RISK FACTORS
Factors That Could Affect Future Results
An investment in our common stock involves a high degree of risk. You should carefully consider the risks below, as well as
other information included or incorporated by reference in this prospectus before making an investment decision. We operate in a dynamic and rapidly changing environment that involves many risks and
uncertainties that could cause actual results to differ materially from results contemplated by forward-looking statements in this prospectus.
Because of the factors discussed below, other information included or incorporated by reference in this prospectus and other factors affecting our operating results, past performance should not be
considered a reliable indicator of future performance. The risks discussed in this prospectus are not the only risks we face. Risks and uncertainties of which we are not currently aware, or which we
currently deem to be immaterial, may also adversely affect our business, financial condition or operating results. As a result, the price of our common stock could decline, and you could lose all or
part of your investment.
Risks Related to Our Business
We have a history of losses, and we intend to continue to invest in our business, so we cannot
assure you that we will achieve profitability.
We incurred net losses of $10.2 million during the six months ended June 30, 2016, $13.1 million in 2015, $11.6 million
in 2014, and $21.4 million in 2013. We had an accumulated deficit of $294.1 million as of June 30, 2016. We intend to continue to invest in our business, including with respect to
our employee base; sales and marketing efforts; development of new products, services, and features; and improvement of our existing products, services, and features. Therefore, to achieve
profitability, we must increase our revenue, particularly our recurring revenue by entering into more and larger sales transactions while limiting customer churn, and manage our cost structure in line
with our revenue. If we fail to do so, our future results and financial condition will be adversely affected and we may be unable to continue operating.
We
continue to monitor and manage our costs in an effort to optimize our performance for the long term. However, there is no assurance that we will be successful and unforeseen expenses, difficulties
or delays may prevent us from realizing our goals. From time to time, we incur restructuring expenses or expenses related to other cost reduction efforts, but we can offer no assurance that these or
other actions will enable us to achieve or sustain profitability in the future. In addition, we cannot be certain that steps we have taken to control our costs will not adversely affect our prospects
for long-term revenue growth. If we cannot increase our revenue, improve gross margins and control costs, our future results and financial condition will be negatively affected.
Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the
future, and because we recognize revenue from subscriptions over a period of time, downturns in revenue may not be immediately reflected in our operating results.
Because we recognize recurring revenue and maintenance revenue ratably over the terms of the related subscription agreements and maintenance support
agreements, most of our revenue each quarter results from recognition of deferred revenue related to agreements entered into during previous quarters. Consequently, declines in new or renewed
subscription agreements and maintenance agreements, or termination of existing subscription agreements and maintenance agreements that occur in one quarter will largely be felt in both the existing
quarter and in future quarters, both because we may be unable to generate sufficient new revenue to offset the decline and because we may be unable to adjust our operating costs and capital
expenditures to align with the changes in revenue. Our subscription model makes it more difficult for us to increase our revenue rapidly in any period, because revenue from new
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customers
must be recognized over the applicable subscription term. Furthermore, although our business model is primarily focused on recurring revenue and we do not intend to sell on-premise licenses,
we anticipate continuing to recognize license revenue primarily only from upgrades reflecting additional usage over the contracted amount. License revenue is difficult to forecast and is likely to
fluctuate due to many factors that are beyond our control including transition of license customers to recurring revenue models. Accordingly, we believe that period-to-period comparisons of our
results of operations should not be relied upon as definitive indicators of future performance. Other factors that may cause our revenue and operating results to fluctuate
include:
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timing of customer budget cycles;
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the priority our customers place on our products compared to other business investments;
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size, timing and contract terms of new customer contracts, and unpredictable and often lengthy sales cycles;
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reduced renewals;
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competitive factors, including new product introductions, upgrades and discounted pricing or special payment terms offered by our
competitors, as well as strategic actions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
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technical difficulties, errors or service interruptions in our solutions that may cause customer dissatisfaction with solutions;
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consolidation among our customers, which may alter their buying patterns, or business failures that may reduce demand for our
solutions;
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operating expenses associated with expansion of our sales force or business, and our product development efforts;
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cost, timing and management efforts related to the introduction of new features to our solutions;
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our ability to obtain, maintain and protect our intellectual property rights and adequately safeguard the information imported into
our solutions or otherwise provided to us by our customers;
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changes in the regulatory environment, including with respect to security, or privacy laws and regulations, or their enforcement; and
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extraordinary expenses such as impairment charges, litigation or other payments related to settlement of disputes.
Any
of these developments may adversely affect our revenue, operating results and financial condition. Furthermore, we maintain an allowance for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. In such cases, we may be required to defer revenue recognition on sales to affected customers. In the future, we may have to record additional
reserves or write-offs, or defer revenue on sales transactions, which could negatively impact our financial results.
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If we are unable to maintain the profitability of our recurring revenue solutions, our operating
results could be adversely affected.
We have invested, and expect to continue to invest, substantial resources to expand, market and refine our solutions. If we are unable to grow the
volume of our recurring revenue, or to improve our gross margins, we may not be able to achieve profitability and our operating results and financial condition could be adversely affected. Factors
that could harm our ability to improve our gross margins include:
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customer attrition as customers decide not to renew for any reason;
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our inability to maintain or increase the prices customers pay for our solutions, due to competitive pricing pressures or limited
demand;
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our inability to reduce operating costs through technology-based efficiencies and streamlined processes;
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increased direct and indirect cost of third-party services, including hosting facilities and professional services contractors
performing implementation and support services;
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higher personnel and personnel-related costs;
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increased costs to integrate products or personnel that we acquire, including time and expense associated with new sales personnel
reaching full productivity; and
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increased costs to license and maintain and replace third-party software embedded in our solutions or to create alternatives to such
third-party software.
Our business and operations have experienced rapid growth in recent periods, and if we do not
effectively manage any future growth or are unable to improve our systems and processes, our operating results will be adversely affected.
We have experienced rapid growth and increased demand for our products over the last few years. Our employee headcount and number of customers have
increased significantly, and we expect to continue to grow our headcount significantly in future periods. For example, from the end of fiscal 2015 through June 30, 2016, our employee headcount
increased from 901 to 997 employees, and our number of customers increased from approximately 4,600 to over 4,800. We anticipate that we will continue to significantly expand our operations and
headcount in the near term, and that our customer base will continue to expand. The growth and expansion of our business and our product and service offerings place a significant strain on our
management, operations, sales and marketing, and financial resources. To manage any future growth effectively, we must continue to improve and expand our information technology and financial
infrastructure, our operating and administrative systems, our sales and marketing teams and our ability to manage headcount, capital and business processes in an efficient manner.
We
may not be able to implement improvements to our systems and processes in an efficient or timely manner, and we may discover deficiencies in our existing systems and processes. We may experience
difficulties in managing improvements to our systems and processes, which could disrupt existing customer relationships, cause us to lose customers, limit sales of our products, or increase our
technical support costs. Our failure to improve our systems and processes, or the failure of those systems and processes to operate in the intended manner, may result in our inability to manage the
growth of our business and accurately forecast our revenue and expenses. Our productivity and the quality of our solutions may be adversely affected if we do not integrate and train new employees
quickly and
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effectively.
Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to manage any future growth effectively could result in
increased costs, negatively impact our customers' satisfaction with our solutions and harm our operating results.
Decreases in retention rates for customer SaaS subscriptions or on-premise maintenance arrangements
could materially impact our future revenue or operating results.
Our customers have no obligation to renew their SaaS subscriptions or maintenance support arrangements after the expiration of the subscription or
maintenance period, which is typically 12 to 24 months. Customers may elect not to renew, or may renew for fewer seat licenses or shorter contract terms for a number of reasons, including a
change in corporate priorities or personnel. In addition, we offer a pay-as-you-go model, whereby customers can pay for our SaaS services on a monthly basis without a long-term commitment, which may
unexpectedly increase the rate of customer non-renewals and thus negatively and unpredictably affect our recurring revenue. If
our customer renewal rates decline, which may occur as a result of many factors, including reduced budgets, insourcing decisions or dissatisfaction with our service, our revenue will be adversely
affected and our business will suffer.
We
have discontinued selling and supporting on-premise software for our commissions product. Revenue from on-premise sales of our commissions product included license fees and on-going maintenance
fees paid for support and upgrades during the life of the product. We will no longer realize license fee revenue for this product as we have stopped selling this offering. We plan to support most of
our existing maintenance fee contracts and will do so through June 2017. We are experiencing a decline in maintenance fee revenue primarily due to conversion of existing customers to our cloud-based
commissions solution. We anticipate maintenance fee revenue to continue to decline through June 2017 when we anticipate that we will stop supporting any remaining on-premise customers. If we are
unsuccessful in converting the existing on-premise customers to our SaaS platform we could experience a material adverse impact to our revenue.
Most of our revenue is derived from our Lead to Money solutions, and a decline in sales of those
solutions could adversely affect our operating results and financial condition.
We derive a majority of our revenue from our Lead to Money solutions. If demand for those solutions declines significantly and we are unable to
replace the revenue with revenue from our other offerings, our business and operating results will be adversely affected. We cannot assure you that our current levels of market penetration and revenue
from these solutions will continue. If conditions in the market for these solutions change as a result of increased competition or new product offerings by our competitors or consolidation among our
competitors, or if we are unable to timely introduce successful new solutions to keep pace with technological advancements, our revenue may decline and our financial results and financial condition
would be harmed.
The vote by the United Kingdom to leave the European Union could adversely affect us.
The vote in the United Kingdom authorizing its exit from the European Union (referred to as "Brexit") could over time create uncertainty and disrupt
our business. For example, our relationships with customers or prospective customers, data centers and other vendors, and employees could change in unpredictable ways and have an adverse effect on our
business, financial results and operations, and could also have an adverse impact on our bookings. The Brexit vote is non-binding and it appears that negotiations about the specific terms of the
United Kingdom's future relationship with the European Union are unpredictable. For example, important issues such as trade and tariff, immigration, intellectual property and commercial regulation may
be modified during a transition period or permanently. The measures could potentially disrupt the markets we serve and the tax jurisdictions in
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which
we operate and adversely change tax benefits or liabilities in these or other jurisdictions, and may cause us to lose customers or prospective customers, vendors, and employees. In addition,
Brexit could lead to legal uncertainty and divergent national laws and regulations where previously European Union laws and regulations prevailed. Any of these effects of Brexit, and others we cannot
anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.
If we do not compete effectively, our revenue may not grow and could decline.
We experience intense competition from other software companies, as well as from customers' internal development teams. We believe one of our key
challenges is to demonstrate the benefits of our solutions to prospective customers so that they will prioritize purchases of our solutions over other options. Our financial performance depends in
large part on continued growth in the number of organizations adopting our sales effectiveness solutions to manage the performance of their sales organizations, yet the market for sales effectiveness
solutions may not develop as we expect, or at all.
We
compete principally with vendors of sales effectiveness software, incentive compensation management software, enterprise resource planning software and customer relationship management software.
Our competitors may be more successful than we are in capturing the market by, for example, announcing new products, services or enhancements that better meet the needs of prospective customers or our
current customers or changing industry standards. In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could
adversely affect our ability to compete effectively. Increased competition may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect
on our business, results of operations and financial condition.
Many
of our competitors, particularly our enterprise resource planning competitors, have longer operating histories with significantly greater financial, technical, marketing, service and other
resources. Many also have a larger installed base of users, larger marketing budgets, broader relationships, established distribution agreements, and greater name recognition. Some of our competitors'
products may also be more effective at performing particular sales effectiveness or incentive compensation management system functions or may be more customized for particular customer needs in any
given market. Even if our competitors provide products with less sales performance management or incentive compensation management system functionality than our solutions, their products may
incorporate other capabilities, such as recording and accounting for transactions, customer orders or inventory management. A product that performs these functions, along with the functions of our
solutions, may
appeal to some customers by reducing the number of software applications they use in their business. Our competitors, especially larger competitors, may also bundle incentive compensation management
or other functionalities with their other offerings, rendering our software less competitive from a pricing perspective.
Our
products generally must be integrated with software provided by existing or potential competitors. These competitors could alter their software products in ways that inhibit integration with ours,
or they could deny or delay our access to advance software releases, which would restrict our ability to adapt our products for integration with their new releases and could result in the loss of both
sales opportunities and renewals of on-demand services and maintenance.
Some
potential customers have already made substantial investments in third-party or internally-developed solutions designed to model, administer, analyze and report on sales effectiveness programs.
These companies may be reluctant to abandon such investments in favor of our solutions. In addition, information technology departments of some potential customers may resist purchasing our solutions
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for
a variety of reasons, including concerns that hosted solutions are not sufficiently customizable for their needs or that they pose data security concerns for their enterprises.
If we change prices, alter our payment terms or modify our products or services in order to compete,
our margins and operating results may be adversely affected.
The intensely competitive market in which we do business may require us to change our prices or modify our pricing strategies for our solutions in
ways that adversely affect our operating results. If our competitors offer discounts on competitive products or services, we may need to lower prices or offer other terms more favorable to existing
and prospective customers in order to compete successfully. If we raise prices based upon our own evaluation of the value of our products, those increases might not be well received by customers,
which may hurt our sales. Some of our competitors may bundle their products with other solutions for promotional purposes or as a pricing strategy, or provide guarantees of prices and product
implementations. These practices could, over time, limit the prices that we can charge for our solutions or cause us to modify our existing market strategies accordingly. If we cannot offset price
reductions and other terms that are more favorable to our customers with a corresponding increase in sales or decrease in spending, then the reduced revenue resulting from lower prices would adversely
affect our gross margins and operating results.
If we experience service interruptions in our offerings to customers, our business and financial
results could be harmed.
Our business is primarily conducted over the Internet, so we depend on our ability to protect our computer equipment and stored data against damage
from natural disasters, human error, power loss, telecommunications failures, cyber-attacks or other unauthorized intrusion and other events. Moreover, our headquarters are located in the San
Francisco Bay Area, a region known for seismic activity. Although we have redundant facilities to support our operations, our systems, procedures and controls might not be adequate for all
eventualities, which could prolong the adverse impact.
There
can be no assurance that our disaster preparedness will prevent significant interruption of our operations, which could be lengthy, or reduce the speed or functionality of our services. Service
interruptions, no matter how prolonged or frequent, may result in material liability claims from customers for breach of service-level commitments, customer terminations and damage to our reputation
and business prospects.
In
addition, third-party service providers for hosting facilities or other critical infrastructure could be interrupted in the event of a natural disaster, facility closings or other unanticipated
problems. Third-party telecommunications providers of Internet and other telecommunication services may fail to perform adequately, or their systems may fail to operate properly or be disabled,
causing business interruption, system damage or significant expense for us to replace, and could harm our revenue, increase costs, cause regulatory intervention or damage to our reputation.
Software errors could be costly and time-consuming for us to correct, and could harm our reputation
and impair our ability to sell our solutions.
Our solutions are based on complex software that may contain errors, or "bugs," that could be costly to correct, harm our reputation and impair our
ability to sell our solutions to new customers. Moreover, customers relying on our solutions to implement their incentive compensation arrangements may be more sensitive to such errors, and the
attendant potential security vulnerabilities and business interruptions for these applications. If we incur substantial costs to correct any errors of this nature, our operating margins could be
adversely affected. Because our customers depend on our solutions for critical business functions, any service interruptions could result in lost or delayed market acceptance
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and
lost sales, higher service-level credits and warranty costs, diversion of development resources and product liability suits.
Security breaches or loss of customer data could create the perception that our solutions are not
secure, causing customers to discontinue or reject the use of our solutions and potentially subjecting us to significant liability. Implementing, monitoring and maintaining adequate security
safeguards may be costly.
Our solutions allow our customers to access and transmit confidential data, including personally identifiable information of their employees, agents
and customers over the Internet, and we store our customers' data on servers. We may also have access to confidential data in connection with the activities of our professional services organization,
including implementation, maintenance and support activities for our customers.
Moreover,
many of our customers are subject to heightened security obligations regarding the personally identifiable information of their downstream customers. In the United States, these heightened
obligations particularly affect the financial services, healthcare and insurance sectors, which are subject to controls over personal information under various state and federal laws and regulations.
Other directives, such as the European Union Directive on Data Protection and accompanying laws and regulations of the Member States of the European Union implementing the directive, create
international obligations on the protection of personal data that typically exceed security requirements mandated in the United States. Implementation of security measures to satisfy customer and
regulatory requirements may be substantial and costly.
Our
security measures to protect customer information may be inadequate or breached by third-party action, including intentional misconduct or malfeasance, system error, employee error or otherwise,
resulting in unauthorized access to or disclosure of our customers' data, including intellectual property and other confidential business information. Because the techniques used to obtain
unauthorized access, or to sabotage systems, change frequently and are often not recognized until launched against a target, we may be unable to anticipate them or to implement adequate preventative
measures. Because we do not control our customers or third-party technology providers that our customers may authorize to access their data, we cannot ensure the integrity or security of their
activities. In addition, malicious third parties may conduct attacks designed to temporarily deny customers access to our services.
If
we do not adequately safeguard the information that customers import into our solutions or otherwise provide to us, or if third parties penetrate our solutions and misappropriate customers'
confidential information, our reputation may be damaged, resulting in a loss of confidence in our
solutions, negatively impacting our brand and future sales, and we may be sued and incur substantial damages. Even if it is determined that our security measures were adequate, the damage to our
reputation may cause customers and potential customers to reconsider the use of our solutions, which may have a material adverse effect on our results of operations.
Our business depends in part on a strong and trusted brand, and any failure to maintain, protect,
and enhance our brand could harm our business.
We have developed a strong and trusted brand that is associated with our solutions and services and that brand has contributed to the success of our
business. Our brand is based on customer trust in our solutions and the implementations of our solutions in their businesses, across a broad range of industries. To continue to expand our customer
base, it is important that we maintain, protect and enhance our brand. Our ability to achieve that goal depends largely on our ability to maintain our customers' trust and continue to provide
high-quality and secure solutions. Negative publicity could harm our reputation and customer confidence in and use of our solutions, whether that negative
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publicity
relates to our industry or our company, the quality and reliability of our solutions, our risk management processes, our privacy and security practices, or other issues experienced by our
customers. Accordingly, harm to our brand can stem from many sources, such as if we fail to satisfy expectations of service and quality, inadequately protect sensitive information or experience
compliance failures. If we do not successfully maintain a strong and trusted brand, our business and financial results may be harmed.
Legal and regulatory changes related to data protection and privacy could create unexpected costs,
require changes to our business, impact the use and adoption of our solutions or require us to agree to onerous terms and conditions, which could have an adverse effect on our future revenue,
operating results or customer retention.
Legal and regulatory frameworks for data protection and privacy issues are evolving worldwide, and various government and consumer agencies and
public advocacy groups have called for new regulation and changes in industry practices. We expect federal, state and foreign governments to expand data protection and privacy regulation and we expect
more public scrutiny, enforcement and sanctions in this area. In addition, foreign court judgments and regulatory actions
may affect our ability to transfer, process and receive data transnationally, including data that is critical to our operations or core to the functionality of our solutions. New laws, regulations,
judgments or actions may relate to the solicitation, collection, processing, use and disclosure of personal information, including cross-border transfers of personal information, in a way that could
affect demand for our solutions or cause us to change our platform or business model and increase our costs of doing business.
Our
customers can use our solutions to store compensation and other personal identifying information about their sales personnel that is or may be considered personal data in some jurisdictions and,
therefore, may be subject to this evolving legislation, regulation or heightened public scrutiny. In addition to the potential adoption of new laws and regulations in the United States and
internationally, evolving definitions and norms regarding personal data may require us to adapt our business practices, or limit or inhibit our ability to operate or expand our business.
In
order to comply with new United States or international laws, regulations or judgments, including adopting new and potentially onerous customer contractual clauses, we may incur substantial costs
or change our business practices in a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy. Furthermore, to comply with any new non-U.S. laws,
regulations or judgments, we may have to create expensive duplicative information technology infrastructure and business operations, which could hinder our expansion plans or render them commercially
infeasible, increase our costs of doing business and harm our financial results.
In
addition, customers may experience higher compliance costs as a result of laws, regulations and judgments, which may limit the use and adoption of our solutions and reduce overall demand, or lead
to significant fines, penalties or liabilities for any noncompliance. As a result, some industries may not adopt our solutions based on perceived privacy concerns, regardless of the validity of such
concerns.
While
we take measures to protect the security of information that we collect, use and disclose in the operation of our business, and we offer privacy protections for this information, these measures
may not always be effective. Furthermore, although we strive to comply with applicable laws and regulations relating to privacy and data collection, use and disclosure, these laws and regulations are
continually evolving, not always clear and not always consistent across the jurisdictions in which we do business. Any proceedings brought against us relating to compliance with these laws and
regulations could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, adversely affect the demand
for our solutions and ultimately result in the imposition of monetary liability or restrictions on our ability to conduct our business. There is no assurance that contractual indemnity or insurance
would be available to offset any portion of these costs.
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In addition, if we are perceived as not operating in accordance with industry best privacy practices, we may be subject to negative publicity, government investigation,
litigation or investigation by accountability groups. Any action against us could be costly and time consuming, require us to change our business practices, expose us to substantial monetary liability
and result in damage to our reputation and business.
Acquisitions of, and investments in, other businesses present many risks. We may not realize the
anticipated financial and strategic benefits of these transactions, and we may not be able to manage our operations with the acquired businesses efficiently or profitably.
As part of our business strategy, we evaluate opportunities to expand and enhance our product and service offerings to meet customer needs, increase
our market opportunities and grow revenue through internal development efforts and external acquisitions and partnerships. We have completed a number of acquisitions in recent years, including the
acquisition of certain assets of Badgeville, Inc. and ViewCentral, LLC in 2016, the acquisition of BridgeFront LLC in
2015 and the acquisitions of LeadRocket, Inc. and Clicktools Ltd. in 2014. We may continue to acquire or make investments in other companies, products, services and technologies in the
future. Acquisitions and investments may cause disruptions in, or add complexity to, our operations and involve a number of risks, including the
following:
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anticipated benefits, such as increased revenue, may not materialize if, for example, a larger than expected number of customers
choose not to renew their contracts or if we are unable to cross-sell the acquired company's solutions to our existing customer base;
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we may have difficulty integrating and managing the acquired technologies or products with our existing product lines, and maintaining
uniform standards, controls, procedures and policies across locations;
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we may experience challenges in, and have difficulty penetrating, new markets where we have little or no prior experience and where
competitors have stronger market positions;
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integrating the financial systems and personnel of the acquired business and retaining key employees may be difficult, and, to the
extent we issue shares of stock or other rights to purchase stock to such individuals, existing stockholders may be diluted;
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our ongoing business and management's attention may be disrupted or diverted by transition or integration issues and the complexity of
overseeing geographically and culturally diverse locations;
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we may find that the acquired businesses or assets do not further our business strategy, or that we overpaid for the businesses or
assets, or that we do not realize the expected operating efficiencies or product integration benefits;
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our use of cash consideration for one or more significant acquisitions may require us to use a substantial portion of our available
cash or incur substantial debt, and if we incur substantial debt, it could result in material limitations on the conduct of our business;
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we may fail to uncover or realize the significance of, or otherwise become exposed to, liabilities and other issues assumed from an
acquired business, such as claims from terminated employees or third-parties and unfavorable revenue recognition or other accounting practices; and
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we may experience customer confusion as a result of product overlap, particularly when we offer, price and support various product
lines differently.
These
factors could have a material adverse effect on our business, results of operations and financial condition or cash flows. Furthermore, during periods of operational expansion, we often need to
increase the size of our staff, our related operations and third party partnerships, and potentially amplify our financial and accounting controls to ensure they remain effective. Such changes may
increase our expenses, and there is no assurance that our infrastructure will be sufficiently scalable to efficiently manage any growth that we may experience. If we are unable to leverage our
operating cost investments as a percentage of revenue, our ability to generate or increase profits will be adversely impacted. In addition, from time to time, we may enter into negotiations for
acquisitions and other investments that are not ultimately consummated, which could result in significant expense and diversion of management attention.
Some of our products rely on third-party software licenses to operate, and the loss of or inability
to maintain these licenses, or errors, discontinuations or updates to that software, could result in higher costs, delayed sales, customer claims or termination of existing agreements.
We license technology and content from several software providers for our reporting, analytics, training, and integration applications, and we
anticipate continuing to license technologies and content from these or other providers in connection with our current and future products. We also rely on generally available third-party software to
run our applications. Any of these software applications may not continue to be available on commercially reasonable terms, if at all, or new versions may be released that are incompatible with our
offerings. Some of the products could be difficult to replace, and developing or integrating new software with our products could require months or years of design and engineering work. Modification
or loss of access to any of these technologies could result in delays in providing our products until equivalent technology or content is developed or, if available, is identified, licensed and
integrated. Acquisitions of third-party technologies or content by other companies, including our competitors, may have a material adverse impact on us if the acquirer seeks to cancel or change the
terms of our license.
In
addition, we depend upon the successful operation of third-party products in conjunction with our products or services. As a result, undetected errors in those third-party products could prevent
the implementation, or impair the functionality of, our products, delay new product introductions, limit the availability of our products via our on-demand service and injure our reputation. Our use
of additional or alternative third-party products could result in new or higher royalty payments by us if we are required to enter into license agreements for such products.
Our success depends upon our ability to develop new solutions and enhance our existing solutions
rapidly and cost-effectively. Failure to introduce new or enhanced solutions that meet customer needs may adversely affect our operating results.
The markets for sales effectiveness solutions and cloud computing are generally characterized by:
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rapid technological advances,
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changing customer needs, and
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frequent new product introductions and enhancements.
To
keep pace with technological developments, satisfy increasingly sophisticated customer requirements, achieve market acceptance and effectively respond to competition, we must quickly
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identify
emerging trends and requirements, accurately define and design enhancements and improvements for existing solutions, and introduce new solutions that satisfy our customers' changing demands.
Accelerated introductions for new solutions require high levels of expenditures for research and development that could adversely affect our operating results. Further, any new solutions we develop
may not be introduced in a timely manner or be available in a distribution model favored by our target markets and, therefore, may not achieve the broad market acceptance necessary to generate
significant revenue. If we are unable to quickly and successfully develop or acquire and distribute new products and services cost-effectively, or enhance existing solutions, or if we fail to position
and price our solutions to meet market demand, our business and operating results will be adversely affected.
Our offshore product development, support and professional services may prove difficult to manage
and may not allow us to realize our growth and cost reduction goals, or produce effective new solutions.
We use offshore resources to perform new product and services development and provide support and professional consulting efforts, which requires
detailed technical and logistical coordination. We must ensure that our international resources and personnel are aware of and understand development specifications and customer support, as well as
implementation and configuration requirements, and that they can meet applicable timelines. If we are unable to maintain acceptable standards of quality in support, product development and
professional services through our international third-party service providers, our attempts to reduce costs and drive growth through new products and margin improvements in technical support and
professional services may be negatively impacted, which would adversely affect our results of operations. Outsourcing services to offshore providers may expose us to misappropriation of our
intellectual property or that of our customers, or make it more difficult to defend intellectual property rights in our technology.
The loss of key personnel, higher than normal employee attrition in key departments or the inability
of replacement personnel to quickly and successfully perform in their new roles could adversely affect our business.
Our success depends to a significant extent on the abilities and effectiveness of our personnel, and, in particular, our chief executive officer and
other executive officers. All of our existing personnel, including our executive officers, are employed on an "at-will" basis. If we lose or terminate the services of one or more of our current
executives or key employees or if one or more of our current or former executives or key employees joins a competitor or otherwise competes with us, or if we do not have an effective succession or
development plan in place for such individuals, our ability to successfully implement our business plan could be impaired. Likewise, if a number of employees from specific departments were to depart,
our business may be adversely affected. If we are unable to quickly identify, hire, develop and retain qualified replacements for our executives, other key positions or employees within specific
departments, our ability to execute our business plan and continue to maintain and grow our business could be harmed. Competition for highly skilled personnel is intense in the San Francisco Bay Area
where our headquarters are located, so we may need to invest heavily to attract and retain new personnel, and we may never realize returns on those investments. Even if we can quickly hire qualified
replacements, we would expect to experience operational disruptions and inefficiencies during any transition.
If we are unable to hire and retain qualified employees and contractors, including sales,
professional services and engineering personnel, our growth may be impaired.
To scale our business successfully, increase productivity, maintain a high level of quality and meet customers' needs, we need to recruit, retain and
motivate highly skilled employees and contractors in all areas of our business, including sales, professional services and engineering. In particular, if we are
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unable
to hire and retain talented personnel with the skills, and in the locations, we require, we might need to redeploy existing personnel or increase our reliance on contractors. Furthermore, we
have increased and intend to continue to increase our sales force and, if we are not successful in attracting and retaining qualified personnel, or if new sales personnel are unable to achieve desired
productivity levels within a reasonable time period, we may not be able to increase our revenue and realize the anticipated benefits of these investments.
As
our customer base increases and as we continue to evaluate and modify our organizational structure to increase efficiency, we are likely to experience staffing constraints in connection with the
deployment of trained and experienced professional services and support resources capable of implementing, configuring, maintaining and supporting our products and related services. Moreover, as a
company focused on the development of complex products and the provision of online services, we are often in need of additional software developers and engineers. We have relied on our ability to
grant equity compensation as one mechanism for recruiting, retaining and motivating such highly skilled personnel. Our ability to provide equity compensation depends, in part, upon receiving
stockholder approval for an increase in shares authorized for issuance pursuant to our equity compensation plan. If we are not able to secure such approval from our stockholders, our ability to
recruit, retain and motivate our personnel may be adversely impacted, which would negatively impact our operating results.
If we are unable to maintain effective internal control over financial reporting, investors may lose
confidence in the accuracy and completeness of our financial reports and the trading price of our common stock may be negatively affected.
We are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Effective
planning and management processes are necessary to meet these requirements. We expect that we will need to continue to improve existing, and implement new, operational and financial systems,
procedures and controls to manage our business effectively in the future. We are also required to furnish a report by management on the effectiveness of our internal control over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of
Section 404 in a timely manner or assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to express an opinion
as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the trading price of our common stock
could be negatively affected, and we could become subject to investigations by The Nasdaq Stock Market LLC, the Securities and Exchange Commission or other regulatory authorities, which could
be costly for us.
If we fail to adequately protect our proprietary rights and intellectual property, we may lose
valuable assets, experience reduced revenue and incur costly litigation.
Our success and ability to compete depends on our internally-developed technology and expertise, including the proprietary technology embedded in our
solutions, as well as our ability to obtain and protect intellectual property rights. We rely on a combination of patents, trademarks, copyrights, service marks, trade secrets, contractual provisions
and other similar measures to establish and protect our proprietary rights. We cannot protect our intellectual property if we are unable to enforce our rights or if we do not detect its unauthorized
use. Despite our precautions,
unauthorized third parties may be able to copy or reverse engineer our solutions and use information that we regard as proprietary to create products and services that compete with ours. Provisions in
our agreements prohibiting unauthorized use, copying, transfer and disclosure of our licensed programs and services may be unenforceable under the laws of some jurisdictions. Further, the laws of some
countries do not
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protect
proprietary rights to the same extent as the laws of the United States, and the outcome of any actions taken in any foreign jurisdiction to enforce our rights may be different than if such
actions were determined under the laws of the United States. To the extent that we engage in international activities, our exposure to unauthorized copying and use of our products, services and
proprietary information increases.
We
enter into various restrictive agreements with our employees and consultants, as well as with customers and third parties with whom we have strategic relationships. We cannot ensure that these
agreements will be effective in controlling access to and distribution of our products, services and proprietary information. These agreements also do not prevent our competitors from independently
developing technologies that are substantially equivalent or superior to our solutions. Litigation may be necessary to enforce our intellectual property rights and protect our trade secrets.
Litigation, whether successful or unsuccessful, could result in substantial costs and diversion of management resources, either of which could seriously harm our business.
Our results of operations may be adversely affected if we are subject to a protracted infringement
claim or one that results in a significant damage award.
From time to time, we receive claims that our products, services offerings or business infringe or misappropriate the intellectual property rights of
third parties, and we have in the past, and may continue in the future, to assert claims of infringement against third parties on such bases, such as the lawsuit we settled with Versata
Software, Inc., Versata Development Group, Inc. and Versata, Inc. in November 2014. Our competitors or other third parties may also challenge the validity or scope of our
intellectual property rights. For more information, see "Item 3. Legal Proceedings" of our Annual Report on Form 10-K incorporated by reference herein. We believe that claims of
infringement are likely to increase as the functionalities of our solutions expand and we introduce new solutions, including technology acquired or licensed from third parties. Any infringement claim,
whether offensive or defensive, could:
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require costly litigation to resolve;
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absorb significant management time;
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cause us to enter into unfavorable royalty or license agreements;
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require us to discontinue the sale of, or materially modify, all or a portion of our products or services;
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require us to indemnify our customers or third-party service providers; and
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require us to expend additional development resources to redesign our products or services.
Inclusion of open source software in our products may expose us to liability or require release of
our source code.
We currently use open source software in our products and may use more in the future. We could be subject to suits by parties claiming ownership of
what we believe to be open source software that has been incorporated into our products. In addition, some open source software is provided under licenses which require that proprietary software, when
combined in specific ways with open source software, become subject to the open source license and thus freely available.
While we take steps to minimize the risk that our products, when incorporated with open source software, would become subject to
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such
provisions, few courts have interpreted open source licenses. As a result, the enforcement of these licenses is unclear. If our products became subject to open source licenses, our ability to
continue commercializing our solutions, along with our operating results, would be materially and adversely affected.
Sales to customers in international markets pose risks and challenges for which we may not achieve
the expected results.
We continue to invest substantial time and resources to grow our international operations. If we fail to do so successfully, our business and
operating results could be seriously harmed. Such expansion may require substantial financial resources and management attention. International operations involve a variety of risks,
particularly:
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greater difficulty in supporting and localizing our solutions;
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complying with numerous regulatory requirements, taxes, trade and export laws and tariffs that may conflict or change unexpectedly,
including labor, tax, privacy and data protection;
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using international resellers and complying with anti-bribery and anti-corruption laws;
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greater difficulty in establishing, staffing and managing foreign operations;
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greater difficulty in maintaining acceptable quality standards in support, product development and professional services by our
international third-party service providers;
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differing abilities to protect our intellectual property rights; and
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possible political and economic instability.
We may be affected by fluctuations in currency exchange rates.
We are potentially exposed to adverse movements in currency exchange rates. Although most of our revenue and expenses occur in U.S. Dollars, some
occur in local currencies and the amounts occurring in local currencies may increase as we expand our international operations. An increase in the value of the U.S. Dollar could increase the real cost
to our customers of our products in those markets outside the U.S., and a weakened U.S. Dollar could increase the cost of our expenses, as well as overseas capital expenditures. Therefore,
fluctuations in the exchange rate of foreign currencies may have a negative impact on our revenue and operating activities.
Our services revenue produces substantially lower gross margins than our recurring revenue, and
periodic variations in the proportional relationship between services revenue and higher margin recurring revenue may harm our overall gross margins.
Our services revenue, which includes fees for consulting, implementation and training, represented 24% of our revenue in 2015 and 21% of our revenue
for the six months ended June 30, 2016. Our services revenue has a substantially lower gross margin than our recurring revenue.
The
percentage of total revenue represented by services revenue has varied significantly from period to period principally because the number of new recurring revenue customers varies from quarter to
quarter.
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Deployment of solutions may require substantial technical implementation and support by us or
third-party service providers. We may lose sales opportunities and our business may be harmed if we do not meet these implementation and support requirements, which may cause a decline in revenue and
an increase in our expenses.
We deploy solutions, such as large enterprise-wide deployments, that require a substantial degree of technical and logistical expertise, personnel
commitments, and mutual cooperation to achieve milestone and other commitments by both us and our customers. It may be difficult for us to manage these deployments, including the timely allocation of
personnel and resources by us and our customers. Failure to successfully manage the process could harm our reputation, both generally and with specific customers, harming our sales and causing
customer disputes, which could adversely affect our revenue and increase our technical support and litigation costs. If actual remediation services exceed our accrued estimates, we could be required
to take additional charges, which could be material.
We
engage third-party partners, systems integrators and software vendors to provide customer referrals, cooperate with us in the design, sales and marketing of our solutions, provide insights into
market demands, and provide our customers with systems implementation services or overall program management. In some cases, we may not have formal agreements governing such relationships, and the
agreements we do have generally do not include specific obligations with respect to exclusivity, generating sales opportunities or cooperating on future business.
From
time to time, we also consider new or unusual strategic relationships, which can pose additional risks. For example, while reseller arrangements offer the advantage of leveraging larger sales
organizations than our own to sell our products, they also require considerable time and effort on our part to train and support the reseller's personnel, and require the reseller to properly motivate
and incentivize its sales force. Also, if we enter into an exclusive reseller arrangement, the exclusivity may prevent us from pursuing the applicable market ourselves, and if the reseller is not
successful in the particular location, our results of operations may be adversely affected.
Should
any of these third-parties go out of business, perform unsatisfactory services or choose not to work with us, we may be forced to develop new capabilities internally, which may cause
significant delays and expense, thereby adversely affecting our operating results. These third-party providers may offer products of other companies, including products competitive with ours. If we do
not successfully or efficiently establish, maintain and expand our relationships with influential market participants, we could lose sales and service opportunities, which would adversely affect our
results of operations.
Our credit agreement contains restrictive covenants and financial covenants that may limit our
operational flexibility. Furthermore, if we default on our obligations under the credit agreement, our operations may be interrupted and our business and financial results could be adversely affected.
In May 2014, we entered into a credit agreement with Wells Fargo Bank, National Association ("Wells Fargo"), under which Wells Fargo agreed to
provide a revolving loan ("Revolver") to us in an amount not to exceed $10.0 million, which was increased to $15.0 million in September 2014. We may draw upon the Revolver to finance our
operations or for other corporate purposes. The Revolver contains a number of restrictive covenants, and its terms may restrict our current and future operations,
including:
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our flexibility to plan for, or react to, changes in our business and industry conditions;
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our ability to use our cash flows, or obtain additional financing, for future working capital, capital expenditures, acquisitions or
other general corporate purposes;
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place us at a competitive disadvantage compared to our less leveraged competitors; and
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increase our vulnerability to the impact of adverse economic and industry conditions.
In
addition, if we fail to comply with the covenants or payment obligations specified in the Revolver, we may trigger an event of default and Wells Fargo would have the right to: (i) terminate
its commitment to provide additional loans under the Revolver, and (ii) declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and
payable. In addition, Wells Fargo would have the right to proceed against the Revolver collateral, which consists of substantially all of our assets. If the debt under the Revolver were to be
accelerated we may not have sufficient cash or be able to sell sufficient collateral to repay this debt, which would have an immediate material adverse effect on our business, results of operations
and financial condition.
Changes in the terms of our current or future indebtedness or assessments of our creditworthiness
may adversely affect our financial condition and results of operations.
We cannot provide assurances that additional borrowing capacity will be available under the Revolver, including whether future indebtedness will be
obtainable on favorable terms. As a result, in the future, we may be subject to higher interest rates and our interest expense may increase, which may have an adverse effect on our financial results.
Furthermore, any future assessments by any rating agency of our creditworthiness could negatively affect the value of both our debt and equity securities and increase the interest amounts we pay on
outstanding or future debt. These risks could adversely affect our financial condition and results.
Our solutions have unpredictable sales cycles, making it difficult to plan our expenses and forecast
our results.
It is difficult to determine how long the sales cycles for our solutions will be, thereby making it difficult to predict the quarter in which a
particular sale will close and to plan expenditures accordingly. Moreover, to the extent that sales are completed in the final two weeks of a quarter, the impact of recurring revenue transactions is
typically not reflected in our financial statements until subsequent quarters. The period between our initial contact with a potential customer and ultimate sale of our solutions is relatively long
due to several factors, which may include:
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the complex nature of some of our products;
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the need to educate potential customers about the uses and benefits of our solutions;
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budget cycles of our potential customers that affect the timing of purchases;
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the expiration date of existing point solutions that we seek to replace;
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customer requirements for competitive evaluation and often lengthy internal approval processes and protracted contract negotiations
(particularly of large organizations) before purchasing our solutions; and
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potential delays of purchases due to announcements or planned introductions of new solutions by us or our competitors.
The
length and unpredictability of our sales cycle make it difficult for us to project revenues and plan for levels of expenditures to support our solutions appropriately. If we do not manage our
sales cycle successfully, we may misallocate resources and our financial results may be harmed.
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Our latest product features and functionality may require existing on-premise license customers to
migrate to our SaaS solutions. Moreover, we may choose or be compelled to discontinue maintenance support for older versions of our software products, forcing our on-premise customers to upgrade their
software in order to continue receiving maintenance support. If existing on-premise license customers fail to migrate or delay migration to our on-demand solution, our revenue may be harmed.
We continue to promote our on-demand product offerings to existing customers who currently have on-premise perpetual and term licenses. Customers
with on-premise licenses may need to migrate to our on-demand solutions to take full advantage of the features and functionality in those solutions. For example, in April 2016, we stopped offering
perpetual licenses for our commissions product. We expect to periodically terminate maintenance support on older versions of our on-premise products for various reasons including, without limitation,
termination of support by third-party software vendors whose products complement ours or upon which we are dependent. Regardless of the reason, a migration is likely to involve additional cost, which
our customers may delay or decline to incur. If a sufficient number of customers do not migrate to our on-demand product offerings, our continued maintenance support opportunities and our ability to
sell additional products to these customers, and as a result, our revenue and operating income, may be harmed.
Risks Related to Our Stock and This Offering
Our stock price is likely to remain volatile.
The trading price of our common stock has in the past, and may in the future, be subject to wide fluctuations in response to many factors, including
those described in this section. The volume of trading in our common stock is limited, which may increase volatility. Investors should consider an investment in our common stock as risky and should
purchase our common stock only if they can withstand significant losses. Other factors that affect the volatility of our stock include:
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our actual and anticipated operating performance and the performance of other similar companies;
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actual and anticipated fluctuations in our financial results;
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failure of securities analysts to maintain coverage of us;
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ratings changes by any securities analysts who follow us;
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failure to meet our projected results or the published operating estimates or expectations of securities analysts and investors;
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failure to achieve revenue or earnings expectations;
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price and volume fluctuations in the overall stock market, including as a result of trends in the global economy;
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significant sales by existing investors, coupled with limited trading volume for our stock;
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announcements by us or our competitors of significant contracts, results of operations, projections, or new technologies;
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lawsuits threatened or filed against us;
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adverse publicity;
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acquisitions, commercial relationships, joint-ventures or capital commitments;
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changes in our management team or board of directors;
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publication of research reports, particularly those that are inaccurate or unfavorable, about us or our industry by securities
analysts; and
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other events or factors, including those resulting from war, incidents or terrorism or responses to these events.
Additionally,
some companies with volatile market prices for their securities have been the subject of securities class action lawsuits. Any such suit could have a material adverse effect on our
business, results of operations, financial condition and price of our common stock.
Future sales of substantial amounts of our common stock, including securities convertible into or
exchangeable for shares of our common stock could cause our stock price to fall.
We may issue additional shares of our common stock, including securities convertible into or exchangeable for, or that represent the right to
receive, shares of our common stock. Such issuances will dilute the ownership interest of our stockholders and could adversely affect the market price of our common stock. We cannot predict the effect
that future sales of shares of our common stock or other equity-related securities would have on the market price of our common stock. In addition, sales by existing stockholders of a large number of
shares of our common stock in the public trading market (or in private transactions), including sales by our executive officers, directors or institutional investors, or the perception that such
additional sales could occur, could cause the market price of our common stock to drop. We have stock options and restricted stock units outstanding for shares of our common stock. Our stockholders
may incur dilution upon exercise of an outstanding stock option or vesting of outstanding restricted stock units.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and
expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently,
stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Provisions in our charter documents and Delaware law may delay or prevent an acquisition of our
company.
Our certificate of incorporation and bylaws contain provisions that could make it harder for a third-party to acquire us without the consent of our
board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or
act by written consent without a meeting. In addition, our board of directors has staggered terms, which means that replacing a majority of our directors would require at least two annual meetings. A
potential acquirer would also be required to provide advance notice of its proposal to replace directors at any annual meeting, and would not be able to accumulate votes at a meeting, which would
require such potential acquirer to hold more shares to gain representation on the board of directors than if cumulative voting were permitted. Furthermore, Section 203 of the Delaware General
Corporation Law limits business combination
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transactions
with 15% stockholders that have not been approved by the board of directors. All of these factors make it more difficult for a third-party to acquire us without negotiation. These
provisions may apply even if the offer may be considered beneficial by some stockholders. Our board of directors could choose not to negotiate with a potential acquirer that it does not believe is in
our strategic interests. If a potential acquirer is discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by these or other measures, under some
circumstances, the market price of our common stock could be reduced.
We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways
which may not yield a return.
The net proceeds from the sale of shares of our common stock in this offering may be used for working capital and other general corporate purposes.
However, we do not currently have any specific planned uses of the net proceeds. Our management will have a broad range of discretion in the application and use of the net proceeds, and you will not
have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Until the
net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF OUR COMMON STOCK
The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of our common stock acquired in
this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not address the net investment income tax or alternative minimum
tax, and does not deal with state, local or non-U.S. tax consequences that may be relevant to Non-U.S. Holders in light of their particular circumstances, nor does it address U.S. federal estate and
gift tax consequences except to the limited extent provided below. Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under
the Internal Revenue Code of 1986, as amended (the "Code") such as financial institutions, insurance companies, tax-exempt organizations, broker-dealers and traders in securities, persons who acquired
our common stock as compensation for (or otherwise in connection with) the performance of services, certain former U.S. citizens and long-term residents, "controlled foreign corporations," "passive
foreign investment companies," corporations that accumulate earnings to avoid U.S. federal income tax, persons that hold our common stock as part of a "straddle," "hedge," "conversion transaction,"
"synthetic security" or integrated investment or other risk reduction strategy, investors who own 5% or more of our stock (except to the limited extent set forth below), partnerships and other
pass-through entities, and investors in such partnerships or pass-through entities (regardless of their places of organization or formation). Such Non-U.S. Holders are urged to consult their own tax
advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.
The
discussion below is based upon the provisions of the Code and Treasury regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the U.S. Internal Revenue Service
(the "IRS") with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions. This
discussion assumes that the Non-U.S. Holder holds our common stock as a "capital asset" within the meaning of Section 1221 of the Code (generally, property held for investment).
Persons considering the purchase of our common stock pursuant to this offering should consult their own tax advisors concerning the U.S. federal income tax consequences of
acquiring, owning and disposing of our common stock in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction, including any state,
local or non-U.S. tax consequences or any U.S. federal non-income tax consequences.
For
the purposes of this discussion, a "Non-U.S. Holder" is, for U.S. federal income tax purposes, a beneficial owner of common stock that is neither a U.S. Holder nor a partnership (or any other
entity or arrangement that is treated as a partnership) for U.S. federal income tax purposes. A "U.S. Holder"
means a beneficial owner of our common stock that is for U.S. federal income tax purposes (a) an individual who is a citizen or resident of the United States, (b) a corporation or other
entity treated as a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the income of which is subject to
U.S. federal income taxation regardless of its source or (d) a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have
the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. If you are an
individual, you may be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being either (i) lawfully admitted as a U.S. permanent resident, or (ii) present in
the United States for at least 31 days in the calendar year and for an aggregate of at
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least
183 days during a three-year period ending in the current calendar year. For these purposes, all the days present in the current year, one-third of the days present in the immediately
preceding year, and one-sixth of the days present in the second preceding year are counted.
Distributions
Subject to the discussion below, distributions, if any, made on our common stock to a Non-U.S. Holder of our common stock to the extent made out of
our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) generally will constitute dividends for U.S. tax purposes and will be subject to withholding
tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to
provide us or our paying agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E, or appropriate substitute or successor form, certifying the Non-U.S. Holder's entitlement to
benefits under that treaty. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder's behalf, the holder will be required to provide appropriate
documentation to such agent. The holder's agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. If you are eligible for a
reduced rate of U.S. federal withholding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts
withheld by timely filing an appropriate claim for a refund with the IRS.
We
generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States
(and, if required by an applicable income tax treaty, are attributable to a permanent establishment that such holder maintains in the United States) if a properly executed IRS Form W-8ECI,
stating that the dividends are so connected, is furnished to us or our paying agent. In general, such
effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A corporate Non-U.S. Holder receiving effectively connected dividends
may also be subject to an additional "branch profits tax," which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the
corporate Non-U.S. Holder's effectively connected earnings and profits, subject to certain adjustments.
To
the extent distributions on our common stock, if any, exceed our current and accumulated earnings and profits, they will first reduce your adjusted basis in our common stock as a non-taxable return
of capital, but not below zero, and then any excess will be treated as gain realized from a sale or other disposition of our common stock as described in the next section.
Gain on Disposition of Our Common Stock
Subject to the discussion below regarding backup withholding and foreign account tax compliance, a Non-U.S. Holder generally will not be subject to
U.S. federal income tax with respect to gain realized on a sale or other disposition of our common stock unless (a) the gain is effectively connected with a trade or business of such holder in
the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that such holder maintains in the United States), (b) the Non-U.S. Holder is
a nonresident alien individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (c) we are or have been a
"United States real property holding corporation" within the meaning of Code Section 897(c)(2) at any time within the shorter of the five-year period preceding such disposition or such holder's
holding period.
If
you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at regular graduated U.S. federal income tax rates and corporate
Non-U.S.
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Holders
described in (a) above may be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you are an
individual Non-U.S. Holder described in (b) above, you will be required to pay a flat 30% tax on the gain derived from the sale, or such reduced rate as is specified by an applicable income tax
treaty, which gain may be offset by certain U.S. source capital losses (even though you are not considered a resident of the United States).
With
respect to (c) above, in general, we would be a United States real property holding corporation if interests in U.S. real estate comprised (by fair market value) at least half of our
business assets. We believe that we are not, and do not anticipate becoming, a United States real property holding corporation; however, there can be no assurance that we will not become a United
States real property holding corporation in the future. Even if we are treated as a United States real property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common
stock will not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly and constructively, no more than five percent of our common stock at all
times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder's holding period and (2) our common stock is regularly traded on an established
securities market. There can be no assurance that our common stock will continue to qualify as regularly traded on an established securities market.
U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S.
corporation, our common stock will be U.S. situs property and therefore will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the
United States and the decedent's country of residence provides otherwise.
Information Reporting Requirements and Backup Withholding
Generally, we or certain financial intermediaries must report information to the IRS with respect to any dividends we pay on our common stock
including the amount of such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are paid.
Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient's country of residence.
Dividends
paid to a Non-U.S. Holder may also be subject to U.S. backup withholding. The backup withholding rate is currently 28%. U.S. backup withholding generally will not apply to a Non-U.S. Holder
who provides an applicable, properly executed IRS Form W-8 or otherwise establishes an exemption (unless we or the applicable payor have actual knowledge, or reason to know, that the holder is,
in fact, a U.S. person).
Under
current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our common stock effected by or
through a U.S. office of any broker, U.S. or non-U.S., unless the holder provides an applicable, properly executed IRS Form W-8 or otherwise meets documentary evidence requirements for
establishing Non-U.S. Holder status (and the broker does not have actual knowledge, or reason to know, that the holder is, in fact, a U.S. person) or otherwise establishes an exemption. Generally,
U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States
through a non-U.S. office of a non-U.S. broker. For information reporting purposes, however, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar
to U.S. brokers.
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Backup
withholding is not an additional tax. Any amounts withheld from a payment to a holder of common stock under the backup withholding rules can be credited against any U.S. federal income tax
liability of the holder and may entitle the holder to a refund, provided that the required information is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance Act (FATCA)
Under the legislation known as the Foreign Account Tax Compliance Act ("FATCA"), U.S. federal withholding tax of 30% generally will apply on
dividends and the gross proceeds of a disposition of our common stock paid to a foreign financial institution (as specifically defined by applicable rules) unless such institution enters into an
agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution
(which includes certain equity holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). This U.S. federal withholding tax of 30% will also apply on
dividends and the gross proceeds of a disposition of our common stock paid to a non-financial foreign entity unless such entity provides the withholding agent with a certification that it does not
have any substantial direct or indirect U.S. owners or provides information regarding direct and indirect U.S. owners of the entity, in either case on Form W-8BEN-E. The withholding tax
described above will not apply if the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from the rules. Under certain circumstances, a Non-U.S. Holder
might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this
paragraph. Non-U.S. Holders are encouraged to consult with their own tax advisors regarding the possible implications of the legislation on their investment in our common stock.
These
withholding requirements apply to payments of gross proceeds from a sale or other disposition of our common stock if such disposition occurs on or after January 1, 2019 and to payments of
dividends on our common stock regardless of the date of payment.
EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE
IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS.
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UNDERWRITING
Piper Jaffray & Co. and Credit Suisse Securities (USA) LLC are acting as representatives of each of the underwriters named
below. Subject to the terms and conditions set forth in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed,
severally and not jointly, to purchase from us, the number of shares of our common stock set forth opposite its name below.
|
|
|
|
|
Underwriter
|
|
Number of Shares
|
|
Piper Jaffray & Co.
|
|
|
2,040,000
|
|
Credit Suisse Securities (USA) LLC
|
|
|
1,402,500
|
|
Roth Capital Partners, LLC
|
|
|
765,000
|
|
Craig-Hallum Capital Group LLC
|
|
|
637,500
|
|
B. Riley & Co., LLC
|
|
|
255,000
|
|
|
|
|
|
|
Total
|
|
|
5,100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject
to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting
agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the
underwriting agreement may be terminated.
We
have agreed to indemnify the several underwriters against certain liabilities, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
Discounts and Commissions
The representatives have advised us that the underwriters propose initially to offer the shares to the public at the public offering price set forth
on the cover page of this prospectus and to dealers at that price less a concession of $0.657 per share. After the initial offering, the public offering price, concession or any other term of this
offering may be changed. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
The
following table shows the public offering price, underwriting discounts and commissions and proceeds before expenses to us. The information assumes either no exercise or full exercise by the
underwriters of their option to purchase additional shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
Without Option
|
|
With Option
|
|
Public offering price
|
|
$
|
18.250
|
|
$
|
93,075,000
|
|
$
|
107,036,250
|
|
Underwriting discounts and commissions
|
|
$
|
1.095
|
|
$
|
5,584,500
|
|
$
|
6,422,175
|
|
Proceeds, before expenses, to us
|
|
$
|
17.155
|
|
$
|
87,490,500
|
|
$
|
100,614,075
|
|
The
underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval
of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such
shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters' option to purchase additional shares described below. If an underwriter
defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased.
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We
have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 765,000 additional shares of our common stock at the public offering
price listed on the cover page of this prospectus, less underwriting discounts and commissions. To the extent the option is exercised, each underwriter will become obligated, subject to certain
conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter's name in the preceding table bears to the total number of
shares of common stock listed next to the names of all underwriters in the table above.
The
estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $350,000.
Our
common stock is listed on The NASDAQ Global Market under the trading symbol "CALD."
No Sales of Similar Securities
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities
and Exchange Commission a registration statement under the Securities Act of 1933 (the "Securities Act") relating to, any shares of our common stock or securities convertible into or exchangeable or
exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Piper
Jaffray & Co. and Credit Suisse Securities (USA) LLC for a period of 60 days after the date of this prospectus except grants of employee stock options, restricted stock or
restricted stock units pursuant to the terms of a plan in effect on the date of this prospectus, issuances of securities pursuant to the exercise of such options, or the exercise or vesting of any
other employee stock options, restricted stock or restricted stock units outstanding on the date of this prospectus.
Our
executive officers and directors have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that
transfers, in whole or in part, any of the economic consequences of ownership of our common stock whether any of these transactions are to be settled by delivery of our common stock or other
securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in
each case, the prior written consent of Piper Jaffray & Co. and Credit Suisse Securities (USA) LLC for a period of 60 days after the date of this prospectus. These
restrictions are subject to certain exceptions, including:
-
-
the sale of common stock or securities convertible into common stock or exercisable for common stock under a trading plan pursuant to
Rule 10b5-1 of the Exchange Act that is existing as of the date of this prospectus, provided that to the extent a filing under the Exchange Act is required by law and is made in connection with
any such sales during the period of 60 days after the date of this prospectus, such filing shall state that such sales have been executed under a 10b5-1 plan, and shall also state the date such
trading plan was adopted;
-
-
the modification, amendment or termination of (in each case, in accordance with the 10b5-1 plan and our internal policies), a 10b5-1
plan in existence as of the date of this prospectus; provided that to the extent a public announcement or filing under the Exchange Act regarding such modification, amendment or termination shall be
required by law by any officer or director party to such 10b5-1 plan or us, such announcement or filing shall include a statement to the effect that no transfer of common stock may be
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Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing shares
of our common stock. However, the representatives may engage in transactions that stabilize the price of our common stock, such as bids or purchases to peg, fix or maintain that price.
In
connection with this offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales, purchases on the open market to
cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering.
"Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares described above. The underwriters may close out any covered short position by
either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will
consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares.
"Naked" short sales are sales in excess of the option to purchase additional shares. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely
affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of shares of our common stock made by the underwriters in the open market prior to the
closing of this offering.
The
underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives
have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar
to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing
or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The underwriters
may conduct these transactions on The NASDAQ Global Market, in the over-the-counter market or otherwise.
Neither
we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common
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stock.
In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be
discontinued without notice.
Electronic Offer, Sale and Distribution of Shares
In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.
In addition, one or more of the underwriters may facilitate Internet distribution for this offering to certain of their Internet subscription customers. Any such underwriter may allocate a limited
number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet websites maintained by any such underwriter. Other than the prospectus in electronic
format, the information on the websites of any such underwriter is not part of this prospectus.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities
trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the
underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They
have received, or may in the future receive, customary fees and commissions for these transactions.
In
the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities
activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent
research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") an
offer to the public of any shares of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock
may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
-
(a)
-
to
any legal entity which is a qualified investor as defined in the Prospectus Directive;
-
(b)
-
to
fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons
(other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer;
or
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-
(c)
-
in
any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our common stock shall
result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.
For
the purposes of this provision, the expression an "offer to the public" in relation to any shares of our common stock in any Relevant Member State means the communication in any form and by any
means of sufficient information on the terms of the offer and any shares of our common stock to be offered so as to enable an investor to decide to purchase any shares of our common stock, as the same
may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto,
including the 2010 PD Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.
United Kingdom
Each underwriter has represented and agreed that:
-
(a)
-
it
has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in
investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of the shares of our
common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and
-
(b)
-
it
has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our common stock
in, from or otherwise involving the United Kingdom.
Canada
The shares of our common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as
defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National
Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares of our common stock must be made in accordance with an exemption from, or in
a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities
legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the prospectus (including any amendment thereto) contains a
misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser
within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the
purchaser's province or territory for particulars of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105
Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection
with this offering.
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Hong Kong
The shares common of common stock may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do
not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and
Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the
Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue
(in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the
laws of Hong Kong) other than with respect to common shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the
Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document
or material in connection with the offer or sale, or invitation for subscription or purchase, of the common shares may not be circulated or distributed, nor may the shares of common stock be offered
or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a
relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or
(iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where
the shares of common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
-
(a)
-
a
corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the
entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
-
(b)
-
a
trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who
is an accredited investor,
shares,
debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after
that corporation or that trust has acquired the common shares pursuant to an offer made under Section 275 of the SFA except:
-
(a)
-
to
an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or
to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a
consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and
further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
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-
(b)
-
where
no consideration is or will be given for the transfer; or
-
(c)
-
where
the transfer is by operation of law.
Switzerland
The shares of common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the "SIX") or on any other
stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the
Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility
in Switzerland. Neither this document nor any other offering or marketing material relating to the common shares or the offering may be publicly distributed or otherwise made publicly available in
Switzerland.
Neither
this document nor any other offering or marketing material relating to the offering, or the shares of common have been or will be filed with or approved by any Swiss regulatory authority. In
particular, this document will not be filed with, and the offer of shares of common stock will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares of
common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes ("CISA"). Accordingly, no public distribution, offering or advertising, as defined in
CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from
Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of shares of common stock.
United Arab Emirates
This offering has not been approved or licensed by the Central Bank of the United Arab Emirates (the "UAE"), Securities and Commodities Authority of
the UAE and/or any other relevant licensing authority in the UAE including any licensing authority incorporated under the laws and regulations of any of the free zones established and operating in the
territory of the UAE, in
particular the Dubai Financial Services Authority ("DFSA"), a regulatory authority of the Dubai International Financial Centre ("DIFC"). The offering does not constitute a public offer of securities
in the UAE, DIFC and/or any other free zone in accordance with the Commercial Companies Law, Federal Law No 8 of 1984 (as amended), DFSA Offered Securities Rules and NASDAQ Dubai Listing Rules,
accordingly, or otherwise. The shares of common stock may not be offered to the public in the UAE and/or any of the free zones.
The
shares of common stock may be offered and issued only to a limited number of investors in the UAE or any of its free zones who qualify as sophisticated investors under the relevant laws and
regulations of the UAE or the free zone concerned.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and
Investments Commission ("ASIC'), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act
2001 (the "Corporations Act"), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
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Any
offer in Australia of the shares may only be made to persons (the "Exempt Investors") who are "sophisticated investors" (within the meaning of section 708(8) of the Corporations Act),
"professional investors" (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act
so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The
shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in
circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise
or where the offer is.
Notice to Prospective Investors in Japan
The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended)
and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or
to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the
relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
France
This prospectus (including any amendment, supplement or replacement thereto) is not being distributed in the context of a public offering in France
within the meaning of Article L. 411-1 of the French Monetary and Financial Code (Code monétaire et financier).
This
prospectus has not been and will not be submitted to the French Autorité des marchés financiers (the "AMF") for approval in France and accordingly may not and will
not be distributed to the public in France.
Pursuant
to Article 211-3 of the AMF General Regulation, French residents are hereby informed that:
1. the
transaction does not require a prospectus to be submitted for approval to the AMF;
2. persons
or entities referred to in Point 2°, Section II of Article L.411-2 of the Monetary and Financial Code may take part in the transaction solely for
their own account, as provided in Articles D. 411-1, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the Monetary and Financial Code; and
3. the
financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L.
621-8 to L. 621-8-3 of the Monetary and Financial Code.
This
prospectus is not to be further distributed or reproduced (in whole or in part) in France by the recipients of this prospectus. This prospectus has been distributed on the understanding that such
recipients will only participate in the issue or sale of our common stock for their own account and undertake not to transfer, directly or indirectly, our common stock to the public in France, other
than in compliance with all applicable laws and regulations and in particular with Articles L. 411-1 and L. 411-2 of the French Monetary and Financial Code.
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