings”). The CBM proceedings resulted in a March 26, 2014 ruling denying defendants’ petitions on the claims most relevant to GrubHub Holdings Inc. and Seamless North America LLC. The consolidated case remains stayed.
No trial date has been set for this case. The Company believes this case lacks merit and that it has strong defenses to all of the infringement claims. The Company intends to defend the suit vigorously. However, the Company is unable to predict the likelihood of success of Ameranth’s infringement claims and is unable to predict the likelihood of success of its counterclaims. The Company has not recorded an accrual related to this lawsuit as of June 30, 2015, as it does not believe a material loss is probable. It is a reasonable possibility that a loss may be incurred; however, the possible range of loss is not estimable given the early stage of the dispute and the uncertainty as to whether the claims at issue are with or without merit, will be settled out of court, or will be determined in the Company’s favor, whether the Company may be required to expend significant management time and financial resources on the defense of such claims, and whether the Company will be able to recover any losses under its insurance policies.
In addition to the matters described above, from time to time, the Company is involved in various other legal proceedings arising from the normal course of business activities. During the first quarter of 2015, a final settlement was approved by the court for one such litigation matter in which the Company incurred $0.2 million in previously reserved or accrued settlement fees and related expenses, net of insurance recovery proceeds received of $0.4 million.
Indemnification
In connection with the merger of GrubHub and Seamless in August 2013, the Company agreed to indemnify Aramark Holdings for negative income tax consequences associated with the October 2012 spin-off of Seamless Holdings Corporation that were the result of certain actions taken by the Company through October 29, 2014, in certain instances subject to a $15.0 million limitation. Management is not aware of any actions that would impact the indemnification obligation.
Restructuring
On November 20, 2013, the Company announced plans to close its Sandy, Utah office location in 2014. The Company recorded a restructuring accrual in the condensed consolidated balance sheets for severance and payroll related benefits and other facility closure costs as a result of the restructuring announcement. The amounts recorded represented the service vesting requirements for identified employees who worked for various periods beyond the communication date and related lease termination costs. The facility was closed on November 30, 2014; however, certain employees worked until January 2, 2015. Total restructuring costs incurred were approximately $1.3 million, including expense of $0.5 million related to the termination of the Sandy, Utah office lease agreement. For the three and six months ended June 30, 2014, restructuring expense of $0.2 million and $0.5 million, respectively, was recognized in general and administrative expenses in the condensed consolidated statements of operations. The Company did not incur any restructuring expense during the three and six months ended June 30, 2015 and does not expect to incur any additional restructuring expense related to the Sandy, Utah facility closure.
The following table summarizes the Company’s restructuring activity during the six months ended June 30, 2015:
|
|
(in thousands) |
|
|
Restructuring accrual balance at December 31, 2014 |
|
$ |
748 |
|
Restructuring expense |
|
|
— |
|
Cash payments |
|
|
(748 |
) |
Restructuring accrual balance at June 30, 2015 |
|
$ |
— |
|
|
8. Stock-Based Compensation
In May 2015, the Company’s stockholders approved the GrubHub Inc. 2015 Long-Term Incentive Plan (“the 2015 Plan”), pursuant to which the Compensation Committee of the Board of Directors may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock-based and cash-based awards. On May 20, 2015, the Company filed a registration statement on Form S-8 to register up to 14,256,901 shares of common stock reserved for issuance pursuant to awards granted under the 2015 Plan. Effective May 20, 2015, no further grants will be made under the Company’s 2013 Omnibus Incentive Plan.
The Company recognizes compensation expense based on estimated grant date fair values for all stock-based awards issued to employees and directors, including stock options, restricted stock awards and restricted stock units.
Stock Options
The Company granted 1,432,597 and 1,739,273 stock options during the six months ended June 30, 2015 and 2014, respectively. The fair value of each stock option award was estimated based on the assumptions below as of the grant date using the Black-Scholes-Merton option pricing model. Expected volatilities are based on a combination of the historical and implied volatilities of comparable publicly-traded companies and the historical volatility of the Company’s own common stock due to its limited trading history. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of the award is estimated using a simplified method. The fair value at grant date prior to the Company’s initial public offering in April 2014 (the “IPO”) was determined considering the performance of the Company at the grant date as well as future growth and profitability expectations by applying market and income approaches. The risk-free rate for the period within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions used to determine the fair value of the stock options granted during the six months ended June 30, 2015 and 2014 were as follows:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2015 |
|
|
2014 |
|
||
Weighted-average fair value options granted |
|
$ |
16.54 |
|
|
$ |
13.12 |
|
Average risk-free interest rate |
|
|
1.44 |
% |
|
|
2.00 |
% |
Expected stock price volatilities(a) |
|
|
47.0 |
% |
|
|
50.5 |
% |
Dividend yield |
|
None |
|
|
None |
|
||
Expected stock option life (years) |
|
|
6.06 |
|
|
|
6.29 |
|
(a) |
There was no active external or internal market for the Company’s common stock prior to the IPO in April 2014. Due to the Company’s limited trading history, the Company estimated expected volatility for the six months ended June 30, 2015 based on a combination of the historical and implied volatilities of comparable publicly-traded companies and the historical volatility of the Company’s own common stock. During the six months ended June 30, 2014, the expected volatility was based on the historical and implied volatilities of comparable publicly-traded companies as there was insufficient trading history for the Company’s own common stock as of June 30, 2014. |
Stock option awards as of December 31, 2014 and June 30, 2015, and changes during the six months ended June 30, 2015, were as follows:
|
|
Options |
|
|
Weighted-Average Exercise Price |
|
|
Average Intrinsic Value (thousands) |
|
|
Weighted-Average Exercise Term (years) |
|
||||
Outstanding at December 31, 2014 |
|
|
6,180,795 |
|
|
$ |
8.49 |
|
|
$ |
172,661 |
|
|
|
7.87 |
|
Granted |
|
|
1,432,597 |
|
|
|
35.84 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(419,821 |
) |
|
|
14.56 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(2,164,709 |
) |
|
|
4.53 |
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2015 |
|
|
5,028,862 |
|
|
|
17.48 |
|
|
|
87,078 |
|
|
|
8.16 |
|
Vested and expected to vest at June 30, 2015 |
|
|
3,152,401 |
|
|
|
15.51 |
|
|
|
60,634 |
|
|
|
7.90 |
|
Exercisable at June 30, 2015 |
|
|
1,289,980 |
|
|
$ |
5.85 |
|
|
$ |
36,469 |
|
|
|
6.85 |
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value of the common stock and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on each date. This amount will change in future periods based on the fair value of the Company’s stock and the number of options outstanding. The aggregate intrinsic value of awards exercised during the three months ended June 30, 2015 and 2014 was $28.2 million and $5.1 million, respectively. The aggregate intrinsic value of awards exercised during the six months ended June 30, 2015 and 2014 was $78.0 million and $11.6 million, respectively.
The stock options vest over different lengths of time depending upon the grantee. Compensation expense is recognized over the vesting period. The Company recorded compensation expense for stock options of $2.7 million and $2.3 million for the three months ended June 30, 2015 and 2014, respectively, and $5.5 million and $4.7 million for the six months ended June 30, 2015 and 2014, respectively. During the three and six months ended June 30, 2015, the Company capitalized $0.1 million and $0.2 million of stock-based compensation expense as website and software development costs, respectively. As of June 30, 2015, total unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options was $22.6 million and is expected to be recognized over a weighted-average period of 3.06 years.
During the six months ended June 30, 2015, the Company reported excess tax benefits as a decrease in cash flows from operations and an increase in cash flows from financing activities of $14.4 million. Excess tax benefits were suspended during the six months ended June 30, 2014 due to net operating losses. Excess tax benefits reflect the total of the individual stock option exercise transactions in which the reduction to the Company’s income tax liability is greater than the deferred tax assets that were previously recorded.
Restricted Stock Units and Restricted Stock Awards
Non-vested restricted stock units and restricted stock awards as of December 31, 2014 and June 30, 2015, and changes during the six months ended June 30, 2015 were as follows:
|
|
Restricted Stock Units |
|
|
Restricted Stock Awards |
|
||||||||||
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||||
Outstanding at December 31, 2014 |
|
|
2,899 |
|
|
$ |
31.90 |
|
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
65,510 |
|
|
|
39.98 |
|
|
|
101,616 |
|
|
|
42.01 |
|
Forfeited |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Vested |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at June 30, 2015 |
|
|
68,409 |
|
|
$ |
39.63 |
|
|
|
101,616 |
|
|
$ |
42.01 |
|
During the three and six months ended June 30, 2015, compensation expense recognized related to restricted stock awards was $0.5 million and $0.7 million, respectively. During each of the three and six months ended June 30, 2015, compensation expense recognized related to restricted stock units was $0.1 million. There were no non-vested restricted stock units or restricted stock awards or related expense during the three and six months ended June 30, 2014. As of June 30, 2015, $1.7 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to 68,409 non-vested restricted stock units with weighted-average grant date fair values of $39.63 is expected to be recognized over a weighted-average period of 2.4 years. As of June 30, 2015, $3.6 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to 101,616 non-vested restricted stock awards with weighted-average grant date fair values of $42.01 is expected to be recognized over a weighted-average period of 1.7 years. The fair value of these awards was determined based on the Company’s stock price at the grant date and assumes no expected dividend payments through the vesting period.
There were no excess tax benefits related to restricted stock units or restricted stock awards during the six months ended June 30, 2015 and 2014.
|
9. Income Taxes
As of June 30, 2015, the Company is under audit in the United States for the 2013 income tax year. The Company currently expects the Internal Revenue Service audit to be completed in 2015. The Company cannot predict with certainty whether there will be any additional tax liabilities, penalties and/or interest as a result of the audit.
|
10. Stockholders’ Equity
As of June 30, 2015 and December 31, 2014, the Company was authorized to issue two classes of stock: common stock and Series A Preferred Stock.
Common Stock
Each holder of common stock has one vote per share of common stock held on all matters that are submitted for stockholder vote. At June 30, 2015 and December 31, 2014, there were 500,000,000 shares of common stock authorized. At June 30, 2015 and December 31, 2014, there were 84,579,462 and 81,905,325 shares issued and outstanding, respectively. The Company did not hold any shares as treasury shares as of June 30, 2015 or December 31, 2014.
Series A Preferred Stock
The Company was authorized to issue 25,000,000 shares of preferred stock as of June 30, 2015 and December 31, 2014. Upon the closing of the Company’s IPO on April 4, 2014, all shares of the Company’s then-outstanding convertible Series A Preferred Stock automatically converted on a one-for-one basis into an aggregate of 19,284,113 shares of common stock. There were no issued or outstanding shares of preferred stock as of June 30, 2015 or December 31, 2014.
Redeemable Common Stock
The put rights that would have required the Company to repurchase the Company’s then outstanding redeemable common stock at fair value (as defined in the stockholders agreement) determined at the redemption date were terminated and the shares converted on a one-for-one basis into an aggregate of 1,344,236 shares common stock upon the closing of the IPO on April 4, 2014. There were no outstanding shares of redeemable common stock as of June 30, 2015 or December 31, 2014.
The Company’s equity as of December 31, 2014 and June 30, 2015, and changes during the six months ended June 30, 2015, were as follows:
|
(in thousands) |
|
|
Balance at December 31, 2014 |
$ |
770,522 |
|
Net income |
|
19,922 |
|
Currency translation |
|
103 |
|
Issuance of common stock, acquisitions |
|
15,980 |
|
Stock-based compensation |
|
6,483 |
|
Tax benefit related to stock-based compensation |
|
14,421 |
|
Stock option exercises, net of withholdings and other |
|
9,777 |
|
Balance at June 30, 2015 |
$ |
837,208 |
|
|
12. Fair Value Measurement
Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The accounting guidance for fair value measurements prioritizes valuation methodologies based on the reliability of the inputs in the following three-tier value hierarchy:
|
|
Level 1 |
Quoted prices in active markets for identical assets or liabilities. |
|
|
Level 2 |
Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities. |
|
|
Level 3 |
Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require. |
The Company applied the following methods and assumptions in estimating its fair value measurements: the Company’s commercial paper, investments in corporate bonds and certain money market funds are classified as Level 2 within the fair value hierarchy because they are valued using inputs other than quoted prices in active markets that are observable directly or indirectly. Accounts receivable and accounts payable approximate fair value due to their generally short-term maturities.
The following table presents the balances of assets measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Money market funds |
|
$ |
— |
|
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,386 |
|
|
$ |
— |
|
Commercial paper |
|
|
— |
|
|
|
37,373 |
|
|
|
— |
|
|
|
— |
|
|
|
38,055 |
|
|
|
— |
|
Corporate bonds |
|
|
— |
|
|
|
76,927 |
|
|
|
— |
|
|
|
— |
|
|
|
75,080 |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
114,800 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
114,521 |
|
|
$ |
— |
|
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of acquisitions. See Note 3, Acquisitions, for further discussion of the fair value of assets and liabilities associated with acquisitions.
|
Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of GrubHub Inc. and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements include all wholly-owned subsidiaries and reflect all normal and recurring adjustments, as well as any other than normal adjustments, that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and accompany notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 5, 2015 (the “2014 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, goodwill, depreciable lives of property and equipment, recoverability of intangible assets with definite lives and other long-lived assets, stock-based compensation and income taxes. Actual results could differ from these estimates.
There have been no material changes to the Company’s significant accounting policies described in the 2014 Form 10-K.
Recently Issued Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-05, “Intangibles -Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU 2015-05”), which provides guidance on accounting for fees paid in a cloud computing arrangement. Under ASU 2015-05, if a cloud computing arrangement includes a software license, the software license element should be accounted for consistent with the purchase of other software licenses. If the cloud computing arrangement does not include a software license, it should be accounted for as a service contract. ASU 2015-05 will be effective for the Company in the first quarter of 2016 and may be applied either prospectively or retrospectively. The Company has elected to apply ASU 2015-05 prospectively, however, its adoption is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASU 2014-09 will be effective for the Company in the first quarter of 2017. Management is currently evaluating the impact the adoption of ASU 2014-09 will have on the Company’s condensed consolidated financial position, results of operations or cash flows. The Company currently anticipates applying the modified retrospective approach when adopting the standard. On April 29, 2015, the FASB issued an exposure draft proposing a one-year deferral of the effective date of ASU 2014-09. The proposal, which would defer the effective date for the Company to the first quarter of 2018, was affirmed during the FASB board meeting on July 9, 2015.
|
The assets acquired and liabilities assumed of DiningIn and Restaurants on the Run were recorded at their estimated fair values as of the closing dates of February 4, 2015 and February 27, 2015, respectively. The following table summarizes the final purchase price allocation acquisition-date fair values of the assets and liabilities acquired in connection with the acquisitions:
|
|
|
(in thousands) |
|
|
Cash and cash equivalents |
|
|
$ |
698 |
|
Accounts receivable |
|
|
|
1,978 |
|
Prepaid expenses and other assets |
|
|
|
266 |
|
Customer and vendor relationships |
|
|
|
35,604 |
|
Property and equipment |
|
|
|
161 |
|
Developed technology |
|
|
|
3,295 |
|
Goodwill |
|
|
|
34,778 |
|
Trademarks |
|
|
|
372 |
|
Accounts payable and accrued expenses |
|
|
|
(4,787 |
) |
Total purchase price plus cash acquired |
|
|
|
72,365 |
|
Cash acquired |
|
|
|
(698 |
) |
Fair value of common stock issued |
|
|
|
(15,980 |
) |
Net cash paid |
|
|
$ |
55,687 |
|
The following unaudited pro forma information presents a summary of the operating results of the Company for the three and six months ended June 30, 2015 and 2014 as if the acquisitions had occurred on January 1, 2014:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
||||
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Revenues |
$ |
87,955 |
|
|
$ |
66,320 |
|
|
$ |
179,965 |
|
|
$ |
131,490 |
|
Net income |
|
9,660 |
|
|
|
2,554 |
|
|
|
20,770 |
|
|
|
6,784 |
|
|
The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
2,250 |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
2,249 |
|
Corporate bonds |
|
|
252 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
251 |
|
Short term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial paper |
|
|
35,149 |
|
|
|
— |
|
|
|
(25 |
) |
|
|
35,124 |
|
Corporate bonds |
|
|
76,687 |
|
|
|
712 |
|
|
|
(723 |
) |
|
|
76,676 |
|
Total |
|
$ |
114,338 |
|
|
$ |
712 |
|
|
$ |
(750 |
) |
|
$ |
114,300 |
|
|
|
December 31, 2014 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
1,882 |
|
|
$ |
1 |
|
|
$ |
(1 |
) |
|
$ |
1,882 |
|
Short term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
38,081 |
|
|
|
— |
|
|
|
(26 |
) |
|
|
38,055 |
|
Corporate bonds |
|
|
73,260 |
|
|
|
2 |
|
|
|
(64 |
) |
|
|
73,198 |
|
Total |
|
$ |
113,223 |
|
|
$ |
3 |
|
|
$ |
(91 |
) |
|
$ |
113,135 |
|
The gross unrealized losses, estimated fair value and length of time the individual marketable securities were in a continuous loss position for those marketable securities in an unrealized loss position as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|||||||||||||||||||||
|
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Commercial paper |
|
$ |
37,373 |
|
|
$ |
(26 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
37,373 |
|
|
$ |
(26 |
) |
Corporate bonds |
|
|
46,227 |
|
|
|
(724 |
) |
|
|
— |
|
|
|
— |
|
|
|
46,227 |
|
|
|
(724 |
) |
Total |
|
$ |
83,600 |
|
|
$ |
(750 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
83,600 |
|
|
$ |
(750 |
) |
|
|
December 31, 2014 |
|
|||||||||||||||||||||
|
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
|
Estimated Fair Value |
|
|
Unrealized Loss |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Commercial paper |
|
$ |
38,055 |
|
|
$ |
(26 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
38,055 |
|
|
$ |
(26 |
) |
Corporate bonds |
|
|
64,557 |
|
|
|
(65 |
) |
|
|
— |
|
|
|
— |
|
|
|
64,557 |
|
|
|
(65 |
) |
Total |
|
$ |
102,612 |
|
|
$ |
(91 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
102,612 |
|
|
$ |
(91 |
) |
|
The components of acquired intangible assets as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Developed technology |
|
$ |
8,438 |
|
|
$ |
(4,174 |
) |
|
$ |
4,264 |
|
|
$ |
5,143 |
|
|
$ |
(2,392 |
) |
|
$ |
2,751 |
|
Customer and vendor relationships, databases |
|
|
227,583 |
|
|
|
(36,985 |
) |
|
|
190,598 |
|
|
|
191,979 |
|
|
|
(30,067 |
) |
|
|
161,912 |
|
Trademarks |
|
|
372 |
|
|
|
(89 |
) |
|
|
283 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total amortizable intangible assets |
|
|
236,393 |
|
|
|
(41,248 |
) |
|
|
195,145 |
|
|
|
197,122 |
|
|
|
(32,459 |
) |
|
|
164,663 |
|
Indefinite-lived trademarks |
|
|
89,676 |
|
|
|
— |
|
|
|
89,676 |
|
|
|
89,676 |
|
|
|
— |
|
|
|
89,676 |
|
Total acquired intangible assets |
|
$ |
326,069 |
|
|
$ |
(41,248 |
) |
|
$ |
284,821 |
|
|
$ |
286,798 |
|
|
$ |
(32,459 |
) |
|
$ |
254,339 |
|
The components of the acquired intangibles assets added during the six months ended June 30, 2015 were as follows:
|
|
Six Months Ended June 30, 2015 |
|
|
Weighted-Average Amortization Period |
|
||
|
|
|
(in thousands) |
|
|
|
(years) |
|
Customer and vendor relationships |
|
$ |
35,604 |
|
|
|
18.4 |
|
Developed technology |
|
|
3,295 |
|
|
|
1.5 |
|
Trademarks |
|
|
372 |
|
|
|
1.7 |
|
Total |
|
$ |
39,271 |
|
|
|
|
|
The components of acquired intangible assets as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Value |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Developed technology |
|
$ |
8,438 |
|
|
$ |
(4,174 |
) |
|
$ |
4,264 |
|
|
$ |
5,143 |
|
|
$ |
(2,392 |
) |
|
$ |
2,751 |
|
Customer and vendor relationships, databases |
|
|
227,583 |
|
|
|
(36,985 |
) |
|
|
190,598 |
|
|
|
191,979 |
|
|
|
(30,067 |
) |
|
|
161,912 |
|
Trademarks |
|
|
372 |
|
|
|
(89 |
) |
|
|
283 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total amortizable intangible assets |
|
|
236,393 |
|
|
|
(41,248 |
) |
|
|
195,145 |
|
|
|
197,122 |
|
|
|
(32,459 |
) |
|
|
164,663 |
|
Indefinite-lived trademarks |
|
|
89,676 |
|
|
|
— |
|
|
|
89,676 |
|
|
|
89,676 |
|
|
|
— |
|
|
|
89,676 |
|
Total acquired intangible assets |
|
$ |
326,069 |
|
|
$ |
(41,248 |
) |
|
$ |
284,821 |
|
|
$ |
286,798 |
|
|
$ |
(32,459 |
) |
|
$ |
254,339 |
|
The components of the acquired intangibles assets added during the six months ended June 30, 2015 were as follows:
|
|
Six Months Ended June 30, 2015 |
|
|
Weighted-Average Amortization Period |
|
||
|
|
|
(in thousands) |
|
|
|
(years) |
|
Customer and vendor relationships |
|
$ |
35,604 |
|
|
|
18.4 |
|
Developed technology |
|
|
3,295 |
|
|
|
1.5 |
|
Trademarks |
|
|
372 |
|
|
|
1.7 |
|
Total |
|
$ |
39,271 |
|
|
|
|
|
Changes in the carrying amount of goodwill for the six months ended June 30, 2015 were as follows:
|
|
Goodwill |
|
|
Accumulated Impairment Losses |
|
|
Net Book Value |
|
|||
|
|
(in thousands) |
|
|||||||||
Balance as of December 31, 2014 |
|
$ |
352,788 |
|
|
|
— |
|
|
$ |
352,788 |
|
Acquisitions |
|
|
34,778 |
|
|
|
— |
|
|
|
34,778 |
|
Balance as of June 30, 2015 |
|
$ |
387,566 |
|
|
$ |
— |
|
|
$ |
387,566 |
|
Estimated future amortization expense of acquired intangible assets as of June 30, 2015 was as follows:
|
|
(in thousands) |
|
|
The remainder of 2015 |
|
$ |
9,347 |
|
2016 |
|
|
16,461 |
|
2017 |
|
|
14,193 |
|
2018 |
|
|
14,022 |
|
2019 |
|
|
12,610 |
|
Thereafter |
|
|
128,512 |
|
Total |
|
$ |
195,145 |
|
|
The components of the Company’s property and equipment as of June 30, 2015 and December 31, 2014 were as follows:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||
|
|
(in thousands) |
|
|||||
Computer equipment |
|
$ |
10,436 |
|
|
$ |
12,114 |
|
Furniture and fixtures |
|
|
1,964 |
|
|
|
1,876 |
|
Developed software |
|
|
6,686 |
|
|
|
12,378 |
|
Purchased software |
|
|
262 |
|
|
|
2,149 |
|
Leasehold improvements |
|
|
5,949 |
|
|
|
5,900 |
|
Property and equipment |
|
|
25,297 |
|
|
|
34,417 |
|
Accumulated amortization and depreciation |
|
|
(10,322 |
) |
|
|
(18,414 |
) |
Property and equipment, net |
|
$ |
14,975 |
|
|
$ |
16,003 |
|
|
The following table summarizes the Company’s restructuring activity during the six months ended June 30, 2015:
|
|
(in thousands) |
|
|
Restructuring accrual balance at December 31, 2014 |
|
$ |
748 |
|
Restructuring expense |
|
|
— |
|
Cash payments |
|
|
(748 |
) |
Restructuring accrual balance at June 30, 2015 |
|
$ |
— |
|
|
The assumptions used to determine the fair value of the stock options granted during the six months ended June 30, 2015 and 2014 were as follows:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2015 |
|
|
2014 |
|
||
Weighted-average fair value options granted |
|
$ |
16.54 |
|
|
$ |
13.12 |
|
Average risk-free interest rate |
|
|
1.44 |
% |
|
|
2.00 |
% |
Expected stock price volatilities(a) |
|
|
47.0 |
% |
|
|
50.5 |
% |
Dividend yield |
|
None |
|
|
None |
|
||
Expected stock option life (years) |
|
|
6.06 |
|
|
|
6.29 |
|
(a) |
There was no active external or internal market for the Company’s common stock prior to the IPO in April 2014. Due to the Company’s limited trading history, the Company estimated expected volatility for the six months ended June 30, 2015 based on a combination of the historical and implied volatilities of comparable publicly-traded companies and the historical volatility of the Company’s own common stock. During the six months ended June 30, 2014, the expected volatility was based on the historical and implied volatilities of comparable publicly-traded companies as there was insufficient trading history for the Company’s own common stock as of June 30, 2014. |
Stock option awards as of December 31, 2014 and June 30, 2015, and changes during the six months ended June 30, 2015, were as follows:
|
|
Options |
|
|
Weighted-Average Exercise Price |
|
|
Average Intrinsic Value (thousands) |
|
|
Weighted-Average Exercise Term (years) |
|
||||
Outstanding at December 31, 2014 |
|
|
6,180,795 |
|
|
$ |
8.49 |
|
|
$ |
172,661 |
|
|
|
7.87 |
|
Granted |
|
|
1,432,597 |
|
|
|
35.84 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(419,821 |
) |
|
|
14.56 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(2,164,709 |
) |
|
|
4.53 |
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2015 |
|
|
5,028,862 |
|
|
|
17.48 |
|
|
|
87,078 |
|
|
|
8.16 |
|
Vested and expected to vest at June 30, 2015 |
|
|
3,152,401 |
|
|
|
15.51 |
|
|
|
60,634 |
|
|
|
7.90 |
|
Exercisable at June 30, 2015 |
|
|
1,289,980 |
|
|
$ |
5.85 |
|
|
$ |
36,469 |
|
|
|
6.85 |
|
Non-vested restricted stock units and restricted stock awards as of December 31, 2014 and June 30, 2015, and changes during the six months ended June 30, 2015 were as follows:
|
|
Restricted Stock Units |
|
|
Restricted Stock Awards |
|
||||||||||
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||||
Outstanding at December 31, 2014 |
|
|
2,899 |
|
|
$ |
31.90 |
|
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
65,510 |
|
|
|
39.98 |
|
|
|
101,616 |
|
|
|
42.01 |
|
Forfeited |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Vested |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at June 30, 2015 |
|
|
68,409 |
|
|
$ |
39.63 |
|
|
|
101,616 |
|
|
$ |
42.01 |
|
|
The Company’s equity as of December 31, 2014 and June 30, 2015, and changes during the six months ended June 30, 2015, were as follows:
|
(in thousands) |
|
|
Balance at December 31, 2014 |
$ |
770,522 |
|
Net income |
|
19,922 |
|
Currency translation |
|
103 |
|
Issuance of common stock, acquisitions |
|
15,980 |
|
Stock-based compensation |
|
6,483 |
|
Tax benefit related to stock-based compensation |
|
14,421 |
|
Stock option exercises, net of withholdings and other |
|
9,777 |
|
Balance at June 30, 2015 |
$ |
837,208 |
|
|
The following table presents the balances of assets measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:
|
|
June 30, 2015 |
|
|
December 31, 2014 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Money market funds |
|
$ |
— |
|
|
$ |
500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,386 |
|
|
$ |
— |
|
Commercial paper |
|
|
— |
|
|
|
37,373 |
|
|
|
— |
|
|
|
— |
|
|
|
38,055 |
|
|
|
— |
|
Corporate bonds |
|
|
— |
|
|
|
76,927 |
|
|
|
— |
|
|
|
— |
|
|
|
75,080 |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
114,800 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
114,521 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
|
|
|