Item 1. Financial Statements (Unaudited)
Notes to Consolidated Financial Statements
(In thousands, except share and per share data, where otherwise noted, or instances where expressed in millions)
1. Organization and Operations
TechTarget, Inc. and its subsidiaries (collectively, the “Company”) is a global data and analytics leader and software provider for buyers of purchase intent-driven marketing and sales data for enterprise technology vendors. The Company’s service offerings enable technology vendors to better identify, reach and influence corporate information technology (“IT”) decision-makers actively researching specific IT purchases. The Company improves vendors’ ability to impact these audiences for business growth using advanced targeting, analytics and data services complemented by customized marketing programs that integrate demand generation, brand advertising techniques, and content curation and creation. The Company operates a network of approximately 140 websites and 945 webinars and virtual event channels, which each focus on a specific IT sector such as storage, security or networking. IT and business professionals have become increasingly specialized, and they have come to rely on the Company’s sector-specific websites and webinars and virtual event channels for purchasing decision support. The Company’s content platforms enable IT and business professionals to navigate the complex and rapidly changing IT landscape where purchasing decisions can have significant financial and operational consequences. At critical stages of the purchase decision process, these content offerings through different channels meet IT and business professionals’ needs for expert, peer and IT vendor information and provide platforms on which B2B technology companies can launch targeted marketing campaigns which generate measurable return on investment. Based upon the logical clustering of members and users’ respective job responsibilities and the marketing focus of the products being promoted by the Company’s customers, the Company categorizes its content offerings to address the key market opportunities and audience extensions across a portfolio of distinct market categories: Security; Networking; Storage; Data Center and Virtualization Technologies; CIO/IT Strategy; Business Applications and Analytics; Application Architecture and Development; and ANCL Channel.
2. Summary of Significant Accounting Policies
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these Notes to Consolidated Financial Statements. The Company’s critical accounting policies are those that affect its more significant judgments used in the preparation of its consolidated financial statements. A description of the Company’s critical accounting policies and estimates is contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and in this note to the consolidated financial statements.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, TechTarget Securities Corporation (“TSC”), TechTarget Limited, TechTarget (HK) Limited (“TTGT HK”), TechTarget (Australia) Pty Ltd., TechTarget (Singapore) Pte Ltd., E-Magine Médias SAS (“LeMagIT”), TechTarget Germany GmbH and as of December 23, 2020, BrightTALK Limited and its wholly owned subsidiary, BrightTALK, Inc. (collectively, the “BrightTALK subsidiaries”). TSC is a Massachusetts corporation. TechTarget Limited is a subsidiary doing business principally in the United Kingdom. TTGT HK is a subsidiary incorporated in Hong Kong in order to facilitate the Company’s activities in the Asia-Pacific region. TechTarget (Australia) Pty Ltd. and TechTarget (Singapore) Pte Ltd. are the entities through which the Company does business in Australia and Singapore, respectively; LeMagIT and TechTarget Germany GmbH, both wholly-owned subsidiaries of TechTarget Limited, are entities through which the Company does business in France and Germany, respectively. The BrightTALK subsidiaries are entities which the Company does business for the BrightTALK webinar and virtual event platform.
7
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted (Generally Accepted Accounting Principles or “U.S. GAAP”) in the United States (“U.S.”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown, are of a normal, recurring nature and have been reflected in the consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of results to be expected for any other interim periods or for the full year. The information included in these consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Reclassifications
The Company historically presented depreciation and amortization expense as one combined line item on the Consolidated Statements of Income and Comprehensive Income. Due to the Company’s recent acquisitions, the materiality of amortization expense has increased and the Company has decided to present these expenses in two separate line items for all periods presented. This reclassification had no effect on total operating expenses or net income.
Foreign Currency Translation
The functional currency of the Company’s major foreign subsidiaries is generally the local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are recorded as a separate component on the Consolidated Statement of Comprehensive Income. Foreign currency transaction gains and losses are included in interest and other income (expense), net in the Consolidated Statement of Income. All assets and liabilities denominated in foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate during the period.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue, long-lived assets, goodwill, the allowance for doubtful accounts, stock-based compensation, self-insurance accruals, and income taxes. The Company reduces its accounts receivable for an allowance for doubtful accounts based on its best estimate of the amount of probable credit losses. Estimates of the carrying value of certain assets and liabilities are based on historical experience and on various other assumptions that the Company believes to be reasonable. Actual results could differ from those estimates.
Revenue Recognition
The Company generates its revenue from the sale of purchase intent data and marketing and sales services, which it delivers via its network of websites, webinar and virtual event channels, and data analytics solutions. Revenue is recognized when performance obligations are satisfied by transferring promised goods or services to customers, as determined by applying a five-step process consisting of: a) identifying the contract, or contracts, with a customer, b) identifying the performance obligations in the contract, c) determining the transaction price, d) allocating the transaction price to the performance obligations in the contract, and e) recognizing revenue when, or as, performance obligations are satisfied.
Accounts Receivable
We maintain an allowance for credit losses for expected uncollectible accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the Consolidated Statements of Income and Comprehensive Income. We assess collectability by reviewing accounts receivable on an individual basis when we
8
identify specific customers with known disputes, overdue amounts or collectability issues and also reserve for losses on all accounts based on historical information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status and make judgments about the creditworthiness of customers based on ongoing credit evaluations.
At March 31, 2021, the Company’s collectability assessment continues to include the business and market disruptions caused by COVID-19 and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict, causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.
Fair Value of Financial Instruments
Financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and contingent consideration. Due to their short-term nature and liquidity, the carrying value of these instruments, with the exception of contingent consideration and long-term debt, approximates their estimated fair values. The Company classifies all of its short-term investments as available-for-sale. The fair value of contingent consideration was estimated using a discounted cash flow method.
Business Combinations
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement.
During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s Consolidated Statement of Income and Comprehensive Income.
Other Liabilities
Other liabilities consist of the long-term portions of amounts payable related to our acquisition of substantially all of the assets of The Enterprise Strategy Group, Inc. and Data Science Central LLC (see Note 14) and the amounts deferred under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) which allows employers to defer the payment of the Company’s employer share of FICA payroll taxes. The amount of the employer share of FICA payroll taxes (6.2% of the first $137,700 of employee pay) due for the period beginning on March 27, 2020, and ending December 31, 2020, can be deferred. The deferred amounts will then be payable in equal installments at December 31, 2021 and December 31, 2022. Amounts relating to payment due December 31, 2021 of $958,621 are included in accrued expenses as of March 31, 2021.
Recent Accounting Pronouncements
Recently Adopted Accounting Guidance
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350), simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (step 2 of the goodwill impairment test) and instead requires only a one-step quantitative impairment test, performed by comparing the fair value of goodwill with its carrying amount. ASU 2017-04 is effective on a prospective basis effective for goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We adopted the new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15), which requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the non-cancellable term of
9
the cloud computing arrangements plus any optional renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. We adopted the new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-03, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-03) which amends ASC 326 “Financial Instruments—Credit Losses” which introduces a new methodology for accounting for credit losses on financial instruments. The guidance establishes a new forward looking "expected loss model" that requires entities to estimate current expected credit losses on accounts receivable and financial instruments by using all practical and relevant information. We adopted the new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements” (Topic 820) (ASU 2018-13), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. We adopted the new standard effective January 1, 2020 and the guidance did not have a material impact on our consolidated financial statements.
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments and contracts on an entity’s own equity. Among other things, the standard removes certain accounting models which require bifurcation from the host contract of certain features of convertible debt instruments, unless the feature qualifies as a derivative under ASC 815. Additionally, companies are required to use the if-converted method for convertible instruments in their calculations of diluted earnings per share. Early adoption is permitted but no earlier than the fiscal year beginning after December 15, 2020.
The Company elected to early adopt ASU 2020-06 effective January 1, 2021. The Company has elected the modified retrospective method to transition to the guidance. The modified retrospective method requires the Company to:
|
1)
|
Recombine our convertible notes into a single instrument by reclassifying the amount initially recorded to the equity component against the outstanding debt on the convertible notes.
|
|
2)
|
Reclassify an amount from retained earnings equal to the difference between the sum of the carrying values of the debt and the conversion feature immediately before transition and the revised amortized cost of the combined convertible instrument under the traditional debt model as of the transition date.
|
|
3)
|
Post-transition, account for the convertible notes as a single instrument recognizing interest expense based on the applicable and recalculated effective interest rate and continue to apply the if-converted method in the Company’s calculation of diluted earnings per share.
|
The following table summarizes the impact of the Company’s adoption of ASU 2020-06:
|
|
December 31, 2020
|
|
|
January 1, 2021
|
|
|
|
|
|
Convertible Debt
|
|
$
|
153,882
|
|
|
$
|
194,649
|
|
|
$
|
40,767
|
|
Additional Paid-in Capital
|
|
|
363,055
|
|
|
|
332,555
|
|
|
|
(30,500
|
)
|
Retained Earnings
|
|
|
37,580
|
|
|
|
37,813
|
|
|
|
233
|
|
Deferred Tax Liabilities
|
|
|
23,848
|
|
|
|
13,348
|
|
|
|
(10,500
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
10
3. Revenue
Disaggregation of Revenue
The following table depicts the disaggregation of revenue according to categories consistent with how the Company evaluates its financial performance and economic risk. International revenue consists of international geo-targeted campaigns, which are campaigns targeted at an audience of members outside of North America.
|
For the Three Months Ended
March 31,
|
|
|
2021
|
|
|
2020
|
|
North America
|
$
|
33,038
|
|
|
$
|
19,881
|
|
International
|
|
19,931
|
|
|
|
11,535
|
|
Total
|
$
|
52,969
|
|
|
$
|
31,416
|
|
Contract Liabilities
Timing may differ between the satisfaction of performance obligations and the invoicing and collections of amounts related to the Company’s contracts with customers. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. Additionally, certain customers may receive credits, which are accounted for as a material right. The Company estimates these amounts based on the expected amount of future services to be provided to customer and allocates a portion of the transaction price to these material rights. The Company recognizes these material rights as the material rights are exercised. The resulting amounts included in the contract liabilities on the accompanying Consolidated Balance Sheets were $2.4 million and $2.2 million at March 31, 2021, and December 31, 2020, respectively.
|
|
Contract Liabilities
|
|
Year-to-Date Activity
|
|
|
|
|
Balance at December 31, 2020
|
|
$
|
15,689
|
|
Deferral of revenue
|
|
|
62,341
|
|
Recognition of previously unearned revenue
|
|
|
(52,969
|
)
|
Balance at March 31, 2021
|
|
$
|
25,061
|
|
The Company elected to apply the following practical expedients:
|
•
|
Existence of a Significant Financing Component in a Contract. As a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will be one year or less. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In addition, the Company has determined that the payment terms that the Company provides to its customers are structured primarily for reasons other than the provision of financing to the customer.
|
11
|
•
|
Costs to Fulfill a Contract. The Company’s revenue is primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentive compensation paid based on the achievements of sales targets. As a practical expedient, for amortization periods that are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.
|
|
•
|
Revenue Invoiced. The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
|
4. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including short-term and long-term investments and contingent consideration. The Company’s bank and money market accounts are in bank deposits and are not quoted instruments. As such they are all considered cash. The fair value of these financial assets and liabilities was determined based on three levels of input as follows:
|
•
|
Level 1. Quoted prices in active markets for identical assets and liabilities;
|
|
•
|
Level 2. Observable inputs other than quoted prices in active markets; and
|
|
•
|
Level 3. Unobservable inputs.
|
The fair value hierarchy of the Company’s financial assets carried at fair value and measured on a recurring basis is as follows:
|
|
|
|
|
|
Fair Value Measurements at
March 31, 2021
|
|
|
|
March 31, 2021
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments (1)
|
|
$
|
84
|
|
|
$ —
|
|
|
$
|
84
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration - current (2)
|
|
$
|
1,984
|
|
|
$ —
|
|
|
$ —
|
|
|
$
|
1,984
|
|
Contingent consideration - non-current (2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total liabilities
|
|
$
|
1,984
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,984
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2020
|
|
|
|
December 31, 2020
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments (1)
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration - current (2)
|
|
$
|
1,027
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,027
|
|
Contingent consideration - non-current (2)
|
|
|
1,751
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,751
|
|
Total liabilities
|
|
$
|
2,778
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,778
|
|
(1)
|
Short-term investments consist of municipal bonds, corporate bonds, bond funds, U.S. Treasury securities, and government agency bonds; their fair value is calculated using an interest rate yield curve for similar instruments.
|
12
(2)
|
Contingent consideration liabilities are measured using the income approach and discounted to present value based on an assessment of the probability that the Company would be required to make such future payments. The contingent consideration liabilities are measured at fair value using significant Level 3 (unobservable) inputs such as discount rates and probability measures. Remeasurement of the contingent consideration to fair value is expensed through the income statement in the period remeasured.
|
5. Cash and Investments
Cash is carried at cost, which approximates fair market value. As of March 31, 2021 and December 31, 2020, cash consisted of $93.8 million and $82.6 million respectively.
Investments are recorded at fair value with the related unrealized gains and losses included in accumulated other comprehensive income, a component of stockholders’ equity, net of tax. Realized gains and losses on the sale of these investments are determined using the specific identification method. There were no realized gains or losses as of March 31, 2021 or December 31, 2020.
Short-term investments consisted of the following:
|
|
March 31, 2021
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond funds
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
Total short-term investments
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
|
December 31, 2020
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond funds
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
Total short-term investments
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
6. Goodwill and Intangible Assets
The following table summarizes the Company’s intangible assets, net:
|
|
|
|
|
|
March 31, 2021
|
|
|
|
Estimated
Useful Lives
(Years)
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Customer, affiliate and advertiser relationships
|
|
5-19
|
|
|
$
|
78,546
|
|
|
$
|
(7,803
|
)
|
|
$
|
70,743
|
|
Developed websites, technology and patents
|
|
|
10
|
|
|
|
32,725
|
|
|
|
(2,059
|
)
|
|
|
30,666
|
|
Trademark, trade name and domain name
|
|
5-16
|
|
|
|
7,652
|
|
|
|
(1,961
|
)
|
|
|
5,691
|
|
Proprietary user information database and internet traffic
|
|
|
5
|
|
|
|
1,146
|
|
|
|
(1,146
|
)
|
|
|
—
|
|
Non-compete agreements
|
|
1.5-3
|
|
|
|
230
|
|
|
|
(73
|
)
|
|
|
157
|
|
Total intangible assets
|
|
|
|
|
|
$
|
120,299
|
|
|
$
|
(13,042
|
)
|
|
$
|
107,257
|
|
13
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Estimated
Useful Lives
(Years)
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Customer, affiliate and advertiser relationships
|
|
5-19
|
|
|
$
|
78,283
|
|
|
$
|
(6,595
|
)
|
|
$
|
71,688
|
|
Developed websites, technology and patents
|
|
|
10
|
|
|
|
32,535
|
|
|
|
(1,315
|
)
|
|
|
31,220
|
|
Trademark, trade name and domain name
|
|
5-16
|
|
|
|
7,619
|
|
|
|
(1,831
|
)
|
|
|
5,788
|
|
Proprietary user information database and internet traffic
|
|
|
5
|
|
|
|
1,149
|
|
|
|
(1,149
|
)
|
|
—
|
|
Non-compete agreements
|
|
1.5-3
|
|
|
|
230
|
|
|
|
(54
|
)
|
|
|
176
|
|
Total intangible assets
|
|
|
|
|
|
$
|
119,816
|
|
|
$
|
(10,944
|
)
|
|
$
|
108,872
|
|
Intangible assets are amortized over their estimated useful lives, which range from eighteen months to nineteen years, using methods of amortization that are expected to reflect the estimated pattern of economic use. The remaining amortization expense will be recognized over a weighted-average period of approximately 7.4 years. Amortization expense was $2.2 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively. Amortization expense relating to developed websites, technology and patents is recoded within costs of revenues. All other amortization is recorded within operating expenses as the remaining intangible assets consist of customer-related assets which generate website traffic that the Company considers to be in support of selling and marketing activities. The Company did not write off any fully amortized intangible assets in the first three months of 2021.
The Company expects amortization expense of intangible assets to be as follows:
Years Ending December 31:
|
|
Amortization
Expense
|
|
2021 (April 1 – December 31)
|
|
$
|
6,516
|
|
2022
|
|
|
8,241
|
|
2023
|
|
|
8,072
|
|
2024
|
|
|
8,041
|
|
2025
|
|
|
8,041
|
|
Thereafter
|
|
|
68,346
|
|
Total
|
|
$
|
107,257
|
|
Goodwill and indefinite-lived intangible assets are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. The Company did not have any intangible assets with indefinite lives other than goodwill as of March 31, 2021 or December 31, 2020. There were no indications of impairment as of March 31, 2021, and the Company believes that, as of the balance sheet dates presented, none of the Company’s goodwill or intangible assets was impaired.
14
7. Net Income Per Common Share
A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per common share is as follows:
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,810
|
|
|
$
|
2,207
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock and vested, undelivered restricted stock units outstanding
|
|
|
28,140,619
|
|
|
|
28,003,663
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock and vested, undelivered restricted stock units outstanding
|
|
|
28,140,619
|
|
|
|
28,003,663
|
|
Effect of potentially dilutive shares (1)
|
|
|
1,101,728
|
|
|
|
436,056
|
|
Total weighted average shares of common stock and vested, undelivered restricted stock units outstanding and potentially dilutive shares
|
|
|
29,242,347
|
|
|
|
28,439,719
|
|
Net Income Per Common Share:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$
|
1,810
|
|
|
$
|
2,207
|
|
Weighted average shares of stock outstanding
|
|
|
28,140,619
|
|
|
|
28,003,663
|
|
Basic net income per common share
|
|
$
|
0.06
|
|
|
$
|
0.08
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$
|
1,810
|
|
|
$
|
2,207
|
|
Weighted average shares of stock outstanding
|
|
|
29,242,347
|
|
|
|
28,439,719
|
|
Diluted net income per common shares (1)
|
|
$
|
0.06
|
|
|
$
|
0.08
|
|
(1)
|
In calculating diluted net income per share, 26.0 thousand shares related to outstanding stock options and unvested, undelivered restricted stock units were excluded for the three months ended March 31, 2021. Additionally, we excluded the impact of the amortization into interest expense from net income relating to our convertible shares and the resulting 2.9 million common shares under the if-converted method due to their anti-dilutive nature. 37.5 thousand shares related to outstanding stock options and unvested, undelivered restricted stock units were excluded for the three months ended March 31, 2020.
|
8. Convertible Debt and Loan Agreement
Convertible Debt
In December 2020, the Company issued $201.3 million in aggregate principal amount of 0.125% convertible senior notes (the “Notes”) due December 15, 2025, unless earlier repurchased by the Company or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2021.
The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes are unsecured and rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes and equal in right of payment to the Company’s unsecured indebtedness that is not so subordinated.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election.
The Notes have an initial conversion rate of 14.1977 shares of common stock per $1,000 principal amount of the Notes. This represents an initial effective conversion price of approximately $70.43 per share of common stock and 2,857,447 shares issuable upon conversion. Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited circumstances. Accrued but unpaid interest will be deemed to be paid by cash, shares of the Company’s common
15
stock or a combination of cash and shares of the Company’s common stock paid or delivered, as the case may be, to the holder upon conversion of the Notes.
Prior to the close of business on September 15, 2025, the Notes will be convertible at the option of holders during certain periods, only upon satisfaction of certain conditions set forth below. On or after September 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at the conversion price at any time regardless of whether the conditions set forth below have been met.
Holders may convert all or a portion of their Notes prior to the close of business on September 14, 2025, in multiples of the $1,000 principal amount, only under the following circumstances:
|
•
|
during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sales price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
|
|
•
|
during the five business day period after any five consecutive trading day period, or the Notes measurement period, in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
|
|
•
|
if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on September 14, 2025; or
|
|
•
|
upon the occurrence of specified corporate events as set forth in the Indenture.
|
As of March 31, 2021, the Notes were not yet convertible.
Prior to the adoption of ASU 2020-06, based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturities, the Company estimated the implied market interest rate of its Notes to be approximately 5%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component of the Notes, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $158.8 million upon issuance, calculated as the present value of future contractual payments based on the $201.3 million of aggregate principal amount. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is amortized to interest expense over the term of the Notes. The $42.5 million difference between the gross proceeds received from issuance of the Notes of $201.3 million and the estimated fair value of the liability component represents the equity component of the Notes and was recorded in additional paid-in capital. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the transaction costs related to the issuance of the Notes, the Company allocated the total amount incurred to the liability and equity components in proportion to the allocation of proceeds. Transaction costs attributable to the liability component, totaling $5.25 million, are being amortized to expense over the term of the Notes, and transaction costs attributable to the equity component, totaling $1.4 million, were included with the equity component in shareholders’ equity.
Effective January 1, 2021, upon the adoption of ASU 2020-06, the Company reclassified the equity component into the debt component as more fully described above.
The Notes consist of the following:
|
March 31, 2021
|
|
December 31, 2020
|
|
Liability Component:
|
|
|
|
|
|
|
Principal
|
$
|
201,250
|
|
$
|
201,250
|
|
Less: debt discount, net of amortization
|
|
6,274
|
|
|
47,368
|
|
Net carrying amount
|
$
|
194,976
|
|
$
|
153,882
|
|
Equity component (a)
|
$
|
-
|
|
$
|
41,059
|
|
(a)Recorded in the consolidated balance sheet within additional paid-in capital, net of $1,404 transaction costs in equity
16
The following table sets forth total interest expense recognized related to the Notes:
|
March 31, 2021
|
|
December 31, 2020
|
|
0.125% coupon
|
$
|
63
|
|
$
|
10
|
|
Amortization of debt discount and transaction costs
|
|
327
|
|
|
346
|
|
|
$
|
390
|
|
$
|
356
|
|
As of March 31, 2021, the fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted prices of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s convertible notes classified in equity) were as follows:
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Convertible senior notes
|
$
|
234,615
|
|
$
|
194,976
|
|
$
|
218,940
|
|
$
|
153,882
|
|
Based on the closing price of our common stock of $69.45 on March 31, 2021, the if-converted value of the Notes was less than their respective principal amounts.
Loan Agreement
On December 24, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Western Alliance Bank (the “Bank”) as the lender. The Loan Agreement provided for a $25 million term loan facility with a maturity date of December 10, 2023. The Loan Agreement was paid in full in December 2020 and all liens related to the Loan Agreement released.
Borrowings under the Loan Agreement bore interest, on the outstanding daily balance thereof, at a floating per annum rate equal to one and three-eighths percent (1.375%) above the greater of (a) the one (1) month U.S. LIBOR rate reported in The Wall Street Journal as of such date or (b) two percent (2.00%).
9. Leases, Contingencies, and Subsequent Event
The Company conducts its operations in leased office facilities under various noncancelable operating lease agreements that expire through December 2029.
On October 26, 2017, the Company entered into a Third Amendment (the “Third Amendment”) to the lease agreement for office space in Newton, Massachusetts, dated as of August 4, 2009 (the “Newton Lease”). The Third Amendment extended the lease term to December 31, 2029 and preserves the Company’s option to extend the term for an additional five-year period subject to certain terms and conditions set forth in the Newton Lease. The Third Amendment reduced the rentable space from approximately 110,000 square feet to approximately 74,000 square feet effective January 1, 2018. Beginning on January 1, 2018, base monthly rent under the Third Amendment will be $0.3 million. The base rent will increase biennially at a rate averaging approximately 1% per year, beginning on January 1, 2020. The Company remains responsible for certain other costs under the Third Amendment, including operating expense and taxes.
In April 2021, the Company entered into a Fourth Amendment (the “Fourth Amendment”). The Fourth Amendment becomes effective during May 2021. The Fourth Amendment will reduce the rentable space from approximately 74,000 square feet to approximately 68,000 square feet and will provide the Company with a one-time payment of approximately $0.6 million. Beginning June 1, 2021, base monthly rent will be approximately $0.25 million per month. All other terms and conditions are substantially similar to the Third Amendment.
Certain of the Company’s operating leases , including the Newton Lease, include lease incentives and escalating payment amounts and are renewable for varying periods. The Company recognizes the related rent expense on a straight-line basis over the term of each lease, taking into account the lease incentives and escalating lease payments.
17
The Company has various non-cancelable lease agreements for certain of its offices with original lease periods expiring between 2021 and 2029. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain it will exercise that option. Leases with renewal options allow the Company to extend the lease term typically between 1 and 5 years. When determining the lease term, renewal options reasonably certain of being exercised are included in the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain that the Company would exercise such option. Renewal and termination options were generally not included in the lease term for the Company's existing operating leases. Certain of the arrangements have discounted rent periods or escalating rent payment provisions. Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheets. The Company recognizes rent expense on a straight-line basis over the lease term.
As of March 31, 2021, operating lease assets were $25.2 million and operating lease liabilities were $29.5 million. The maturities of the Company’s operating lease liabilities as of March 31, 2021 were as follows:
|
|
Minimum Lease
|
|
Years Ending December 31:
|
|
Payments
|
|
2021 (April 1 – December 31)
|
|
$
|
3,494
|
|
2022
|
|
|
4,605
|
|
2023
|
|
|
4,257
|
|
2024
|
|
|
4,253
|
|
2025
|
|
|
3,464
|
|
Thereafter
|
|
|
14,296
|
|
Total future minimum lease payments
|
|
$
|
34,369
|
|
Less imputed interest
|
|
|
4,820
|
|
Total operating lease liabilities
|
|
$
|
29,549
|
|
Included in the Consolidated Balance Sheet:
|
|
|
|
|
Current operating lease liabilities
|
|
$
|
3,557
|
|
Non-current operating lease liabilities
|
|
|
25,992
|
|
Total operating lease liabilities
|
|
$
|
29,549
|
|
For the three months ended March 31, 2021 and 2020, the total lease cost was comprised of the following amounts:
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
2020
|
|
Operating lease expense
|
|
$
|
1,142
|
|
$
|
947
|
|
Short-term lease expense
|
|
|
76
|
|
|
28
|
|
Total lease expense
|
|
$
|
1,218
|
|
$
|
975
|
|
The following summarizes additional information related to operating leases:
|
|
As of
|
|
|
|
March 31, 2021
|
|
Weighted-average remaining lease term — operating leases
|
|
|
4.6
|
|
Weighted-average discount rate — operating leases
|
|
|
4
|
%
|
If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.
18
Litigation
From time to time and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. At March 31, 2021 and December 31, 2020, the Company did not have any pending claims, charges, or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
10. Stock-Based Compensation
Stock Option and Incentive Plans
In April 2007, the Board approved the 2007 Stock Option and Incentive Plan (the “2007 Plan”), which was approved by the stockholders of the Company and became effective upon the consummation of the Company’s IPO in May 2007. The 2007 Plan allowed the Company to grant incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), stock appreciation rights, deferred stock awards, restricted stock units and other awards. Under the 2007 Plan, stock options could not be granted at less than fair market value on the date of grant and grants generally vested over a three- to four-year period. Stock options granted under the 2007 Plan expire no later than ten years after the grant date. Additionally, beginning with awards made in August 2015, the Company had the option to direct a net issuance of shares for satisfaction of tax liability with respect to vesting of awards and delivery of shares. Prior to August 2015, this choice of settlement method was solely at the discretion of the award recipient. The 2007 Plan expired in May 2017.
No new awards may be granted under the 2007 Plan; however, the shares of common stock remaining in the 2007 Plan are available for issuance in connection with previously awarded grants under the 2007 Plan. There are 40,000 shares of common stock that remain subject to outstanding stock grants under the 2007 Plan as of March 31, 2021.
In March 2017, the Board approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”), which was approved by the stockholders of the Company at the 2017 Annual Meeting and became effective June 16, 2017. The 2017 Plan replaces the Company’s 2007 Plan. On that date, 3,000,000 shares of Common Stock were reserved for issuance under the 2017 Plan and, generally, shares that are forfeited or canceled from awards under the 2017 Plan also will be available for future awards. Under the 2017 Plan, the Company may grant restricted stock and restricted stock units, non-qualified stock options, stock appreciation rights, performance awards, and other stock-based and cash-based awards. Grants generally vest in equal tranches over a three-year period. Stock options granted under the 2017 Plan expire no later than ten years after the grant date. Shares of stock issued pursuant to restricted stock awards are restricted in that they are not transferable until they vest. Stock underlying awards of restricted stock units are not issued until the units vest. Non-qualified stock options cannot be exercised until they vest. Under the 2017 Plan, all stock options and stock appreciation rights must be granted with an exercise price that is at least equal to the fair market value of the stock on the date of grant. The 2017 Plan broadly prohibits the repricing of options and stock appreciation rights without stockholder approval and requires that no dividends or dividend equivalents be paid with respect to options or stock appreciation rights. The 2017 Plan further provides that, in the event any dividends or dividend equivalents are declared with respect to restricted stock, restricted stock units, other stock-based awards and performance awards (referred to as “full-value awards”), they would be subject to the same vesting and forfeiture provisions as the underlying award. There are a total of 1,584,350 shares of common stock that remain subject to outstanding stock grants under the 2017 Plan as of March 31, 2021.
Accounting for Stock-Based Compensation
The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of an award.
The expected volatility of options granted has been determined using a weighted average of the historical volatility of the Company’s stock for a period equal to the expected life of the option. The expected life of options has been determined utilizing the “simplified” method. The risk-free interest rate is based on a zero coupon U.S. treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company applied an estimated annual forfeiture rate based on historical averages in determining the expense recorded in each period.
19
A summary of the stock option activity under the Company’s plans for the three months ended March 31, 2021 is presented below:
Year-to-Date Activity
|
|
Options
Outstanding
|
|
|
Weighted-
Average
Exercise Price
Per Share
|
|
|
Weighted-
Average
Remaining
Contractual
Term in
Years
|
|
|
Aggregate
Intrinsic
Value
|
|
Options outstanding at December 31, 2020
|
|
|
107,500
|
|
|
$
|
17.34
|
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options outstanding at March 31, 2021
|
|
|
107,500
|
|
|
$
|
17.34
|
|
|
|
6.38
|
|
|
$
|
5,602
|
|
Options exercisable at March 31, 2021
|
|
|
87,500
|
|
|
$
|
14.53
|
|
|
|
5.73
|
|
|
$
|
4,806
|
|
Options vested or expected to vest at March 31, 2021
|
|
|
107,164
|
|
|
$
|
17.30
|
|
|
|
6.37
|
|
|
$
|
5,589
|
|
There were no options exercised during the three months ended March 31, 2021 and March 31, 2020.
Restricted Stock Units
Restricted stock units are valued at the market price of a share of the Company’s common stock on the date of the grant. A summary of the restricted stock unit activity under the Company’s plans for the three months ended March 31, 2021 is presented below:
Year-to-Date Activity
|
|
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
|
|
Aggregate
Intrinsic
Value
|
|
Nonvested outstanding at December 31, 2020
|
|
|
1,478,000
|
|
|
$
|
31.33
|
|
|
|
—
|
|
Granted
|
|
|
64,152
|
|
|
|
77.93
|
|
|
|
—
|
|
Vested
|
|
|
(25,677
|
)
|
|
|
73.22
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Nonvested outstanding at March 31, 2021
|
|
|
1,516,475
|
|
|
$
|
32.61
|
|
|
$
|
105,319
|
|
There were 25,677 restricted stock units with a total grant-date fair value of $1.9 million that vested during the three months ended March 31, 2021. There were 95,688 restricted stock units with a total grant-date fair value of $2.0 million that vested during the three months ended March 31, 2020.
As of March 31, 2021, there was $36.3 million of total unrecognized compensation expense related to stock options and restricted stock units, which is expected to be recognized over a weighted average period of 1.8 years.
20
11. Stockholders’ Equity
Common Stock Repurchase Programs
On November 7, 2018, the Company announced a program (the “November 2018 Stock Repurchase Program”) to repurchase shares up to an aggregate amount of $25.0 million whereby the Company was authorized to repurchase the Company’s common stock from time to time on the open market or in privately negotiated transactions at prices and in a manner that may be determined by management. The Company repurchased 736,760, 411,849 and 243,425 shares at an aggregate purchase price of $14.8 million, $7.1 million and $3.1 million and an average share price of $20.10, $17.14 and $12.82 during the years ended December 31, 2020, 2019, and 2018, respectively, under the November 2018 Stock Repurchase Program. We terminated this repurchase program in May 2020.
In May 2020, we announced that our Board had authorized a $25.0 million stock repurchase program (the “May 2020 Repurchase Program”) whereby we are authorized to repurchase our common stock from time to time on the open market or in privately negotiated transactions at prices and in the manner that may be determined by management. No amounts were repurchased under this plan for the three months ended March 31, 2021.
Repurchased shares are recorded under the cost method and are reflected as treasury stock in the accompanying Consolidated Balance Sheets.
Reserved Common Stock
As of March 31, 2021, the Company has reserved 1,750,336 shares of common stock for use in settling outstanding options and unvested restricted stock units that have not been issued, as well as future awards available for grant under the 2007 and 2017 Plans and 4,000,186 shares issuable upon conversion of the Notes.
12. Income Taxes
The Company measures its interim period tax expense using an estimated annual effective tax rate and adjustments for discrete taxable events that occur during the interim period. The estimated annual effective income tax rate is based upon the Company’s estimations of annual pre-tax income, the geographic mix of pre-tax income, and its interpretations of tax laws. The Company updates the estimate of its annual effective tax rate at the end of each quarterly period. The Company recorded income tax expense of $0.7 million and $0.9 million for the three months ended March 31, 2021 and March 31, 2020 respectively.
13. Segment Information
The Company views its operations and manages its business as one operating segment which is the business of providing purchase intent marketing and sales services. The Company aggregated its operating segment based upon the similar economic and operating characteristics of its operations.
Geographic Data
Net sales by campaign target area were as follows (1):
|
For the Three Months Ended
March 31,
|
|
|
2021
|
|
|
2020
|
|
North America
|
$
|
33,038
|
|
|
$
|
19,881
|
|
International
|
|
19,931
|
|
|
|
11,535
|
|
Total
|
$
|
52,969
|
|
|
$
|
31,416
|
|
|
(1)
|
Net sales to customers by campaign target area is based on the geo-targeted (target audience) location of the campaign.
|
Net sales to unaffiliated customers by geographic area were as follows (2):
21
|
For the Three Months Ended
March 31,
|
|
|
2021
|
|
|
2020
|
|
United States
|
$
|
37,500
|
|
|
$
|
22,437
|
|
United Kingdom
|
|
8,148
|
|
|
|
3,792
|
|
Other international
|
|
7,321
|
|
|
|
5,187
|
|
Total
|
$
|
52,969
|
|
|
$
|
31,416
|
|
|
(2)
|
Net sales to unaffiliated customers by geographic area is based on the customers’ current billing addresses and does not consider the geo-targeted (target audience) location of the campaign.
|
Long-lived assets by geographic area were as follows:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
United States
|
|
$
|
195,627
|
|
|
$
|
195,424
|
|
International
|
|
|
106,238
|
|
|
|
106,227
|
|
Total
|
|
$
|
301,865
|
|
|
$
|
301,651
|
|
Long-lived assets are comprised of property and equipment, net; goodwill; and intangible assets, net. The United Kingdom accounted for 35% of the Company’s long-lived assets for the three months ended March 31, 2021 and no single country outside of the U.S. or United Kingdom accounted for 10% or more of the Company’s long-lived assets during either of these periods.
14. Acquisitions
2020 Acquisitions
BrightTALK Limited
In December, 2020, the Company acquired all outstanding stock of BrightTALK Limited and its wholly owned subsidiary BrightTALK, Inc., which is a leading marketing platform for webinars and virtual events that enables marketers to create original webinar and video content. The Company has included the financial results of BrightTALK in the consolidated financial statements from the date of acquisition. The acquisition date fair value of the consideration transferred for BrightTALK was approximately $151.0 million in cash.
The acquisition was accounted for using the acquisition method of accounting, which requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value at the date of acquisition.
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities, for which there is no basis for U.S. income tax purposes. The fair values assigned to tangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The provisional measurements of fair value for income taxes payable and deferred taxes set forth above may be subject to change as additional information is received and certain tax returns are finalized. Certain tax attributes that will benefit the Company, for which the calculations are not yet complete, are payable to the seller upon the Company’s realization of those benefits. Estimated fair value measurements relating to the acquisition are made using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily from the income approach, which include the use of both the multiple period excess earnings method and the relief from royalties method. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.
22
Other Acquisitions
During 2020, the Company acquired substantially all the assets of two other companies for an aggregate of $25.0 million in cash and $2.2 of contingent consideration and has included the financial results of these companies in its consolidated financial statements from the dates of acquisition. The earnouts are subject to certain revenue growth targets and the payment is adjusted based on actual results. The transactions were not material to the Company and the costs associated with the acquisitions were not material. The Company accounted for the transactions as business combinations. In allocating the purchase consideration based on estimated fair values, the Company recorded $17.1 million of intangible assets (offset by the value of assumed liabilities under of the agreements of $3.5 million), and $12.7 million of goodwill. The majority of the goodwill balance associated with these business combinations is deductible for U.S. income tax purposes.
23