Interim Consolidated Financial Statements | 9 Months Ended |
Sep. 30, 2013 |
Quarterly Financial Information Disclosure [Abstract] | ' |
Interim Consolidated Financial Statements | ' |
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Note 1 — Interim Consolidated Financial Statements |
Basis of Presentation |
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Forrester Research, Inc. (“Forrester”) Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows as of the dates and for the periods presented have been included. The results of operations for the three and nine months ended September 30, 2013 may not be indicative of the results for the year ending December 31, 2013, or any other period. |
Fair Value Measurements |
The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. See Note 2 – Marketable Investments for the fair value of the Company’s marketable investments. |
Revision of Prior Period Financial Statements |
During the quarter ended September 30, 2013, the Company identified certain prior period errors that affected the interim and annual periods in the years ended December 31, 2012 and 2011, as well as the interim periods in the six months ended June 30, 2013. The Company has reflected in the financial information included in this Note the correction of all identified prior period errors in the periods in which they originated. The prior period errors relate to: |
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| • | | An adjustment of $0.8 million for the three and six months ended June 30, 2013 to increase the amount of research services revenue related to recognition of revenue for the event ticket included in the Company’s RoleView and Forrester Leadership Board subscription products. Based on the identification of this error, the Company reassessed its historical calculations and identified a required change in its methodology for the accounting for an insignificant amount of contract modifications during this period that resulted in an increase (decrease) to revenue for each of the periods is as follows: ($0.1) million and $0.1 million for the three months ended March 31, 2012 and September 30, 2012, respectively, and $0.1 million for the year ended December 31, 2011. This error has been reflected in deferred revenue in the revised consolidated balance sheet and statement of cash flows presented below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Adjustments to the Company’s share of operating results in one of the technology-related investment funds in which the Company holds an interest, which adjustments are principally a result of information received by the Company from the fund after the applicable reporting periods. The Company records a portion of the fund’s operating results, based on the Company’s ownership interest in the fund, as investment gains (losses). The adjustments to the gains (losses) on investments for each period is as follows: ($0.1) million and $0.1 million for the three months ended March 31, 2013 and June 30, 2013, respectively; $0.6 million and ($0.1) million for the three months ended September 30, 2012 and December 31, 2012, respectively; and $0.5 million and ($1.4) million for the years ended December 31, 2012 and 2011, respectively. This error has been reflected in other assets in the revised consolidated balance sheet and in net (gains) losses from investments in the revised statement of cash flows presented below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Adjustments to revenue for historical insignificant variances in deferred revenue for reconciling items between the Company’s general ledger and sub-ledger system. The increase (decrease) to revenue for each of the periods is as follows: ($0.1) million for the three months ended March 31, 2013; ($0.2) million, $0.2 million and $0.1 million for the three months ended June 30, 2012, September 30, 2012 and December 31, 2012, respectively; and $0.1 million and ($0.4) million for the years ended December 31, 2012 and 2011, respectively. This error has been reflected in deferred revenue in the revised consolidated balance sheet and statement of cash flows presented below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| • | | Adjustments within the year ended December 31, 2012 for the improper capitalization of software development costs during the three months ended June 30, 2012 and September 30, 2012. These errors were corrected in the three months ended December 31, 2012 in the previously filed financial statements. The increase (decrease) in general and administrative expense for each of the periods is as follows: $0.2 million, $0.3 million and ($0.5) million for the three months ended June 30, 2012, September 30, 2012 and December 31, 2012, respectively. This error has been reflected in purchases of property and equipment in the revised consolidated statement of cash flows presented below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
In evaluating whether the Company’s previously issued consolidated financial statements were materially misstated, the Company considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. The Company concluded that these errors were not material individually or in the aggregate to any of the prior reporting periods, and therefore, amendments of previously filed reports are not required. As such, the revisions for prior period corrections are reflected in the financial information for the applicable prior periods and will be reflected in future filings containing such prior period financial information. |
The effects of these prior period errors on the consolidated financial statements are as follows (in thousands, except per share amounts): |
Revised Consolidated Statements of Income |
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| | Three Months Ended March 31, 2013 | | | Three Months Ended June 30, 2013 | | | Six Months Ended June 30, 2013 | |
| | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | |
Previously | Revised | Previously | Revised | Previously | Revised |
Reported | | Reported | | Reported | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research services | | $ | 50,378 | | | $ | (100 | ) | | $ | 50,278 | | | $ | 50,512 | | | $ | 800 | | | $ | 51,312 | | | $ | 100,890 | | | $ | 700 | | | $ | 101,590 | |
Advisory services and other | | | 21,121 | | | | (38 | ) | | | 21,083 | | | | 27,652 | | | | (11 | ) | | | 27,641 | | | | 48,773 | | | | (49 | ) | | | 48,724 | |
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Total revenues | | | 71,499 | | | | (138 | ) | | | 71,361 | | | | 78,164 | | | | 789 | | | | 78,953 | | | | 149,663 | | | | 651 | | | | 150,314 | |
Income from operations | | | 3,418 | | | | (138 | ) | | | 3,280 | | | | 8,999 | | | | 789 | | | | 9,788 | | | | 12,417 | | | | 651 | | | | 13,068 | |
Gains (losses) on investments, net | | | (51 | ) | | | (149 | ) | | | (200 | ) | | | (51 | ) | | | 149 | | | | 98 | | | | (102 | ) | | | — | | | | (102 | ) |
Income before income taxes | | | 3,743 | | | | (287 | ) | | | 3,456 | | | | 9,203 | | | | 938 | | | | 10,141 | | | | 12,946 | | | | 651 | | | | 13,597 | |
Income tax provision | | | 1,402 | | | | (115 | ) | | | 1,287 | | | | 3,581 | | | | 375 | | | | 3,956 | | | | 4,983 | | | | 260 | | | | 5,243 | |
Net income | | $ | 2,341 | | | $ | (172 | ) | | $ | 2,169 | | | $ | 5,622 | | | $ | 563 | | | $ | 6,185 | | | $ | 7,963 | | | $ | 391 | | | $ | 8,354 | |
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Basic income per common share | | $ | 0.1 | | | $ | — | | | $ | 0.1 | | | $ | 0.26 | | | $ | 0.03 | | | $ | 0.29 | | | $ | 0.37 | | | $ | 0.01 | | | $ | 0.38 | |
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Diluted income per common share | | $ | 0.1 | | | $ | — | | | $ | 0.1 | | | $ | 0.26 | | | $ | 0.02 | | | $ | 0.28 | | | $ | 0.36 | | | $ | 0.02 | | | $ | 0.38 | |
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| | Nine Months Ended September 30, 2012 | | | Three Months Ended December 31, 2012 | | | Full Year Ended December 31, 2012 | |
| | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | |
Previously | Revised | Previously | Revised | Previously | Revised |
Reported | | Reported | | Reported | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research services | | $ | 151,132 | | | $ | 13 | | | $ | 151,145 | | | $ | 51,866 | | | $ | 80 | | | $ | 51,946 | | | $ | 202,998 | | | $ | 93 | | | $ | 203,091 | |
Advisory services and other | | | 66,732 | | | | (7 | ) | | | 66,725 | | | | 23,200 | | | | 15 | | | | 23,215 | | | | 89,932 | | | | 8 | | | | 89,940 | |
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Total revenues | | | 217,864 | | | | 6 | | | | 217,870 | | | | 75,066 | | | | 95 | | | | 75,161 | | | | 292,930 | | | | 101 | | | | 293,031 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative | | | 26,667 | | | | 457 | | | | 27,124 | | | | 10,199 | | | | (457 | ) | | | 9,742 | | | | 36,866 | | | | — | | | | 36,866 | |
Total operating expenses | | | 194,598 | | | | 457 | | | | 195,055 | | | | 67,673 | | | | (457 | ) | | | 67,216 | | | | 262,271 | | | | — | | | | 262,271 | |
Income from operations | | | 23,266 | | | | (451 | ) | | | 22,815 | | | | 7,393 | | | | 552 | | | | 7,945 | | | | 30,659 | | | | 101 | | | | 30,760 | |
Gains (losses) on investments, net | | | 290 | | | | 608 | | | | 898 | | | | (739 | ) | | | (65 | ) | | | (804 | ) | | | (449 | ) | | | 543 | | | | 94 | |
Income before income taxes | | | 24,452 | | | | 157 | | | | 24,609 | | | | 7,058 | | | | 487 | | | | 7,545 | | | | 31,510 | | | | 644 | | | | 32,154 | |
Income tax provision | | | 3,129 | | | | 62 | | | | 3,191 | | | | 2,807 | | | | 195 | | | | 3,002 | | | | 5,936 | | | | 257 | | | | 6,193 | |
Net income | | $ | 21,323 | | | $ | 95 | | | $ | 21,418 | | | $ | 4,251 | | | $ | 292 | | | $ | 4,543 | | | $ | 25,574 | | | $ | 387 | | | $ | 25,961 | |
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Basic income per common share | | $ | 0.94 | | | $ | 0.01 | | | $ | 0.95 | | | $ | 0.19 | | | $ | 0.01 | | | $ | 0.2 | | | $ | 1.14 | | | $ | 0.01 | | | $ | 1.15 | |
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Diluted income per common share | | $ | 0.93 | | | $ | — | | | $ | 0.93 | | | $ | 0.19 | | | $ | 0.01 | | | $ | 0.2 | | | $ | 1.12 | | | $ | 0.01 | | | $ | 1.13 | |
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| | Three Months Ended June 30, 2012 | | | Six Months Ended June 30, 2012 | | | Three Months Ended September 30, 2012 | |
| | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | |
Previously | Revised | Previously | Revised | Previously | Revised |
Reported | | Reported | | Reported | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research services | | $ | 51,072 | | | $ | (100 | ) | | $ | 50,972 | | | $ | 100,832 | | | $ | (196 | ) | | $ | 100,636 | | | $ | 50,300 | | | $ | 209 | | | $ | 50,509 | |
Advisory services and other | | | 28,021 | | | | (61 | ) | | | 27,960 | | | | 48,521 | | | | (60 | ) | | | 48,461 | | | | 18,211 | | | | 53 | | | | 18,264 | |
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Total revenues | | | 79,093 | | | | (161 | ) | | | 78,932 | | | | 149,353 | | | | (256 | ) | | | 149,097 | | | | 68,511 | | | | 262 | | | | 68,773 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative | | | 8,645 | | | | 148 | | | | 8,793 | | | | 18,256 | | | | 148 | | | | 18,404 | | | | 8,411 | | | | 309 | | | | 8,720 | |
Total operating expenses | | | 67,632 | | | | 148 | | | | 67,780 | | | | 133,264 | | | | 148 | | | | 133,412 | | | | 61,334 | | | | 309 | | | | 61,643 | |
Income from operations | | | 11,461 | | | | (309 | ) | | | 11,152 | | | | 16,089 | | | | (404 | ) | | | 15,685 | | | | 7,177 | | | | (47 | ) | | | 7,130 | |
Gains (losses) on investments, net | | | 84 | | | | — | | | | 84 | | | | 143 | | | | — | | | | 143 | | | | 147 | | | | 608 | | | | 755 | |
Income before income taxes | | | 11,675 | | | | (309 | ) | | | 11,366 | | | | 16,771 | | | | (404 | ) | | | 16,367 | | | | 7,681 | | | | 561 | | | | 8,242 | |
Income tax provision | | | 3,906 | | | | (124 | ) | | | 3,782 | | | | 5,821 | | | | (162 | ) | | | 5,659 | | | | (2,692 | ) | | | 224 | | | | (2,468 | ) |
Net income | | $ | 7,769 | | | $ | (185 | ) | | $ | 7,584 | | | $ | 10,950 | | | $ | (242 | ) | | $ | 10,708 | | | $ | 10,373 | | | $ | 337 | | | $ | 10,710 | |
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Basic income per common share | | $ | 0.34 | | | $ | — | | | $ | 0.34 | | | $ | 0.48 | | | $ | (0.01 | ) | | $ | 0.47 | | | $ | 0.46 | | | $ | 0.02 | | | $ | 0.48 | |
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Diluted income per common share | | $ | 0.34 | | | $ | (0.01 | ) | | $ | 0.33 | | | $ | 0.47 | | | $ | (0.01 | ) | | $ | 0.46 | | | $ | 0.45 | | | $ | 0.02 | | | $ | 0.47 | |
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| | Three Months Ended March 31, 2012 | | | Full Year Ended December 31, 2011 | | | | | | | | | | | | | |
| | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | | | | | | | | | | | | | |
Previously | Revised | Previously | Revised | | | | | | | | | | | | |
Reported | | Reported | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Research services | | $ | 49,760 | | | $ | (96 | ) | | $ | 49,664 | | | $ | 191,648 | | | $ | (153 | ) | | $ | 191,495 | | | | | | | | | | | | | |
Advisory services and other | | | 20,500 | | | | 1 | | | | 20,501 | | | | 91,968 | | | | (128 | ) | | | 91,840 | | | | | | | | | | | | | |
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Total revenues | | | 70,260 | | | | (95 | ) | | | 70,165 | | | | 283,616 | | | | (281 | ) | | | 283,335 | | | | | | | | | | | | | |
Income from operations | | | 4,628 | | | | (95 | ) | | | 4,533 | | | | 36,997 | | | | (281 | ) | | | 36,716 | | | | | | | | | | | | | |
Gains (losses) on investments, net | | | 59 | | | | — | | | | 59 | | | | 1,018 | | | | (1,417 | ) | | | (399 | ) | | | | | | | | | | | | |
Income before income taxes | | | 5,096 | | | | (95 | ) | | | 5,001 | | | | 38,645 | | | | (1,698 | ) | | | 36,947 | | | | | | | | | | | | | |
Income tax provision | | | 1,915 | | | | (38 | ) | | | 1,877 | | | | 15,635 | | | | (679 | ) | | | 14,956 | | | | | | | | | | | | | |
Net income | | $ | 3,181 | | | $ | (57 | ) | | $ | 3,124 | | | $ | 23,010 | | | $ | (1,019 | ) | | $ | 21,991 | | | | | | | | | | | | | |
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Basic income per common share | | $ | 0.14 | | | $ | — | | | $ | 0.14 | | | $ | 1.02 | | | $ | (0.05 | ) | | $ | 0.97 | | | | | | | | | | | | | |
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Diluted income per common share | | $ | 0.14 | | | $ | (0.01 | ) | | $ | 0.13 | | | $ | 0.99 | | | $ | (0.04 | ) | | $ | 0.95 | | | | | | | | | | | | | |
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Revised Consolidated Statements of Comprehensive Income |
The consolidated statements of comprehensive income for all periods is impacted by the same amount as net income for the respective period. |
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Revised Consolidated Balance Sheet |
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| | As of December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As | | | Adjustments | | | As | | | | | | | | | | | | | | | | | | | | | | | | | |
Previously | Revised | | | | | | | | | | | | | | | | | | | | | | | | |
Reported | | | | | | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prepaid expenses and other current assets | | $ | 18,846 | | | $ | 132 | | | $ | 18,978 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total current assets | | | 336,565 | | | | 132 | | | | 336,697 | | | | | | | | | | | | | | | | | | | | | | | | | |
Other assets | | | 9,123 | | | | (314 | ) | | | 8,809 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 487,832 | | | $ | (182 | ) | | $ | 487,650 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Current Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred revenue | | $ | 150,479 | | | $ | 16 | | | $ | 150,495 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total current liabilities | | | 181,329 | | | | 16 | | | | 181,345 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 190,762 | | | | 16 | | | | 190,778 | | | | | | | | | | | | | | | | | | | | | | | | | |
Retained earnings | | | 117,648 | | | | (198 | ) | | | 117,450 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total stockholders’ equity | | | 297,070 | | | | (198 | ) | | | 296,872 | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 487,832 | | | $ | (182 | ) | | $ | 487,650 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Revised Consolidated Statements of Cash Flows |
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| | Three Months Ended March 31, 2013 | | | Six Months Ended June 30, 2013 | | | | | | | | | | | | | |
| | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | | | | | | | | | | | | | |
Previously | Revised | Previously | Revised | | | | | | | | | | | | |
Reported | | Reported | | | | | | | | | | | | | |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 2,341 | | | $ | (172 | ) | | $ | 2,169 | | | $ | 7,963 | | | $ | 391 | | | $ | 8,354 | | | | | | | | | | | | | |
Net (gains) losses from investments | | | 51 | | | | 149 | | | | 200 | | | | 102 | | | | — | | | | 102 | | | | | | | | | | | | | |
Prepaid expenses and other current assets | | | 1,271 | | | | (115 | ) | | | 1,156 | | | | 4,619 | | | | 260 | | | | 4,879 | | | | | | | | | | | | | |
Deferred revenue | | | 2,709 | | | | 138 | | | | 2,847 | | | | (12,955 | ) | | | (651 | ) | | | (13,606 | ) | | | | | | | | | | | | |
Net cash provided by operating activities | | | 35,453 | | | | — | | | | 35,453 | | | | 37,231 | | | | — | | | | 37,231 | | | | | | | | | | | | | |
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| | Nine Months Ended September 30, 2012 | | | Year Ended December 31, 2012 | | | Year Ended December 31, 2011 | |
| | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | | | As | | | Adjustments | | | As | |
Previously | Revised | Previously | Revised | Previously | Revised |
Reported | | Reported | | Reported | |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 21,323 | | | $ | 95 | | | $ | 21,418 | | | $ | 25,574 | | | $ | 387 | | | $ | 25,961 | | | $ | 23,010 | | | $ | (1,019 | ) | | $ | 21,991 | |
Net (gains) losses from investments | | | (290 | ) | | | (608 | ) | | | (898 | ) | | | 449 | | | | (543 | ) | | | (94 | ) | | | (1,018 | ) | | | 1,417 | | | | 399 | |
Prepaid expenses and other current assets | | | 3,929 | | | | 62 | | | | 3,991 | | | | 6,279 | | | | 257 | | | | 6,536 | | | | (7,805 | ) | | | (679 | ) | | | (8,484 | ) |
Deferred revenue | | | (23,302 | ) | | | (6 | ) | | | (23,308 | ) | | | 1,807 | | | | (101 | ) | | | 1,706 | | | | 16,364 | | | | 281 | | | | 16,645 | |
Net cash provided by operating activities | | | 43,223 | | | | (457 | ) | | | 42,766 | | | | 53,147 | | | | — | | | | 53,147 | | | | 55,444 | | | | — | | | | 55,444 | |
Purchases of property and equipment | | | (4,845 | ) | | | 457 | | | | (4,388 | ) | | | (5,103 | ) | | | — | | | | (5,103 | ) | | | (39,776 | ) | | | — | | | | (39,776 | ) |
Net cash provided by (used in) investing activities | | | (15,989 | ) | | | 457 | | | | (15,532 | ) | | | (4,076 | ) | | | — | | | | (4,076 | ) | | | (53,036 | ) | | | — | | | | (53,036 | ) |