NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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|
1.
|
Description of Business and Basis of Presentation
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LivePerson, Inc. (the “Company” or “LivePerson”) was incorporated in the State of Delaware in November 1995 and the LivePerson service was introduced in November 1998. In April 2000, the Company completed an initial public offering and is currently traded on the Nasdaq Global Select Market and the Tel Aviv Stock Exchange. LivePerson is headquartered in New York City, with U.S. offices in Alpharetta (Georgia) and international offices in Amsterdam, Berlin, London, Mannheim, Melbourne, Milan, Paris, Ra'anana (Israel), Reading (UK), and Tokyo.
LivePerson provides mobile and online messaging technologies that power digital communication between brands and consumers. LiveEngage, the Company’s enterprise-class, cloud-based platform, enables businesses to create a meaningful connection with consumers by offering messaging as a preferred channel of communication. Messaging diminishes the need to rely on email systems or call a 1-800 number. Brands leverage LivePerson’s sophisticated intelligence engine and suite of text and mobile messaging, real-time chat messaging, content delivery, and cobrowsing offerings to proactively engage with consumers through m-dot sites, mobile apps, the desktop, social media and third-party consumer messaging platforms. The Company’s campaign-based messaging enables the brand to target the right consumer at the right time on a brand’s site by leveraging proprietary analysis and data-driven intelligence.
The data the Company gathers and analyzes, on behalf of its customers, spans the breadth of an online or mobile visitor session, starting from an initial keyword search or application login, through actions on the website or mobile application of the Company’s customer, and even into a shopping cart and an executed sale. The Company combines this session data with other historical, behavioral and operational information to develop insights into each step of a consumer’s journey for sales and service transactions. These unique, industry- and use-case specific insights are mapped to each brand’s business goals in order to deliver successful campaign outcomes. LivePerson’s products, coupled with its domain knowledge, industry expertise and consulting services, have been proven to maximize the effectiveness of consumer engagement.
The Company’s primary revenue source is from the sale of LivePerson services to businesses of all sizes. The Company also offers an online marketplace that connects independent service providers (“Experts”) who provide information and knowledge for a fee via mobile and online messaging with individual consumers (“Users”).
Basis of Presentation
The accompanying condensed consolidated financial statements as of
June 30, 2016
and for the
three and six
months ended
June 30, 2016
and
2015
are unaudited. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the consolidated financial position of LivePerson as of
June 30, 2016
, and the consolidated results of operations, comprehensive loss and cash flows for the interim periods ended
June 30, 2016
and
2015
. The financial data and other information disclosed in these notes to the condensed consolidated financial statements related to these periods are unaudited. The results of operations for any interim period are not necessarily indicative of the results of operations for any other future interim period or for a full fiscal year. The condensed consolidated balance sheet at December 31, 2015 has been derived from audited consolidated financial statements at that date.
Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2016.
Principles of Consolidation
The condensed consolidated financial statements include the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Reclassification
For comparability, certain 2015 amounts have been reclassified, where appropriate, to conform to the financial presentation in 2016. The Company reclassified
$0.2 million
related to the fair value adjustment of the contingent earn-out for Engage Pty Ltd. (“Engage”) from cost of revenue to general and administrative expenses.
Use of Estimates
The preparation of the Company’s 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 condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates.
Recently Issued Accounting Standards
In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-17, “Income taxes: Balance Sheet Classification of Deferred Taxes Business” (“ASU 2015-17”). Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, ASU 2015-17 requires that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has elected to early adopt ASU 2015-17 on its financial statements effective June 30, 2016 on a prospective basis.
In September 2015, FASB issued Accounting Standards Update No. 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in ASU 2015-16 require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for annual reporting periods beginning after December 15, 2015. This standard became effective for the Company in the first quarter of 2016, and is applied on a prospective basis to adjustments to provisional amounts that occur after the effective date with no material impact to its financial statements.
In February 2015, FASB issued Accounting Standards Update No. 2015-02, Consolidation: Amendments to the Consolidation Analysis (“ASU 2015-02”), which affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The standard amends the consolidation requirements in ASC 810. ASU 2015-02 is effective for fiscal periods beginning after December 15, 2015 for public companies, and early adoption is permitted. The Company adopted this standard during the first quarter of 2016 and there was no material impact of this on its financial statements.
In May 2014, FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes most existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In March 2016, the FASB issued implementation guidance that clarified the considerations in principal versus agent determination. In April 2016, the FASB issued guidance that clarified identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. In May 2016, FASB issued guidance that addresses narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The Company will adopt this guidance at the beginning of its first quarter of fiscal year 2018. Adoption of this guidance is not expected to have a material impact on the Company’s financial statements.
The majority of the Company’s revenue is generated from monthly service revenues and related professional services from the sale of the LivePerson services. Because the Company provides its application as a service, the Company follows the provisions of FASB Accounting Standards Codification (“ASC”) 605-10-S99, “Revenue Recognition” and ASC 605-25, “Revenue Recognition with Multiple-Element Arrangements.” The Company charges a monthly, quarterly or annual fee, which varies by
type of service, the level of customer usage and website traffic, and in some cases, the number of orders placed via the Company’s online engagement solutions.
For certain of the Company’s larger customers, the Company may provide call center labor through an arrangement with one or more of several qualified vendors. For most of these customers, the Company passes the fee it incurs with the labor provider and its fee for the hosted services through to its customers in the form of a fixed fee for each order placed via the Company’s online engagement solutions. For these Pay for Performance (“PFP”) arrangements, in accordance with ASC 605-45, “Principal Agent Considerations,” the Company records revenue for transactions in which it acts as an agent on a net basis, and revenue for transactions in which it acts as a principal on a gross basis.
The Company also sells certain of the LivePerson services directly via Internet download. These services are marketed as LiveEngage for small to medium-sized businesses, and are paid for almost exclusively by credit card. Credit card payments accelerate cash flow and reduce the Company’s collection risk, subject to the merchant bank’s right to hold back cash pending settlement of the transactions. Sales of LiveEngage may occur with or without the assistance of an online sales representative, rather than through face-to-face or telephone contact that is typically required for traditional direct sales.
The Company recognizes monthly service revenue based upon the fee charged for the LivePerson services, provided that there is persuasive evidence of an arrangement, no significant Company obligations remain, collection of the resulting receivable is probable and the amount of fees to be paid is fixed or determinable. The Company’s service agreements typically have
twelve
month terms and, in some cases, are terminable or may terminate upon
30
to
90
days’ notice without penalty. When professional service fees add value to the customer on a standalone basis, the Company recognizes professional service fees upon completion and customer acceptance. The Company establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) best estimated selling price. If a professional services arrangement does not qualify for separate accounting, the Company recognizes the fees, and the related labor costs, ratably over the contracted period.
For revenue from the Company’s Consumer segment generated from online transactions between Experts and Users, the Company recognizes revenue net of the Expert fees in accordance with ASC 605-45, “Principal Agent Considerations,” due primarily to the fact that the Expert is the primary obligor. Additionally, the Company performs as an agent without any risk of loss for collection, and is not involved in selecting the Expert or establishing the Expert’s fee. The Company collects a fee from the User and retains a portion of the fee, and then remits the balance to the Expert. Revenue from these transactions is recognized when there is persuasive evidence of an arrangement, no significant Company obligations remain, collection of the resulting receivable is probable and the amount of fees to be paid is fixed and determinable.
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3.
|
Net Income (Loss) Per Share
|
The Company calculates earnings per share (“EPS”) in accordance with the provisions of ASC 260-10 and the guidance of SEC Staff Accounting Bulletin (“SAB”) No. 98. Under ASC 260-10, basic EPS excludes dilution for common stock equivalents and is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. All options, warrants or other potentially dilutive instruments issued for nominal consideration are required to be included in the calculation of basic and diluted net income attributable to common stockholders. Diluted EPS is calculated using the treasury stock method and reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and resulted in the issuance of common stock.
Diluted net loss per common share for the
three and six
months ended
June 30, 2016
does not include the effect of
9,156,278
outstanding common stock awards, as the effect of their inclusion is anti-dilutive. Diluted net loss per common share for the
three and six
months ended
June 30, 2015
does not include the effect of
11,358,658
outstanding common stock awards, as the effect of their inclusion is anti-dilutive.
A reconciliation of shares used in calculating basic and diluted net loss per share follows:
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Basic
|
55,965,525
|
|
|
56,491,989
|
|
|
56,174,603
|
|
|
56,392,240
|
|
Effect of assumed exercised options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Diluted
|
55,965,525
|
|
|
56,491,989
|
|
|
56,174,603
|
|
|
56,392,240
|
|
The Company accounts for its segment information in accordance with the provisions of ASC 280-10, “Segment Reporting.” ASC 280-10 establishes annual and interim reporting standards for operating segments of a company. ASC 280-10 requires disclosures of selected segment-related financial information about products, major customers, and geographic areas based on the Company’s internal accounting methods. The Company is organized into
two
operating segments for purposes of making operating decisions and assessing performance. The Business segment facilitates real-time online interactions – chat, voice and content delivery across multiple channels and screens for global corporations of all sizes. The Consumer segment facilitates online transactions between Experts and Users and sells its services to consumers. Both segments currently generate their revenue primarily in the United States. The chief operating decision maker, who is the chief executive officer, evaluates performance, makes operating decisions, and allocates resources based on the operating income of each segment. The reporting segments follow the same accounting polices used in the preparation of the Company’s condensed consolidated financial statements which are described in the summary of significant accounting policies. The Company allocates cost of revenue, sales and marketing and amortization of purchased intangibles to the segments, but it does not allocate product development expenses, general and administrative expenses, restructuring costs and income tax expense because management does not use this information to measure performance of the operating segments. There are currently no inter-segment sales.
Summarized financial information by segment for the three months ended
June 30, 2016
, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision maker, follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
Consumer
|
|
Corporate
|
|
Consolidated
|
Revenue:
|
|
|
|
|
|
|
|
Hosted services – Business
|
$
|
46,729
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,729
|
|
Hosted services – Consumer
|
—
|
|
|
4,238
|
|
|
—
|
|
|
4,238
|
|
Professional services
|
5,712
|
|
|
—
|
|
|
—
|
|
|
5,712
|
|
Total revenue
|
52,441
|
|
|
4,238
|
|
|
—
|
|
|
56,679
|
|
Cost of revenue
|
16,691
|
|
|
817
|
|
|
—
|
|
|
17,508
|
|
Sales and marketing
|
21,315
|
|
|
1,773
|
|
|
—
|
|
|
23,088
|
|
Amortization of purchased intangibles
|
1,017
|
|
|
—
|
|
|
—
|
|
|
1,017
|
|
Unallocated corporate expenses
|
—
|
|
|
—
|
|
|
20,880
|
|
|
20,880
|
|
Operating income (loss)
|
$
|
13,418
|
|
|
$
|
1,648
|
|
|
$
|
(20,880
|
)
|
|
$
|
(5,814
|
)
|
Summarized financial information by segment for the three months ended
June 30, 2015
, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision maker, follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
Consumer
|
|
Corporate
|
|
Consolidated
|
Revenue:
|
|
|
|
|
|
|
|
Hosted services – Business
|
$
|
50,197
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50,197
|
|
Hosted services – Consumer
|
—
|
|
|
3,862
|
|
|
—
|
|
|
3,862
|
|
Professional services
|
5,275
|
|
|
—
|
|
|
—
|
|
|
5,275
|
|
Total revenue
|
55,472
|
|
|
3,862
|
|
|
—
|
|
|
59,334
|
|
Cost of revenue
|
17,436
|
|
|
616
|
|
|
—
|
|
|
18,052
|
|
Sales and marketing
|
22,617
|
|
|
1,765
|
|
|
—
|
|
|
24,382
|
|
Amortization of purchased intangibles
|
1,178
|
|
|
—
|
|
|
—
|
|
|
1,178
|
|
Unallocated corporate expenses
|
—
|
|
|
—
|
|
|
23,403
|
|
|
23,403
|
|
Operating income (loss)
|
$
|
14,241
|
|
|
$
|
1,481
|
|
|
$
|
(23,403
|
)
|
|
$
|
(7,681
|
)
|
Summarized financial information by segment for the six months ended
June 30, 2016
, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision maker, follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
Consumer
|
|
Corporate
|
|
Consolidated
|
Revenue:
|
|
|
|
|
|
|
|
Hosted services – Business
|
$
|
92,688
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92,688
|
|
Hosted services – Consumer
|
—
|
|
|
8,004
|
|
|
—
|
|
|
8,004
|
|
Professional services
|
11,452
|
|
|
—
|
|
|
—
|
|
|
11,452
|
|
Total revenue
|
104,140
|
|
|
8,004
|
|
|
—
|
|
|
112,144
|
|
Cost of revenue
|
31,929
|
|
|
1,443
|
|
|
—
|
|
|
33,372
|
|
Sales and marketing
|
42,328
|
|
|
3,436
|
|
|
—
|
|
|
45,764
|
|
Amortization of purchased intangibles
|
1,941
|
|
|
—
|
|
|
—
|
|
|
1,941
|
|
Unallocated corporate expenses
|
—
|
|
|
—
|
|
|
39,623
|
|
|
39,623
|
|
Operating income (loss)
|
$
|
27,942
|
|
|
$
|
3,125
|
|
|
$
|
(39,623
|
)
|
|
$
|
(8,556
|
)
|
Summarized financial information by segment for the six months ended
June 30, 2015
, based on the Company’s internal financial reporting system utilized by the Company’s chief operating decision maker, follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
Consumer
|
|
Corporate
|
|
Consolidated
|
Revenue:
|
|
|
|
|
|
|
|
Hosted services – Business
|
$
|
100,809
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100,809
|
|
Hosted services – Consumer
|
—
|
|
|
7,559
|
|
|
—
|
|
|
7,559
|
|
Professional services
|
10,736
|
|
|
—
|
|
|
—
|
|
|
10,736
|
|
Total revenue
|
111,545
|
|
|
7,559
|
|
|
—
|
|
|
119,104
|
|
Cost of revenue
|
33,053
|
|
|
1,254
|
|
|
—
|
|
|
34,307
|
|
Sales and marketing
|
45,531
|
|
|
3,145
|
|
|
—
|
|
|
48,676
|
|
Amortization of purchased intangibles
|
2,490
|
|
|
—
|
|
|
—
|
|
|
2,490
|
|
Unallocated corporate expenses
|
—
|
|
|
—
|
|
|
43,367
|
|
|
43,367
|
|
Operating income (loss)
|
$
|
30,471
|
|
|
$
|
3,160
|
|
|
$
|
(43,367
|
)
|
|
$
|
(9,736
|
)
|
Geographic Information
The Company is domiciled in the United States and has international operations in the United Kingdom, Asia-Pacific, Latin America and Western Europe, particularly France and Germany. The following table presents the Company’s revenues attributable to domestic and foreign operations for the periods presented (amounts in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
United States
|
$
|
38,272
|
|
|
$
|
38,996
|
|
|
$
|
76,063
|
|
|
$
|
80,437
|
|
Other Americas
(1)
|
1,546
|
|
|
3,145
|
|
|
3,092
|
|
|
5,848
|
|
Total Americas
|
39,818
|
|
|
42,141
|
|
|
79,155
|
|
|
86,285
|
|
EMEA
(2)
|
12,274
|
|
|
13,421
|
|
|
23,880
|
|
|
25,206
|
|
APAC
(3)
|
4,587
|
|
|
3,772
|
|
|
9,109
|
|
|
7,613
|
|
Total revenue
|
$
|
56,679
|
|
|
$
|
59,334
|
|
|
$
|
112,144
|
|
|
$
|
119,104
|
|
(1)
Canada, Latin America and South America
(2)
Europe, the Middle East and Africa (“EMEA”)
(3)
Asia-Pacific (“APAC”)
The following table presents the Company’s long-lived assets by geographic region for the periods presented (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2016
|
|
2015
|
United States
|
$
|
95,171
|
|
|
$
|
96,362
|
|
Israel
|
15,173
|
|
|
16,393
|
|
Australia
|
8,556
|
|
|
8,290
|
|
Netherlands
|
7,467
|
|
|
8,285
|
|
Other
(1)
|
2,239
|
|
|
2,482
|
|
Total long-lived assets
|
$
|
128,606
|
|
|
$
|
131,812
|
|
(1)
United Kingdom, Germany, Japan, France and Italy
No individual customer accounted for 10% or more of consolidated revenue for any of the periods presented. No individual customer accounted for 10% or more of accounts receivable as of
June 30, 2016
and
December 31, 2015
|
|
5.
|
Goodwill and Intangible Assets
|
Goodwill
The changes in the carrying amount of goodwill for the
six months ended
June 30, 2016
are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
|
|
Consumer
|
|
Consolidated
|
Balance as of December 31, 2015
|
$
|
72,298
|
|
|
$
|
8,024
|
|
|
$
|
80,322
|
|
Adjustments to goodwill:
|
|
|
|
|
|
Foreign exchange adjustment
|
38
|
|
|
—
|
|
|
38
|
|
Balance as of June 30, 2016
|
$
|
72,336
|
|
|
$
|
8,024
|
|
|
$
|
80,360
|
|
Intangible Assets
Intangible assets are summarized as follows (see Note 8) (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Amount
|
|
Weighted
Average
Amortization
Period
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
Technology
|
$
|
28,050
|
|
|
$
|
(17,818
|
)
|
|
$
|
10,232
|
|
|
4.7 years
|
Customer relationships
|
16,016
|
|
|
(7,777
|
)
|
|
8,239
|
|
|
5.8 years
|
Trade names
|
1,298
|
|
|
(1,271
|
)
|
|
27
|
|
|
2.6 years
|
Non-compete agreements
|
1,448
|
|
|
(1,079
|
)
|
|
369
|
|
|
1.7 years
|
Patents
|
3,690
|
|
|
(1,034
|
)
|
|
2,656
|
|
|
10.4 years
|
Other
|
262
|
|
|
(235
|
)
|
|
27
|
|
|
3.0 years
|
Total
|
$
|
50,764
|
|
|
$
|
(29,214
|
)
|
|
$
|
21,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Amount
|
|
Weighted
Average
Amortization
Period
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
Technology
|
$
|
28,005
|
|
|
$
|
(15,723
|
)
|
|
$
|
12,282
|
|
|
4.7 years
|
Customer relationships
|
16,008
|
|
|
(6,873
|
)
|
|
9,135
|
|
|
5.8 years
|
Trade names
|
1,287
|
|
|
(1,250
|
)
|
|
37
|
|
|
2.6 years
|
Non-compete agreements
|
1,446
|
|
|
(936
|
)
|
|
510
|
|
|
1.7 years
|
Patents
|
3,440
|
|
|
(848
|
)
|
|
2,592
|
|
|
10.4 years
|
Other
|
312
|
|
|
(249
|
)
|
|
63
|
|
|
3.0 years
|
Total
|
$
|
50,498
|
|
|
$
|
(25,879
|
)
|
|
$
|
24,619
|
|
|
|
Amortization expense is calculated over the estimated useful life of the asset. Aggregate amortization expense for intangible assets was
$1.7 million
and
$2.0 million
for the three months ended
June 30, 2016
and 2015, respectively. Aggregate amortization expense for intangible assets was $
3.3 million
and $
4.2 million
for the
six months ended June 30, 2016
and 2015, respectively. For the three and
six months ended June 30, 2016
and 2015, respectively, a portion of this amortization is included in cost of revenue. Estimated amortization expense for the next five years is as follows (amounts in thousands):
|
|
|
|
|
|
Estimated Amortization Expense
|
2016
|
$
|
3,326
|
|
2017
|
4,934
|
|
2018
|
2,827
|
|
2019
|
2,608
|
|
2020
|
2,417
|
|
Thereafter
|
5,438
|
|
Total
|
$
|
21,550
|
|
|
|
6.
|
Property and Equipment
|
The following table presents the detail of property and equipment for the periods presented (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
Computer equipment and software
|
$
|
73,429
|
|
|
$
|
67,631
|
|
Furniture, equipment and building improvements
|
13,849
|
|
|
13,761
|
|
|
87,278
|
|
|
81,392
|
|
Less: accumulated depreciation
|
(64,057
|
)
|
|
(57,263
|
)
|
Total
|
$
|
23,221
|
|
|
$
|
24,129
|
|
|
|
7.
|
Accrued Expenses and Other Current Liabilities
|
The following table presents the detail of accrued expenses and other current liabilities for the periods presented (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
Payroll and other employee related costs
|
$
|
14,116
|
|
|
$
|
14,107
|
|
Professional services and consulting and other vendor fees
|
9,290
|
|
|
12,372
|
|
Sales commissions
|
2,231
|
|
|
4,522
|
|
Contingent earnout (see Notes 8 and 9)
|
210
|
|
|
377
|
|
Other
|
3,362
|
|
|
2,918
|
|
Total
|
$
|
29,209
|
|
|
$
|
34,296
|
|
Engage Pty Ltd.
On
November 9, 2012
, the Company acquired all of the outstanding shares of Engage Pty Ltd. (“Engage”), an Australian provider of cloud-based customer contact solutions. The transaction was accounted for under the purchase method of accounting and, accordingly, the operating results of Engage were included in the Company’s consolidated results of operations from the date of acquisition.
The purchase price was approximately
$10.6
million. The total acquisition costs incurred in the year ended December 31, 2012 were approximately
$0.5
million and are included in general and administrative expenses in the Company’s condensed consolidated statements of operations for the same period. The acquisition enhances the Company’s ability to offer intelligent engagement solutions to businesses in the Asia Pacific region. Of the total purchase price,
$0.8
million was allocated to the net book values of the acquired assets and assumed liabilities. The historical carrying amounts of such assets and liabilities approximated their fair values. All receivables acquired are expected to be collectible. The purchase price in excess of the fair value of the net book values of the assets acquired and liabilities assumed was allocated to intangible assets based on management’s best estimate of fair values, taking into account all relevant information available at the time of acquisition, and the excess was allocated to goodwill. The goodwill is not deductible for tax purposes. The intangible assets are being amortized over their expected period of benefit. The purchase price includes approximately
$1.7
million of potential earn-out consideration for the shareholders if certain revenue targets are achieved. The earn-out is payable in shares of LivePerson common stock and cash. The Company recorded the contingent earn-out as part of the purchase price. In accordance with ASC 480, the Company had classified this amount as a liability with the amount included in accrued expenses. At June 30, 2015, the Company assessed this earn-out and recorded a
$0.7
million fair value re-measurement adjustment, which was recorded in operating income as a decrease to general and administrative expenses and cost of revenue. As of
June 30, 2016
, there was no remaining liability included in accrued expenses relating to this earn-out.
Synchronite, LLC
On
June 2, 2014
, the Company acquired Synchronite, LLC (“Synchronite”), a German-based start-up that provides co-browsing technology. The transaction was accounted for under the purchase method of accounting and, accordingly, the operating results of Synchronite were included in the Company’s consolidated results of operations from the date of acquisition.
The allocation of the total purchase price of approximately
$4.1 million
was based upon the estimated fair value of Synchronite’s net tangible and identifiable intangible assets as of the date of acquisition. The total acquisition costs incurred were approximately
$0.4 million
and are included in general and administrative expenses in the Company’s condensed consolidated statements of operations. Of the total purchase price,
$45,000
was allocated to the net book values of the acquired assets and assumed liabilities. The historical carrying amounts of such assets and liabilities approximated their fair values. All receivables acquired are expected to be collectible. The purchase price includes approximately
$2.7 million
of goodwill and approximately
$1.5 million
of intangible assets. The goodwill is deductible for tax purposes. The intangible assets are being amortized over their expected period of benefit. The purchase price includes
$1.8 million
of potential earn-out consideration for the shareholders if complete product integration is achieved. The earn-out is payable in shares of LivePerson common stock and cash. The Company recorded the contingent earn-out as part of the purchase price. In accordance with ASC 480, the Company has classified this amount as a liability and the amount is included in accrued expenses in the
June 30, 2016
condensed consolidated balance sheet, due to the variable number of shares that will be issued if and when the targets are achieved. For the year ended December 31, 2015, the Company made
$1.6 million
of earn-out payments. The remaining potential earn-out consideration at
June 30, 2016
was
$0.2 million
. The Company will continue to assess the earn-out calculation in future periods and any future adjustments will affect operating income.
Contact At Once!, LLC
On
November 7, 2014
, the Company acquired Contact At Once!, LLC (“CAO!”), a software company with a cloud-based platform that instantly connects consumers with businesses through instant messaging, text messaging, chat, social media and video over the internet for consumer-to-business sales conversions. The transaction was accounted for under the purchase method of accounting and, accordingly, the operating results of CAO! were included in the Company’s consolidated results of operations from the date of acquisition.
The allocation of the total purchase price of approximately
$67.0 million
, which includes approximately
$42.8 million
in cash, approximately
$20.0 million
in shares of common stock and approximately
$4.2 million
of potential earn-out consideration in cash, was based upon the estimated fair value of CAO!’s net tangible and identifiable intangible assets as of the date of acquisition. The historical carrying amounts of such assets and liabilities approximated their fair values. All receivables acquired are expected to be collectible. The purchase price includes approximately
$45.1 million
of goodwill and approximately
$20.4 million
of intangible assets. The goodwill will be deductible for tax purposes. The intangible assets are being amortized over their expected period of benefit. The purchase price includes
$4.2 million
of potential earn-out consideration for the shareholders if certain targeted financial, strategic and integration objectives is achieved. The earn-out is payable in cash. The Company recorded the contingent earn-out as part of the purchase price. In accordance with ASC 480, the Company had classified this amount as a liability included in accrued expenses in the consolidated balance sheet. During the year ended
December 31, 2015
, the Company assessed this earn-out and recorded a
$3.2 million
fair value re-measurement adjustment, which was recorded in loss from operations as a decrease to general and administrative expenses. During the six months ended
June 30, 2016
, the Company made cash payments of
$0.2 million
. There is no remaining liability included in accrued expenses relating to this contingent earn-out as of
June 30, 2016
.
|
|
9.
|
Fair Value Measurements
|
The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:
|
|
•
|
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
•
|
Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
•
|
Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
Financial Assets and Liabilities
The Company
’
s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of
June 30, 2016
and
December 31, 2015
, are summarized as follows (amounts in thousands).
The Company’s restricted cash balance of
$4.0 million
at
June 30, 2016
and
$5.4 million
at December 31, 2015 is not held in a money market account and is not included in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
3,073
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,073
|
|
|
$
|
4,059
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,059
|
|
Foreign currency derivative contracts
|
—
|
|
|
287
|
|
|
—
|
|
|
287
|
|
|
—
|
|
|
102
|
|
|
—
|
|
|
102
|
|
Total assets
|
$
|
3,073
|
|
|
$
|
287
|
|
|
$
|
—
|
|
|
$
|
3,360
|
|
|
$
|
4,059
|
|
|
$
|
102
|
|
|
$
|
—
|
|
|
$
|
4,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent earn-outs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
210
|
|
|
$
|
210
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
377
|
|
|
$
|
377
|
|
Foreign currency derivative contracts
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
310
|
|
|
—
|
|
|
310
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
210
|
|
|
$
|
231
|
|
|
$
|
—
|
|
|
$
|
310
|
|
|
$
|
377
|
|
|
$
|
687
|
|
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available.
The Company's money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy. The Company's contingent earn-out liability and foreign currency derivative contracts are measured at fair value on a recurring basis and are classified as level 3 and level 2, respectively, within the fair value hierarchy. On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. The Company uses an income approach and inputs that constitute level 3. During the third quarter of each year, the Company evaluates goodwill for impairment at the reporting unit level. The Company uses qualitative factors in accordance with ASU No. 2011-08 to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This measurement is classified based on level 3 input.
The remaining contingent earn-out amounts as of
June 30, 2016
are recorded in accrued expense on the condensed consolidated balance sheet and are payable in 2016. The contingent earn-out balance as of
June 30, 2016
relates to Synchronite and is based on the fulfillment of a complete product integration and a minimum number of “Co-Browse” interactions per month.
The changes in fair value of the Level 3 liabilities are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
Contingent Earn-Out
|
|
June 30, 2016
|
|
December 31, 2015
|
Balance, Beginning of Period
|
$
|
377
|
|
|
$
|
6,940
|
|
Cash payments
|
(167
|
)
|
|
(2,883
|
)
|
Changes in fair value
|
—
|
|
|
(3,680
|
)
|
Balance, End of Period
|
$
|
210
|
|
|
$
|
377
|
|
Derivative Financial Instruments
The Company is exposed to foreign exchange risks that in part are managed by using derivative financial instruments. The Company entered into foreign currency forward contracts related to risks associated with foreign operations. The Company does not use derivatives for trading purposes. Derivatives are recorded at their estimated fair values based upon Level 2 inputs. Derivatives designated and effective as cash flow hedges are reported as a component of other comprehensive income and reclassified to earnings in the same periods in which the hedged transactions impact earnings. Gains and losses related to derivatives not meeting the requirements of hedge accounting and the portion of derivatives related to hedge ineffectiveness are recognized in current earnings.
In accordance with the foreign currency forward contracts, the Company was required to pledge cash as collateral security to be maintained at the bank. The collateral shall remain in control of the lender, and these funds can be used to satisfy the outstanding obligation. Accordingly, the Company had cash at the bank of approximately
$4.0 million
at
June 30, 2016
, and
$5.4 million
at
December 31, 2015
recorded as cash held as collateral in current assets.
The following summarizes certain information regarding the Company’s outstanding foreign currency derivative contracts related primarily to intercompany receivables and payables for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
Notional amount of foreign currency derivative contracts
|
$
|
43,067
|
|
|
$
|
43,431
|
|
Fair value of foreign currency derivatives contracts
|
$
|
266
|
|
|
$
|
(208
|
)
|
The fair value of the Company’s derivative instruments is summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments
|
|
Balance Sheet Location
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
Derivative Assets
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency derivatives contracts
|
Prepaid expenses and other current assets
|
|
$
|
287
|
|
|
$
|
102
|
|
Derivative Liabilities
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency derivatives contracts
|
Accrued expenses and other liabilities
|
|
$
|
21
|
|
|
$
|
310
|
|
The following summarizes certain information regarding the Company’s derivatives that are not designated or are not effective as hedges (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (losses) on Derivative Instruments Recognized in Statements of Operations
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
Location
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Foreign currency derivatives contracts
|
|
Other (expense)income
|
|
$
|
(393
|
)
|
|
$
|
40
|
|
|
$
|
88
|
|
|
$
|
33
|
|
|
|
10.
|
Commitments and Contingencies
|
Contractual Obligations
The Company leases facilities and certain equipment under agreements accounted for as operating leases. These leases generally require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases for the three and
six months ended
June 30, 2016
was approximately
$2.6 million
and
$5.3 million
, respectively. Rental expense for operating leases for the three and
six months ended
June 30, 2015
was approximately
$2.4 million
and
$4.9 million
, respectively.
Employee Benefit Plans
The Company has a 401(k) defined contribution plan covering all eligible employees. The Company provides for employer matching contributions equal to
50%
of employee contributions, up to the lesser of
5%
of eligible compensation or
$6,000
. Matching contributions are deposited into the employee’s 401(k) account and are subject to
5
year graded vesting. Salaries and related expenses include
$0.3 million
and
$0.7 million
of employer matching contributions for the three and
six months ended
June 30, 2016
, respectively. Salaries and related expenses include
$0.4 million
and
$0.8 million
of employer matching contributions for the three and
six months ended
June 30, 2015
, respectively.
Letters of Credit
As of
June 30, 2016
, the Company has a
$1.9 million
letter of credit outstanding substantially in favor of a certain landlord for office space. In addition, the Company has a letter of credit totaling
$0.1 million
as a security deposit for the due performance by the Company of the terms and conditions of a supply contract. There were no draws against these letters of credit during the three and
six months ended
June 30, 2016
.
|
|
11.
|
Stockholders
’
Equity
|
Common Stock
As of
June 30, 2016
, there were
100,000,000
shares of common stock authorized, and
57,772,165
shares issued and outstanding. As of
December 31, 2015
, there were
100,000,000
shares of common stock authorized, and
57,374,907
shares issued and outstanding. The par value for common shares is
$0.001
.
Preferred Stock
As of
June 30, 2016
and
December 31, 2015
, there were
5,000,000
shares of preferred stock authorized, and
zero
shares issued and outstanding. The par value for preferred shares is
$0.001
.
Stock Repurchase Program
On December 10, 2012, the Company’s Board of Directors approved a stock repurchase program through June 30, 2014. Under the stock repurchase program, the Company is authorized to repurchase shares of its common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the Board of Directors depending upon prevailing market conditions and other corporate considerations. On March 13, 2014, the Company’s Board of Directors increased the aggregate purchase price of the stock repurchase program from
$30.0 million
to
$40.0 million
. On July 23, 2014, the Company’s Board of Directors increased the aggregate purchase price of the stock repurchase program from
$40.0 million
to
$50.0 million
. On March 5, 2015, the Company’s Board of Directors extended the expiration date of the program out to December 31, 2016. On February 16, 2016, the Company's Board of Directors increased the aggregate purchase price of the total stock repurchase program by an additional
$14.0 million
. There were
837,773
shares repurchased under this program during the six months ended June 30, 2016, which were recorded in treasury stock at par on the condensed consolidated balance sheets as of
June 30, 2016
. As of
June 30, 2016
, approximately
$15.5 million
remained available for purchase under the program.
Stock-Based Compensation
The Company follows FASB ASC 718-10, “Stock Compensation,” which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
The per share weighted average fair value of stock options granted during the
three and six
months ended
June 30, 2016
was
$3.03
and
$3.00
, respectively. The per share weighted average fair value of stock options granted during the
three and six
months ended
June 30, 2015
was
$4.20
and
$4.54
, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Dividend yield
|
0.0%
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
Risk-free interest rate
|
1.0% - 1.4%
|
|
1.4%
|
|
1.0% - 1.4%
|
|
1.3% - 1.4%
|
Expected life (in years)
|
5
|
|
5
|
|
5
|
|
5
|
Historical volatility
|
47.7% - 48.2%
|
|
49.4%
|
|
47.3% - 48.2%
|
|
49.4% - 49.7%
|
A description of the methods used in the significant assumptions used to estimate the fair value of stock-based compensation awards follows:
Dividend yield –
The Company uses
0%
as it has never issued dividends and does not anticipate issuing dividends in the near term.
Risk-free interest rate –
The Company uses the market yield on U.S. Treasury securities at
five
years with constant maturity, representing the current expected life of stock options in years.
Expected life –
The Company uses historical data to estimate the expected life of a stock option.
Historical volatility –
The Company uses a trailing
five
year from grant date to determine volatility.
Stock Option Plans
During 1998, the Company established the Stock Option and Restricted Stock Purchase Plan (the “1998 Plan”). Under the 1998 Plan, the Board of Directors could issue incentive stock options or nonqualified stock options to purchase up to
5,850,000
shares of common stock. The 2000 Stock Incentive Plan (the “2000 Plan”) succeeded the 1998 Plan. Under the 2000 Plan, the options which had been outstanding under the 1998 Plan were incorporated in the 2000 Plan increasing the number of shares available for issuance under the plan by approximately
4,150,000
, thereby reserving for issuance
10,000,000
shares of common stock in the aggregate.
The Company established the 2009 Stock Incentive Plan (as amended and restated, the “2009 Plan”) as a successor to the 2000 Plan. Under the 2009 Plan, the options which had been outstanding under the 2000 Plan were incorporated into the 2009 Plan and the Company increased the number of shares available for issuance under the plan by
6,000,000
. The Company amended the 2009 stock incentive plan (the “Amended 2009 Plan”) effective June 7, 2012. The Amended 2009 Plan increased the number of shares authorized for issuance under the plan by an additional
4,250,000
, thereby reserving for issuance
23,817,744
shares of common stock in the aggregate. Options to acquire common stock granted thereunder have
10
-year terms. As of
June 30, 2016
, approximately
2,409,000
shares of common stock were reserved for issuance under the 2009 Plan (taking into account all option exercises through
June 30, 2016
).
Employee Stock Purchase Plan
In June 2010, the Company’s stockholders approved the 2010 Employee Stock Purchase Plan with
1,000,000
shares of common stock initially reserved for issuance. As of
June 30, 2016
, approximately
284,000
shares of common stock were reserved for issuance under the Employee Stock Purchase Plan (taking into account all share purchases through
June 30, 2016
).
Stock Option Activity
A summary of the Company’s stock option activity and weighted average exercise prices follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Activity
|
|
Weighted Average Remaining Contractual Term (in years)
|
|
Aggregate Intrinsic Value (in thousands)
|
|
Options (in thousands)
|
|
Weighted
Average
Exercise Price
|
|
|
Balance outstanding at December 31, 2015
|
9,139
|
|
|
$
|
11.05
|
|
|
|
|
|
Granted
|
140
|
|
|
7.03
|
|
|
|
|
|
Exercised
|
(32
|
)
|
|
4.85
|
|
|
|
|
|
Cancelled or expired
|
(881
|
)
|
|
11.22
|
|
|
|
|
|
Balance outstanding at June 30, 2016
|
8,366
|
|
|
$
|
10.99
|
|
|
6.11
|
|
$
|
1,738
|
|
Options vested and expected to vest
|
7,961
|
|
|
$
|
11.00
|
|
|
6.00
|
|
$
|
1,734
|
|
Options exercisable at June 30, 2016
|
5,573
|
|
|
$
|
10.96
|
|
|
5.32
|
|
$
|
1,731
|
|
The total fair value of stock options exercised during the
six months ended
June 30, 2016
was approximately
$89,927
. As of
June 30, 2016
, there was approximately
$9.6 million
of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of approximately
1.7
years.
The following table summarizes information about outstanding and vested stock options as of
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of Exercise Prices
|
|
Number of Shares Outstanding (in thousands)
|
|
Weighted-Average Remaining Contractual Life (Years)
|
|
Weighted-Average Exercise Price
|
|
Number of Shares (in thousands)
|
|
Weighted-Average Exercise Price
|
$1.79 - $7.02
|
|
1,150
|
|
|
2.52
|
|
$
|
5.04
|
|
|
1,135
|
|
|
$
|
5.03
|
|
$7.04 - $9.24
|
|
1,045
|
|
|
6.92
|
|
8.73
|
|
|
556
|
|
|
8.88
|
|
$9.34 - $10.05
|
|
977
|
|
|
7.81
|
|
9.77
|
|
|
464
|
|
|
9.72
|
|
$10.09 - $10.09
|
|
4
|
|
|
4.64
|
|
10.09
|
|
|
4
|
|
|
10.09
|
|
$10.13 - $10.13
|
|
1,219
|
|
|
7.69
|
|
10.13
|
|
|
616
|
|
|
10.13
|
|
$10.31 - $12.32
|
|
945
|
|
|
6.22
|
|
11.21
|
|
|
694
|
|
|
11.47
|
|
$12.46 - $13.28
|
|
1,295
|
|
|
5.17
|
|
13.09
|
|
|
1,142
|
|
|
13.09
|
|
$13.34 - $16.00
|
|
840
|
|
|
7.10
|
|
14.23
|
|
|
455
|
|
|
14.71
|
|
$16.98 - $18.09
|
|
886
|
|
|
6.00
|
|
17.45
|
|
|
684
|
|
|
17.46
|
|
$18.24 - $18.24
|
|
5
|
|
|
6.08
|
|
18.24
|
|
|
4
|
|
|
18.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,366
|
|
|
6.11
|
|
$
|
10.99
|
|
|
5,754
|
|
|
$
|
10.96
|
|
Restricted Stock Unit Activity
A summary of the Company’s restricted stock units (“RSUs”) activity and weighted average exercise prices follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Unit Activity
|
|
|
|
Number of Shares (in thousands)
|
|
Weighted Average
Grant Date Fair Value (Per Share)
|
|
Aggregate Fair Value (in thousands)
|
Balance outstanding at December 31, 2015
|
1,202
|
|
|
$
|
10.31
|
|
|
$
|
—
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
Released
|
(266
|
)
|
|
10.31
|
|
|
—
|
|
Forfeited
|
(145
|
)
|
|
10.31
|
|
|
—
|
|
Non-vested and outstanding at June 30, 2016
|
791
|
|
|
$
|
10.31
|
|
|
$
|
5,009
|
|
Expected to vest
|
652
|
|
|
$
|
10.31
|
|
|
$
|
4,132
|
|
RSUs granted to employees generally vest over a
four
-year period. As of
June 30, 2016
, total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested RSUs was approximately
$8.1 million
and the weighted-average remaining vesting period was
3.0
years.
The Company's restructuring costs relate to the termination and severance costs associated with a large customer contract, as well as re-prioritizing and reallocating resources to focus on areas showing high growth potential. There was no expense associated with this restructuring during the three and six months ended June 30, 2016. The expense associated with this restructuring was approximately
$3.0 million
during the three and six months ended June 30, 2015 and is classified in the condensed consolidated statements of operations as restructuring costs. The restructuring liability was approximately
$1.7 million
as of June 30, 2015 and is classified as accrued expenses and other current liabilities on the condensed consolidated balance sheets. The following table present the detail of expenses and liability for the Company's restructuring charges for the periods presented (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
Expense incurred during the Six Months Ended June 30, 2015
|
|
Liability as of June 30, 2015
|
Contract termination costs
|
$
|
1,745
|
|
|
$
|
644
|
|
Severance and other associated costs
|
1,243
|
|
|
1,072
|
|
Total restructuring costs
|
$
|
2,988
|
|
|
$
|
1,716
|
|
The Company previously filed an intellectual property suit against [24]7 Customer, Inc. in the Southern District of New York on March 6, 2014 seeking damages on the grounds that [24]7 reverse engineered and misappropriated the Company's technology to develop competing products and misused the Company's business information. Discovery in the New York case is in process. On June 22, 2015, [24]7 Customer, Inc. filed suit against the Company in the Northern District of California alleging patent infringement. On December 7, 2015, [24]7 Customer Inc. filed a second patent infringement suit against the Company, also in the Northern District of California. On January 5, 2016, the two California cases were consolidated for all pre-trial purposes. The Company believes the claims filed by [24]7 Customer Inc. are without merit and intends to defend them vigorously.
The Company routinely assesses all of its litigation and 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.
From time to time, the Company is involved in or subject to legal, administrative and regulatory proceedings, claims, demands and investigations arising in the ordinary course of business, including direct claims brought by or against the Company with respect to intellectual property, contracts, employment and other matters, as well as claims brought against the Company’s customers for whom the Company has a contractual indemnification obligation. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosure related to such matter as appropriate and in compliance with ASC 450. The accruals or estimates, if any, resulting from the foregoing analysis, are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. To the extent there is a reasonable possibility that the losses could exceed the amounts already accrued, the Company will, as applicable, adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made.
From time to time, third parties assert claims against the Company regarding intellectual property rights, privacy issues and other matters arising in the ordinary course of business. Although the Company cannot be certain of the outcome of any litigation or the disposition of any claims, nor the amount of damages and exposure, if any, that the Company could incur, the Company currently believes that the final disposition of all existing matters will not have a material adverse effect on our business, results of operations, financial condition or cash flows. In addition, in the ordinary course of business, the Company is also subject to periodic threats of lawsuits, investigations and claims. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.