Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 23, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | CHANNELADVISOR CORP | |
Entity Central Index Key | 1,169,652 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 25,148,999 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Cash and cash equivalents | $ 58,984 | $ 68,366 |
Accounts receivable, net of allowance of $1,050 and $673 as of September 30, 2015 and December 31, 2014, respectively | 16,141 | 14,619 |
Prepaid expenses and other current assets | 7,181 | 4,940 |
Total current assets | 82,306 | 87,925 |
Property and equipment, net | 12,565 | 12,603 |
Goodwill | 21,473 | 21,518 |
Intangible assets, net | 3,393 | 4,083 |
Restricted cash | 567 | 633 |
Other assets | 637 | 285 |
Total assets | 120,941 | 127,047 |
Liabilities and stockholders’ equity | ||
Accounts payable | 1,851 | 564 |
Accrued expenses | 7,799 | 7,292 |
Deferred revenue | 19,866 | 16,840 |
Other current liabilities | 3,535 | 2,563 |
Total current liabilities | 33,051 | 27,259 |
Long-term capital leases, net of current portion | 2,151 | 2,014 |
Other long-term liabilities | 3,913 | 4,126 |
Total liabilities | $ 39,115 | $ 33,399 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of September 30, 2015 and December 31, 2014 | $ 0 | $ 0 |
Common stock, $0.001 par value, 100,000,000 shares authorized, 25,147,137 and 24,915,510 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | 25 | 25 |
Additional paid-in capital | 237,545 | 228,370 |
Accumulated other comprehensive loss | (856) | (130) |
Accumulated deficit | (154,888) | (134,617) |
Total stockholders’ equity | 81,826 | 93,648 |
Total liabilities and stockholders’ equity | $ 120,941 | $ 127,047 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable, current | $ 1,050 | $ 673 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 25,147,137 | 24,915,510 |
Common stock, shares outstanding | 25,147,137 | 24,915,510 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $ 24,379 | $ 20,966 | $ 71,151 | $ 61,074 |
Cost of revenue (excluding depreciation) | 4,954 | 5,020 | 15,571 | 15,686 |
Depreciation - Cost of revenue | 1,336 | 998 | 3,536 | 2,483 |
Gross profit | 18,089 | 14,948 | 52,044 | 42,905 |
Operating expenses: | ||||
Sales and marketing | 11,879 | 13,595 | 40,790 | 41,475 |
Research and development | 3,874 | 4,157 | 11,955 | 12,308 |
General and administrative | 6,075 | 5,310 | 16,867 | 14,860 |
Depreciation and amortization | 1,005 | 743 | 2,827 | 1,910 |
Total operating expenses | 22,833 | 23,805 | 72,439 | 70,553 |
Loss from operations | (4,744) | (8,857) | (20,395) | (27,648) |
Other income (expense): | ||||
Interest expense, net | (60) | (55) | (142) | (157) |
Other income (expense), net | 14 | (86) | 140 | (86) |
Total other income (expense) | (46) | (141) | (2) | (243) |
Loss before income taxes | (4,790) | (8,998) | (20,397) | (27,891) |
Income tax (benefit) expense | 1 | 6 | (126) | 87 |
Net loss | $ (4,791) | $ (9,004) | $ (20,271) | $ (27,978) |
Net loss per share: | ||||
Basic and diluted (in dollars per share) | $ (0.19) | $ (0.36) | $ (0.81) | $ (1.14) |
Weighted average common shares outstanding: | ||||
Basic and diluted (in shares) | 25,110,212 | 24,793,869 | 25,020,154 | 24,528,263 |
Unaudited Condensed Consolidat5
Unaudited Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (4,791) | $ (9,004) | $ (20,271) | $ (27,978) |
Other comprehensive loss: | ||||
Foreign currency translation adjustments | 95 | (119) | (726) | 184 |
Total comprehensive loss | $ (4,696) | $ (9,123) | $ (20,997) | $ (27,794) |
Unaudited Condensed Consolidat6
Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity - 9 months ended Sep. 30, 2015 - USD ($) $ in Thousands | Total | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Loss [Member] | Accumulated Deficit [Member] |
Balance, amount at Dec. 31, 2014 | $ 93,648 | $ 25 | $ 228,370 | $ (130) | $ (134,617) |
Balance, shares at Dec. 31, 2014 | 24,915,510 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Exercise of stock options and vesting of restricted stock units, amount | 490 | 490 | |||
Exercise of stock options and vesting of restricted stock units, shares | 287,733 | ||||
Stock-based compensation expense | 9,273 | 9,273 | |||
Statutory tax withholding related to net-share settlement of restricted stock units, amount | (588) | (588) | |||
Statutory tax withholding related to net-share settlement of restricted stock units, shares | (56,106) | ||||
Net loss | (20,271) | (20,271) | |||
Foreign currency translation adjustments | (726) | (726) | |||
Balance, amount at Sep. 30, 2015 | $ 81,826 | $ 25 | $ 237,545 | $ (856) | $ (154,888) |
Balance, shares at Sep. 30, 2015 | 25,147,137 |
Unaudited Condensed Consolidat7
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities | ||
Net loss | $ (20,271) | $ (27,978) |
Adjustments to reconcile net loss to cash and cash equivalents used in operating activities: | ||
Depreciation and amortization | 6,363 | 4,393 |
Bad debt expense | 1,253 | 993 |
Stock-based compensation expense | 9,273 | 5,301 |
Other items, net | (150) | 107 |
Changes in assets and liabilities: | ||
Accounts receivable | (4,170) | 603 |
Prepaid expenses and other assets | (2,071) | (818) |
Accounts payable and accrued expenses | 1,924 | (1,668) |
Deferred revenue | 3,045 | 2,238 |
Cash and cash equivalents used in operating activities | (4,804) | (16,829) |
Cash flows from investing activities | ||
Purchases of property and equipment | (3,472) | (5,400) |
Payment of internal-use software development costs | (129) | (820) |
Cash and cash equivalents used in investing activities | (3,601) | (6,220) |
Cash flows from financing activities | ||
Repayment of capital leases | (1,592) | (1,049) |
Proceeds from exercise of stock options | 490 | 1,827 |
Payment of statutory tax withholding related to net-share settlement of restricted stock units | (588) | 0 |
Cash and cash equivalents (used in) provided by financing activities | (1,690) | 778 |
Effect of currency exchange rate changes on cash and cash equivalents | 713 | 145 |
Net decrease in cash and cash equivalents | (9,382) | (22,126) |
Cash and cash equivalents, beginning of period | 68,366 | 104,406 |
Cash and cash equivalents, end of period | 58,984 | 82,280 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 143 | 228 |
Cash paid for income taxes, net | 243 | 53 |
Supplemental disclosure of noncash investing and financing activities | ||
Capital lease obligations entered into for the purchase of fixed assets | $ 3,372 | $ 2,431 |
Description of the Business
Description of the Business | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of the Business | Description of the Business ChannelAdvisor Corporation (“ChannelAdvisor” or the “Company”) was incorporated in the state of Delaware and capitalized in June 2001. The Company began operations in July 2001. ChannelAdvisor is a provider of software-as-a-service, or SaaS, solutions that allow retailers and manufacturers to integrate, manage and monitor their merchandise sales across hundreds of online channels. The Company is headquartered in Morrisville, North Carolina and has international offices in England, Ireland, Germany, Australia, Brazil and China. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Interim Condensed Consolidated Financial Information The accompanying condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of financial position, the results of operations, comprehensive loss, changes in stockholders’ equity and cash flows. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2014, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2015. Reclassification Certain prior period amounts included on the condensed consolidated statements of operations have been reclassified to conform to the current period’s presentation. In order to gain further clarity and understanding of its operating results, the Company will now present depreciation and amortization expense separately on the condensed consolidated statements of operations. Previously, depreciation and amortization expense was included in cost of revenue and operating expenses. These reclassifications had no effect on the Company's reported gross profit and net loss for the three and nine months ended September 30, 2014 . The tables below summarize these reclassifications (in thousands): Three Months Ended September 30, 2014 As Previously Reported Reclassification As Reclassified Cost of revenue (excluding depreciation) $ 6,018 $ (998 ) $ 5,020 Depreciation - Cost of revenue — 998 998 Sales and marketing 13,865 (270 ) 13,595 Research and development 4,263 (106 ) 4,157 General and administrative 5,677 (367 ) 5,310 Depreciation and amortization — 743 743 Nine Months Ended September 30, 2014 As Previously Reported Reclassification As Reclassified Cost of revenue (excluding depreciation) $ 18,169 $ (2,483 ) $ 15,686 Depreciation - Cost of revenue — 2,483 2,483 Sales and marketing 42,131 (656 ) 41,475 Research and development 12,572 (264 ) 12,308 General and administrative 15,850 (990 ) 14,860 Depreciation and amortization — 1,910 1,910 Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") , which provides new guidance for revenue recognition. ASU 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which resulted in a one year deferral of the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on its consolidated financial statements. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (Topic 805) ("ASU 2015-16") , which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. ASU 2015-16 requires that the cumulative impact of measurement-period adjustments, including prior period amounts, be recognized in the reporting period in which the adjustment is identified. The update is effective for fiscal years beginning after December 15, 2015. The Company has elected to early adopt ASU 2015-16; however, the adoption of this pronouncement did not have a material impact on the Company’s results of operations, financial position or cash flows. The Company has reviewed other new accounting pronouncements that were issued as of September 30, 2015 and does not believe that these pronouncements are applicable to the Company, or that they will have a material impact on its financial position or results of operations. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, the useful lives of long-lived assets and other intangible assets, income taxes and assumptions used for purposes of determining stock-based compensation, among others. Estimates and assumptions are also required to value assets acquired and liabilities assumed as well as contingent consideration, where applicable, in conjunction with business combinations. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Revenue Recognition and Deferred Revenue The majority of the Company’s revenue is derived from subscription fees paid by customers for access to and usage of the Company’s cloud-based SaaS platform for a specified period of time, which is typically one year. A portion of the subscription fee is typically fixed and is based on a specified minimum amount of gross merchandise value (“GMV”) that a customer expects to process through the Company’s platform over the contract term. The remaining portion of the subscription fee is variable and is based on a specified percentage of GMV processed through the Company’s platform in excess of the customer’s specified minimum amount. In addition, other sources of revenue consist primarily of implementation fees, which may include fees for providing launch assistance and training. Implementation services are provided at the customer's option and are not essential to the functionality of the Company's platform, nor is the customer required to purchase these services in order to access the Company's platform. The Company also generates revenue from fixed subscription fees from its Where to Buy solution. These contacts are generally one year in duration. The Company recognizes revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is reasonably assured and the amount of the fee to be paid by the customer is fixed or determinable. The Company’s contractual arrangements include performance, termination and cancellation provisions, but do not provide for refunds. Customers do not have the contractual right to take possession of the Company’s software at any time. The Company’s arrangements generally contain multiple elements comprised of subscription and implementation services. The Company evaluates each element in an arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company’s control. The Company’s implementation services are not sold separately from the subscription and there is no alternative use for them. As such, the Company has determined the implementation services do not have standalone value. Accordingly, subscription and implementation services are combined and recognized as a single unit of accounting. The Company generally recognizes the fixed portion of subscription fees and implementation fees ratably over the contract term. Recognition begins when the customer has access to the Company’s platform or Where to Buy solution and transactions can be processed, provided all other revenue recognition criteria have been met. Some customers elect a managed-service solution and contract with the Company to manage some or all aspects of the Company’s SaaS solutions on the customer’s behalf for a specified period of time, which is typically one year. Under these managed-service arrangements, customer transactions cannot be processed through the Company’s platform until the completion of the implementation services. As such, revenue is contingent upon the Company’s completion of the implementation services and recognition commences when transactions can be processed on the Company’s platform, provided all other revenue recognition criteria have been satisfied. At that time, the Company recognizes a pro-rata portion of the fees earned since the inception of the arrangement. The balance of the fees is recognized ratably over the remaining contract term. The Company recognizes the variable portion of subscription fee revenue in the period in which the related GMV is processed, provided all other revenue recognition criteria have been met. Sales taxes collected from customers and remitted to government authorities are excluded from revenue. Deferred revenue represents the unearned portion of fixed subscription fees and implementation fees. Deferred amounts are generally recognized within one year. Those amounts that are expected to be recognized in greater than one year are recorded in other long-term liabilities in the accompanying condensed consolidated balance sheets. Cost of Revenue Cost of revenue primarily consists of personnel and related costs, including salaries, bonuses, payroll taxes and stock-based compensation, co-location facility costs for the Company’s data centers, depreciation expense for computer equipment directly associated with generating revenue, credit card transaction fees and infrastructure maintenance costs. In addition, the Company allocates a portion of overhead, such as rent and employee benefits costs, to cost of revenue based on headcount. Fair Value of Financial Instruments The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows: • Level 1 . Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities; • Level 2 . Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions. The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their respective fair values due to their short-term nature. The acquisition of E-Tale Holdings Limited ("E-Tale") on October 31, 2014 included a contingent consideration arrangement that allows for adjustment of payments based upon achievement of specified quarterly revenue targets through June 2017. Contingent consideration was measured at fair value at the acquisition date and is remeasured to fair value at each reporting date until the contingency is resolved. The fair value is reported within current and non-current liabilities on the condensed consolidated balance sheets. Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future. Subsequent changes in the fair value of contingent consideration are recognized within general and administrative expenses in the Company’s condensed consolidated statements of operations. The fair value of contingent consideration related to the E-Tale acquisition is based on a probability-weighted model in which the Company developed various scenarios for E-Tale’s projected quarterly revenue targets through June 2017. The Company discounted the expected future earn-out payment of each scenario to net present value using Level 3 inputs and assigned probabilities to achieving each scenario. Key assumptions used in the measurement of fair value of contingent consideration include a discount rate of 24% as of September 30, 2015 and December 31, 2014. The Company believes the discount rate used to discount the earn-out payments reflects market participant assumptions. Projected revenue is based on the Company’s internal projections and analysis of the current customer base and expected customer growth, target market and sales potential. The following table presents changes to the Company’s liability for acquisition-related contingent consideration for the nine months ended September 30, 2015 (in thousands): Balance as of January 1, 2015 $ 618 Change in contingent consideration fair value 14 Balance as of September 30, 2015 $ 632 Concentration of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The Company’s cash and cash equivalents accounts exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents accounts to date. To manage accounts receivable risk, the Company maintains an allowance for doubtful accounts. The Company did not have any customers that individually comprised a significant concentration of its accounts receivable as of September 30, 2015 and December 31, 2014 , or a significant concentration of its revenue for the three and nine months ended September 30, 2015 and 2014 . Accounts Receivable and Allowance for Doubtful Accounts The Company extends credit to customers without requiring collateral. Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of amounts due. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates. Other Receivables Under certain customer arrangements, the Company collects and remits monthly activity-based fees incurred on specific channels on the customers’ behalf. The Company records the amounts due from customers as a result of these arrangements as other receivables. Other receivables of $2.9 million and $1.3 million are included in prepaid expenses and other current assets on the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 , respectively. Identifiable Intangible Assets The Company acquired intangible assets in connection with its business acquisitions. These assets were recorded at their estimated fair values at the acquisition date and are being amortized over their respective estimated useful lives using the straight-line method. The estimated useful lives and amortization methodology used in computing amortization are as follows: Estimated Useful Lives Amortization Methodology Customer relationships 7 years Straight-line Acquired technology 7 years Straight-line Trade names 3 years Straight-line Amortization expense associated with the Company's intangible assets was $0.2 million and $0.1 million for the three months ended September 30, 2015 and 2014 , respectively, and $0.7 million and $0.3 million for the nine months ended September 30, 2015 and 2014 , respectively. Software Development Costs The Company capitalizes certain internal-use software development costs, consisting primarily of direct labor associated with creating the internally developed software and third-party consulting fees associated with implementing software purchased for internal use. Software development projects generally include three stages: the preliminary project stage (in which all costs are expensed as incurred), the application development stage (in which certain costs are capitalized) and the post-implementation/operation stage (in which all costs are expensed as incurred). The costs incurred during the application development stage primarily include the costs of designing the application, coding and testing of the system. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software once it is ready for its intended use. Software development costs of $0.1 million and $0.4 million related to creating internally developed software and implementing software purchased for internal use were capitalized during the nine months ended September 30, 2015 and the year ended December 31, 2014 , respectively, and are included in property and equipment in the accompanying condensed consolidated balance sheets. Amortization expense related to capitalized internally developed software was $0.1 million for each of the three months ended September 30, 2015 and 2014 and $0.2 million and $0.1 million for the nine months ended September 30, 2015 and 2014 , respectively, and is included in cost of revenue or general and administrative expense in the accompanying condensed consolidated statements of operations, depending upon the nature of the software development project. The net book value of capitalized internally developed software was $0.5 million and $0.6 million as of September 30, 2015 and December 31, 2014 , respectively. Software development costs of $0.3 million related to configuring and implementing hosted third-party software applications that the Company will use in its business operations were capitalized during the year ended December 31, 2014 . There were no amounts capitalized during the nine months ended September 30, 2015 . These costs are included in property and equipment in the accompanying condensed consolidated balance sheets. Amortization expense related to hosted third-party software applications was $0.2 million for each of the three months ended September 30, 2015 and 2014 and $0.5 million for each of the nine months ended September 30, 2015 and 2014 and is included in general and administrative expense in the accompanying condensed consolidated statements of operations. The net book value of hosted third-party software applications was $0.8 million and $1.4 million as of September 30, 2015 and December 31, 2014 , respectively. Income Taxes Income taxes are accounted for under the asset and liability method of accounting. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company applies the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken, in a tax return. Additionally, the guidance also prescribes the treatment for accounting in interim periods, derecognition, classification and disclosure requirements for uncertain tax positions. The Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes. An uncertain tax position will be recognized if it is not more likely than not to be sustained. The Company’s income tax provision for the three and nine months ended September 30, 2015 and 2014 reflects its estimates of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events that are recorded in the period in which they occur. For the three and nine months ended September 30, 2015 and 2014 , the Company’s effective tax rate differs from the federal statutory rate primarily due to changes in the valuation allowance and nondeductible expenses. For the three and nine months ended September 30, 2015 and 2014 , the Company had net operating loss (“NOL”) carryforwards, the benefit of which is dependent on the Company’s ability to generate sufficient taxable income prior to the expiration of the NOL carryforwards. In addition, the maximum annual use of the NOL carryforwards is limited in certain situations, such as a change in stock ownership. Stock-Based Compensation The Company accounts for stock-based compensation awards, which include stock options and restricted stock units ("RSUs"), based on the fair value of the award as of the grant date. The Company recognizes stock-based compensation expense using the accelerated attribution method, net of estimated forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche. The Company uses the Black-Scholes option pricing model for estimating the fair value of stock options. The use of the option valuation model requires the input of the Company's stock price, as well as highly subjective assumptions, including the expected life of the option and the expected stock price volatility based on peer companies. The fair value of the Company's common stock, for purposes of determining the grant date fair value of option and RSU awards, has been determined by using the closing market price per share of common stock as quoted on the New York Stock Exchange on the date of grant. The recognition of expense requires the estimation of the number of awards that will ultimately vest and the number of awards that will ultimately be forfeited. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Business Combination | Business Combination On October 31, 2014, the Company’s wholly owned subsidiary, ChannelAdvisor UK Limited (“ChannelAdvisor UK”), entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which ChannelAdvisor UK acquired all of the issued and outstanding shares of E-Tale, a UK-based company that offers a global Where to Buy solution (the "E-Tale Acquisition"). The initial aggregate purchase price associated with the E-Tale Acquisition totaled $9.0 million , which was comprised of $8.2 million of cash, $0.6 million for contingent consideration and $0.2 million of other items. During the nine months ended September 30, 2015 , the aggregate purchase price of the E-Tale Acquisition was adjusted by less than $0.1 million for post-closing working capital adjustments, in accordance with the Purchase Agreement. Comparative pro forma financial information for the E-Tale Acquisition has not been presented because the acquisition is not material to the Company’s consolidated results of operations. |
Goodwill
Goodwill | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill The following table shows the changes in the carrying amount of goodwill for the nine months ended September 30, 2015 (in thousands): Balance as of January 1, 2015 $ 21,518 Adjustment to E-Tale Acquisition purchase price (45 ) Balance as of September 30, 2015 $ 21,473 |
Guarantee
Guarantee | 9 Months Ended |
Sep. 30, 2015 | |
Guarantees [Abstract] | |
Guarantee | Guarantee In June 2014, the Company assigned its previous lease of office space in London, England to a third party pursuant to an assignment agreement and a transfer agreement. In accordance with the assignment agreement, the Company is not required to collect any payments from the third party and therefore will not recognize any revenue associated with this assignment. All payments associated with the assigned lease will be made directly by the third party to the lessor and appropriate regulatory authorities. However, the Company has guaranteed the lease payments through the remainder of the lease term, which is until February 2022. As of September 30, 2015 , the remaining lease payments under this lease totaled £2.2 million ( $3.4 million based on the exchange rate as of September 30, 2015 ). This amount represents the maximum potential liability for future payments under the guarantee and will decrease over time as payments are made by the third party. In the event of default, the indemnity clauses in the transfer agreement govern the Company's ability to pursue and recover damages incurred. As of September 30, 2015 , the Company does not anticipate any default by the third party. Therefore, no liability associated with this transaction has been recorded on the Company's condensed consolidated balance sheet as of September 30, 2015 . |
Equity Incentive Plan and Stock
Equity Incentive Plan and Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Equity Incentive Plan and Stock-Based Compensation | Equity Incentive Plan and Stock-Based Compensation Stock-based compensation expense is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Cost of revenue (excluding depreciation) $ 238 $ 183 $ 777 $ 373 Sales and marketing 1,190 922 3,766 1,833 Research and development 397 286 1,295 584 General and administrative 1,272 1,143 3,435 2,511 $ 3,097 $ 2,534 $ 9,273 $ 5,301 Stock Option Awards The following table summarizes the stock option activity for the nine months ended September 30, 2015 : Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in years) (in thousands) Outstanding options as of January 1, 2015 1,425,357 $ 9.12 Granted 456,871 10.59 Exercised (98,700 ) 4.79 Forfeited (152,125 ) 15.39 Expired (36,896 ) 25.66 Outstanding options as of September 30, 2015 1,594,507 $ 8.83 7.45 $ 4,044 Exercisable as of September 30, 2015 908,554 $ 6.82 6.37 $ 3,778 Vested and expected to vest as of September 30, 2015 1,489,014 $ 8.64 7.35 $ 3,995 The total compensation cost related to nonvested stock options not yet recognized as of September 30, 2015 was $1.6 million and will be recognized over a weighted average period of approximately 2.0 years. Restricted Stock Units The following table summarizes the RSU activity for the nine months ended September 30, 2015 : Number of RSUs Weighted Average Grant-Date Fair Value Unvested RSUs as of January 1, 2015 944,734 $ 22.76 Granted 1,520,780 10.22 Vested (186,286 ) 26.23 Forfeited (196,980 ) 15.55 Unvested RSUs as of September 30, 2015 2,082,248 $ 13.98 The total unrecognized compensation cost related to the unvested RSUs as of September 30, 2015 was $15.1 million and will be recognized over a weighted average period of approximately 1.9 years. |
Net Loss Per Share
Net Loss Per Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | Net Loss Per Share Diluted loss per share is the same as basic loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. The following securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2015 and 2014 : Three and Nine Months Ended September 30, 2015 2014 Warrants to purchase common stock — 3,743 Stock options 1,594,507 1,518,737 RSUs 2,082,248 691,864 |
Segment and Geographic Informat
Segment and Geographic Information | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Segment and Geographic Information | Segment and Geographic Information Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) for purposes of allocating resources and evaluating financial performance. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company’s operations constitute a single operating segment and one reportable segment. Substantially all assets were held in the United States during the nine months ended September 30, 2015 and 2014 . The following table summarizes revenue by geography for the three and nine months ended September 30, 2015 and 2014 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Domestic $ 18,429 $ 16,222 $ 54,652 $ 47,220 International 5,950 4,744 16,499 13,854 Total revenue $ 24,379 $ 20,966 $ 71,151 $ 61,074 |
Significant Accounting Polici16
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. |
Interim Condensed Consolidated Financial Information | Interim Condensed Consolidated Financial Information The accompanying condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of financial position, the results of operations, comprehensive loss, changes in stockholders’ equity and cash flows. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2014, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2015. |
Reclassification | Reclassification Certain prior period amounts included on the condensed consolidated statements of operations have been reclassified to conform to the current period’s presentation. In order to gain further clarity and understanding of its operating results, the Company will now present depreciation and amortization expense separately on the condensed consolidated statements of operations. Previously, depreciation and amortization expense was included in cost of revenue and operating expenses. These reclassifications had no effect on the Company's reported gross profit and net loss for the three and nine months ended September 30, 2014 . The tables below summarize these reclassifications (in thousands): Three Months Ended September 30, 2014 As Previously Reported Reclassification As Reclassified Cost of revenue (excluding depreciation) $ 6,018 $ (998 ) $ 5,020 Depreciation - Cost of revenue — 998 998 Sales and marketing 13,865 (270 ) 13,595 Research and development 4,263 (106 ) 4,157 General and administrative 5,677 (367 ) 5,310 Depreciation and amortization — 743 743 Nine Months Ended September 30, 2014 As Previously Reported Reclassification As Reclassified Cost of revenue (excluding depreciation) $ 18,169 $ (2,483 ) $ 15,686 Depreciation - Cost of revenue — 2,483 2,483 Sales and marketing 42,131 (656 ) 41,475 Research and development 12,572 (264 ) 12,308 General and administrative 15,850 (990 ) 14,860 Depreciation and amortization — 1,910 1,910 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") , which provides new guidance for revenue recognition. ASU 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which resulted in a one year deferral of the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on its consolidated financial statements. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (Topic 805) ("ASU 2015-16") , which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. ASU 2015-16 requires that the cumulative impact of measurement-period adjustments, including prior period amounts, be recognized in the reporting period in which the adjustment is identified. The update is effective for fiscal years beginning after December 15, 2015. The Company has elected to early adopt ASU 2015-16; however, the adoption of this pronouncement did not have a material impact on the Company’s results of operations, financial position or cash flows. The Company has reviewed other new accounting pronouncements that were issued as of September 30, 2015 and does not believe that these pronouncements are applicable to the Company, or that they will have a material impact on its financial position or results of operations. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, the useful lives of long-lived assets and other intangible assets, income taxes and assumptions used for purposes of determining stock-based compensation, among others. Estimates and assumptions are also required to value assets acquired and liabilities assumed as well as contingent consideration, where applicable, in conjunction with business combinations. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. |
Revenue Recognition and Deferred Revenue | Revenue Recognition and Deferred Revenue The majority of the Company’s revenue is derived from subscription fees paid by customers for access to and usage of the Company’s cloud-based SaaS platform for a specified period of time, which is typically one year. A portion of the subscription fee is typically fixed and is based on a specified minimum amount of gross merchandise value (“GMV”) that a customer expects to process through the Company’s platform over the contract term. The remaining portion of the subscription fee is variable and is based on a specified percentage of GMV processed through the Company’s platform in excess of the customer’s specified minimum amount. In addition, other sources of revenue consist primarily of implementation fees, which may include fees for providing launch assistance and training. Implementation services are provided at the customer's option and are not essential to the functionality of the Company's platform, nor is the customer required to purchase these services in order to access the Company's platform. The Company also generates revenue from fixed subscription fees from its Where to Buy solution. These contacts are generally one year in duration. The Company recognizes revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is reasonably assured and the amount of the fee to be paid by the customer is fixed or determinable. The Company’s contractual arrangements include performance, termination and cancellation provisions, but do not provide for refunds. Customers do not have the contractual right to take possession of the Company’s software at any time. The Company’s arrangements generally contain multiple elements comprised of subscription and implementation services. The Company evaluates each element in an arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company’s control. The Company’s implementation services are not sold separately from the subscription and there is no alternative use for them. As such, the Company has determined the implementation services do not have standalone value. Accordingly, subscription and implementation services are combined and recognized as a single unit of accounting. The Company generally recognizes the fixed portion of subscription fees and implementation fees ratably over the contract term. Recognition begins when the customer has access to the Company’s platform or Where to Buy solution and transactions can be processed, provided all other revenue recognition criteria have been met. Some customers elect a managed-service solution and contract with the Company to manage some or all aspects of the Company’s SaaS solutions on the customer’s behalf for a specified period of time, which is typically one year. Under these managed-service arrangements, customer transactions cannot be processed through the Company’s platform until the completion of the implementation services. As such, revenue is contingent upon the Company’s completion of the implementation services and recognition commences when transactions can be processed on the Company’s platform, provided all other revenue recognition criteria have been satisfied. At that time, the Company recognizes a pro-rata portion of the fees earned since the inception of the arrangement. The balance of the fees is recognized ratably over the remaining contract term. The Company recognizes the variable portion of subscription fee revenue in the period in which the related GMV is processed, provided all other revenue recognition criteria have been met. Sales taxes collected from customers and remitted to government authorities are excluded from revenue. Deferred revenue represents the unearned portion of fixed subscription fees and implementation fees. Deferred amounts are generally recognized within one year. Those amounts that are expected to be recognized in greater than one year are recorded in other long-term liabilities in the accompanying condensed consolidated balance sheets. |
Cost of Revenue | Cost of Revenue Cost of revenue primarily consists of personnel and related costs, including salaries, bonuses, payroll taxes and stock-based compensation, co-location facility costs for the Company’s data centers, depreciation expense for computer equipment directly associated with generating revenue, credit card transaction fees and infrastructure maintenance costs. In addition, the Company allocates a portion of overhead, such as rent and employee benefits costs, to cost of revenue based on headcount. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows: • Level 1 . Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities; • Level 2 . Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions. The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their respective fair values due to their short-term nature. The acquisition of E-Tale Holdings Limited ("E-Tale") on October 31, 2014 included a contingent consideration arrangement that allows for adjustment of payments based upon achievement of specified quarterly revenue targets through June 2017. Contingent consideration was measured at fair value at the acquisition date and is remeasured to fair value at each reporting date until the contingency is resolved. The fair value is reported within current and non-current liabilities on the condensed consolidated balance sheets. Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future. Subsequent changes in the fair value of contingent consideration are recognized within general and administrative expenses in the Company’s condensed consolidated statements of operations. The fair value of contingent consideration related to the E-Tale acquisition is based on a probability-weighted model in which the Company developed various scenarios for E-Tale’s projected quarterly revenue targets through June 2017. The Company discounted the expected future earn-out payment of each scenario to net present value using Level 3 inputs and assigned probabilities to achieving each scenario. Key assumptions used in the measurement of fair value of contingent consideration include a discount rate of 24% as of September 30, 2015 and December 31, 2014. The Company believes the discount rate used to discount the earn-out payments reflects market participant assumptions. Projected revenue is based on the Company’s internal projections and analysis of the current customer base and expected customer growth, target market and sales potential. The following table presents changes to the Company’s liability for acquisition-related contingent consideration for the nine months ended September 30, 2015 (in thousands): Balance as of January 1, 2015 $ 618 Change in contingent consideration fair value 14 Balance as of September 30, 2015 $ 632 |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The Company’s cash and cash equivalents accounts exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents accounts to date. To manage accounts receivable risk, the Company maintains an allowance for doubtful accounts. The Company did not have any customers that individually comprised a significant concentration of its accounts receivable as of September 30, 2015 and December 31, 2014 , or a significant concentration of its revenue for the three and nine months ended September 30, 2015 and 2014 . |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts The Company extends credit to customers without requiring collateral. Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of amounts due. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates. |
Other Receivables | Other Receivables Under certain customer arrangements, the Company collects and remits monthly activity-based fees incurred on specific channels on the customers’ behalf. The Company records the amounts due from customers as a result of these arrangements as other receivables. Other receivables of $2.9 million and $1.3 million are included in prepaid expenses and other current assets on the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 , respectively. |
Identifiable Intangible Assets | Identifiable Intangible Assets The Company acquired intangible assets in connection with its business acquisitions. These assets were recorded at their estimated fair values at the acquisition date and are being amortized over their respective estimated useful lives using the straight-line method. The estimated useful lives and amortization methodology used in computing amortization are as follows: Estimated Useful Lives Amortization Methodology Customer relationships 7 years Straight-line Acquired technology 7 years Straight-line Trade names 3 years Straight-line Amortization expense associated with the Company's intangible assets was $0.2 million and $0.1 million for the three months ended September 30, 2015 and 2014 , respectively, and $0.7 million and $0.3 million for the nine months ended September 30, 2015 and 2014 , respectively. |
Software Development Costs | Software Development Costs The Company capitalizes certain internal-use software development costs, consisting primarily of direct labor associated with creating the internally developed software and third-party consulting fees associated with implementing software purchased for internal use. Software development projects generally include three stages: the preliminary project stage (in which all costs are expensed as incurred), the application development stage (in which certain costs are capitalized) and the post-implementation/operation stage (in which all costs are expensed as incurred). The costs incurred during the application development stage primarily include the costs of designing the application, coding and testing of the system. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software once it is ready for its intended use. Software development costs of $0.1 million and $0.4 million related to creating internally developed software and implementing software purchased for internal use were capitalized during the nine months ended September 30, 2015 and the year ended December 31, 2014 , respectively, and are included in property and equipment in the accompanying condensed consolidated balance sheets. Amortization expense related to capitalized internally developed software was $0.1 million for each of the three months ended September 30, 2015 and 2014 and $0.2 million and $0.1 million for the nine months ended September 30, 2015 and 2014 , respectively, and is included in cost of revenue or general and administrative expense in the accompanying condensed consolidated statements of operations, depending upon the nature of the software development project. The net book value of capitalized internally developed software was $0.5 million and $0.6 million as of September 30, 2015 and December 31, 2014 , respectively. Software development costs of $0.3 million related to configuring and implementing hosted third-party software applications that the Company will use in its business operations were capitalized during the year ended December 31, 2014 . There were no amounts capitalized during the nine months ended September 30, 2015 . These costs are included in property and equipment in the accompanying condensed consolidated balance sheets. Amortization expense related to hosted third-party software applications was $0.2 million for each of the three months ended September 30, 2015 and 2014 and $0.5 million for each of the nine months ended September 30, 2015 and 2014 and is included in general and administrative expense in the accompanying condensed consolidated statements of operations. The net book value of hosted third-party software applications was $0.8 million and $1.4 million as of September 30, 2015 and December 31, 2014 , respectively. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method of accounting. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company applies the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken, in a tax return. Additionally, the guidance also prescribes the treatment for accounting in interim periods, derecognition, classification and disclosure requirements for uncertain tax positions. The Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes. An uncertain tax position will be recognized if it is not more likely than not to be sustained. The Company’s income tax provision for the three and nine months ended September 30, 2015 and 2014 reflects its estimates of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events that are recorded in the period in which they occur. For the three and nine months ended September 30, 2015 and 2014 , the Company’s effective tax rate differs from the federal statutory rate primarily due to changes in the valuation allowance and nondeductible expenses. For the three and nine months ended September 30, 2015 and 2014 , the Company had net operating loss (“NOL”) carryforwards, the benefit of which is dependent on the Company’s ability to generate sufficient taxable income prior to the expiration of the NOL carryforwards. In addition, the maximum annual use of the NOL carryforwards is limited in certain situations, such as a change in stock ownership. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation awards, which include stock options and restricted stock units ("RSUs"), based on the fair value of the award as of the grant date. The Company recognizes stock-based compensation expense using the accelerated attribution method, net of estimated forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche. The Company uses the Black-Scholes option pricing model for estimating the fair value of stock options. The use of the option valuation model requires the input of the Company's stock price, as well as highly subjective assumptions, including the expected life of the option and the expected stock price volatility based on peer companies. The fair value of the Company's common stock, for purposes of determining the grant date fair value of option and RSU awards, has been determined by using the closing market price per share of common stock as quoted on the New York Stock Exchange on the date of grant. The recognition of expense requires the estimation of the number of awards that will ultimately vest and the number of awards that will ultimately be forfeited. |
Earnings Per Share | Diluted loss per share is the same as basic loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. |
Significant Accounting Polici17
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Schedule of Reclassifications | The tables below summarize these reclassifications (in thousands): Three Months Ended September 30, 2014 As Previously Reported Reclassification As Reclassified Cost of revenue (excluding depreciation) $ 6,018 $ (998 ) $ 5,020 Depreciation - Cost of revenue — 998 998 Sales and marketing 13,865 (270 ) 13,595 Research and development 4,263 (106 ) 4,157 General and administrative 5,677 (367 ) 5,310 Depreciation and amortization — 743 743 Nine Months Ended September 30, 2014 As Previously Reported Reclassification As Reclassified Cost of revenue (excluding depreciation) $ 18,169 $ (2,483 ) $ 15,686 Depreciation - Cost of revenue — 2,483 2,483 Sales and marketing 42,131 (656 ) 41,475 Research and development 12,572 (264 ) 12,308 General and administrative 15,850 (990 ) 14,860 Depreciation and amortization — 1,910 1,910 |
Fair Value Level 3 Liability Reconciliation | The following table presents changes to the Company’s liability for acquisition-related contingent consideration for the nine months ended September 30, 2015 (in thousands): Balance as of January 1, 2015 $ 618 Change in contingent consideration fair value 14 Balance as of September 30, 2015 $ 632 |
Estimated Useful Lives Used in Computing Amortization | The estimated useful lives and amortization methodology used in computing amortization are as follows: Estimated Useful Lives Amortization Methodology Customer relationships 7 years Straight-line Acquired technology 7 years Straight-line Trade names 3 years Straight-line |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table shows the changes in the carrying amount of goodwill for the nine months ended September 30, 2015 (in thousands): Balance as of January 1, 2015 $ 21,518 Adjustment to E-Tale Acquisition purchase price (45 ) Balance as of September 30, 2015 $ 21,473 |
Equity Incentive Plan and Sto19
Equity Incentive Plan and Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock-Based Compensation Expense | Stock-based compensation expense is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Cost of revenue (excluding depreciation) $ 238 $ 183 $ 777 $ 373 Sales and marketing 1,190 922 3,766 1,833 Research and development 397 286 1,295 584 General and administrative 1,272 1,143 3,435 2,511 $ 3,097 $ 2,534 $ 9,273 $ 5,301 |
Summary of Stock Option Activity | The following table summarizes the stock option activity for the nine months ended September 30, 2015 : Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in years) (in thousands) Outstanding options as of January 1, 2015 1,425,357 $ 9.12 Granted 456,871 10.59 Exercised (98,700 ) 4.79 Forfeited (152,125 ) 15.39 Expired (36,896 ) 25.66 Outstanding options as of September 30, 2015 1,594,507 $ 8.83 7.45 $ 4,044 Exercisable as of September 30, 2015 908,554 $ 6.82 6.37 $ 3,778 Vested and expected to vest as of September 30, 2015 1,489,014 $ 8.64 7.35 $ 3,995 |
Summary of Restricted Stock Unit Activity | The following table summarizes the RSU activity for the nine months ended September 30, 2015 : Number of RSUs Weighted Average Grant-Date Fair Value Unvested RSUs as of January 1, 2015 944,734 $ 22.76 Granted 1,520,780 10.22 Vested (186,286 ) 26.23 Forfeited (196,980 ) 15.55 Unvested RSUs as of September 30, 2015 2,082,248 $ 13.98 |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Schedule of Securities Excluded from Calculation of Weighted Average Common Shares Outstanding | The following securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the three and nine months ended September 30, 2015 and 2014 : Three and Nine Months Ended September 30, 2015 2014 Warrants to purchase common stock — 3,743 Stock options 1,594,507 1,518,737 RSUs 2,082,248 691,864 |
Segment and Geographic Inform21
Segment and Geographic Information (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Summary of Revenue by Geography | The following table summarizes revenue by geography for the three and nine months ended September 30, 2015 and 2014 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Domestic $ 18,429 $ 16,222 $ 54,652 $ 47,220 International 5,950 4,744 16,499 13,854 Total revenue $ 24,379 $ 20,966 $ 71,151 $ 61,074 |
Significant Accounting Polici22
Significant Accounting Policies - Additional Information (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Significant Accounting Policies [Line Items] | |||||
Other receivables | $ 2,900,000 | $ 2,900,000 | $ 1,300,000 | ||
Amortization of intangible assets | 200,000 | $ 100,000 | 700,000 | $ 300,000 | |
Software and Software Development Costs [Member] | |||||
Significant Accounting Policies [Line Items] | |||||
Capitalized computer software, additions | 100,000 | 400,000 | |||
Amortization expense on capitalized internally developed software | 100,000 | 100,000 | 200,000 | 100,000 | |
Capitalized internally developed software, net book value | 500,000 | 500,000 | 600,000 | ||
Hosted Software Configuration Costs [Member] | |||||
Significant Accounting Policies [Line Items] | |||||
Capitalized computer software, additions | 0 | 300,000 | |||
Amortization expense on capitalized internally developed software | 200,000 | $ 200,000 | 500,000 | $ 500,000 | |
Capitalized internally developed software, net book value | $ 800,000 | $ 800,000 | $ 1,400,000 | ||
Contingent Consideration [Member] | E-Tale Holdings Limited [Member] | |||||
Significant Accounting Policies [Line Items] | |||||
Fair value inputs, discount rate | 24.00% | 24.00% |
Significant Accounting Polici23
Significant Accounting Policies - Reclassifications (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Cost of revenue | $ 4,954 | $ 5,020 | $ 15,571 | $ 15,686 |
Depreciation - Cost of revenue | 1,336 | 998 | 3,536 | 2,483 |
Sales and marketing | 11,879 | 13,595 | 40,790 | 41,475 |
Research and development | 3,874 | 4,157 | 11,955 | 12,308 |
General and administrative | 6,075 | 5,310 | 16,867 | 14,860 |
Depreciation and amortization | $ 1,005 | 743 | $ 2,827 | 1,910 |
As Previously Reported [Member] | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Cost of revenue | 6,018 | 18,169 | ||
Depreciation - Cost of revenue | 0 | 0 | ||
Sales and marketing | 13,865 | 42,131 | ||
Research and development | 4,263 | 12,572 | ||
General and administrative | 5,677 | 15,850 | ||
Depreciation and amortization | 0 | 0 | ||
Reclassification [Member] | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Cost of revenue | (998) | (2,483) | ||
Depreciation - Cost of revenue | 998 | 2,483 | ||
Sales and marketing | (270) | (656) | ||
Research and development | (106) | (264) | ||
General and administrative | (367) | (990) | ||
Depreciation and amortization | $ 743 | $ 1,910 |
Significant Accounting Polici24
Significant Accounting Policies - Contingent Consideration Rollforward (Detail) - Contingent Consideration [Member] - E-Tale Holdings Limited [Member] $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Contingent consideration, beginning balance | $ 618 |
Change in contingent consideration fair value | 14 |
Contingent consideration, ending balance | $ 632 |
Significant Accounting Polici25
Significant Accounting Policies - Estimated Useful Lives Used in Computing Amortization (Detail) | 9 Months Ended |
Sep. 30, 2015 | |
Customer Relationships [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life of intangible asset | 7 years |
Acquired Technology [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life of intangible asset | 7 years |
Trade Names [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life of intangible asset | 3 years |
Business Combination - Addition
Business Combination - Additional Information (Detail) - E-Tale Holdings Limited [Member] - USD ($) $ in Millions | Oct. 31, 2014 | Sep. 30, 2015 |
Business Acquisition [Line Items] | ||
Post-closing working capital adjustment | $ 0.1 | |
As Previously Reported [Member] | ||
Business Acquisition [Line Items] | ||
Consideration transferred | $ 9 | |
Payments to acquire E-Tale, gross | 8.2 | |
Contingent consideration liability | 0.6 | |
Other acquisition consideration | $ 0.2 |
Goodwill (Detail)
Goodwill (Detail) $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 21,518 |
Adjustment to E-Tale Acquisition purchase price | (45) |
Goodwill, ending balance | $ 21,473 |
Guarantee (Detail)
Guarantee (Detail) - Sep. 30, 2015 - Property Lease Guarantee [Member] £ in Millions | USD ($) | GBP (£) |
Guarantor Obligations [Line Items] | ||
Total remaining lease payments | $ 3,400,000 | £ 2.2 |
Guarantor obligation, current carrying value | $ 0 |
Equity Incentive Plan and Sto29
Equity Incentive Plan and Stock-Based Compensation - Additional Information (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options, compensation cost not yet recognized | $ 1.6 |
Employee Stock Option [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost related to nonvested awards, weighted-average period recognized | 2 years 10 days |
Restricted Stock Units (RSUs) [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost related to nonvested awards, weighted-average period recognized | 1 year 10 months 29 days |
Nonvested RSUs, compensation not yet recognized | $ 15.1 |
Equity Incentive Plan and Sto30
Equity Incentive Plan and Stock-Based Compensation - Summary of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | $ 3,097 | $ 2,534 | $ 9,273 | $ 5,301 |
Cost of revenue [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | 238 | 183 | 777 | 373 |
Sales and Marketing [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | 1,190 | 922 | 3,766 | 1,833 |
Research and Development [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | 397 | 286 | 1,295 | 584 |
General and Administrative [Member] | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense | $ 1,272 | $ 1,143 | $ 3,435 | $ 2,511 |
Equity Incentive Plan and Sto31
Equity Incentive Plan and Stock-Based Compensation - Summary of Stock Option Activity (Detail) $ / shares in Units, $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
Number of Options | |
Number of Options, Beginning balance | shares | 1,425,357 |
Number of Options, Granted | shares | 456,871 |
Number of Options, Exercised | shares | (98,700) |
Number of Options, Forfeited | shares | (152,125) |
Number of Options, Expired | shares | (36,896) |
Number of Options, Ending balance | shares | 1,594,507 |
Number of Options, Exercisable | shares | 908,554 |
Number of Options, Vested and expected to vest | shares | 1,489,014 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning balance | $ 9.12 |
Weighted Average Exercise Price, Granted | 10.59 |
Weighted Average Exercise Price, Exercised | 4.79 |
Weighted Average Exercise Price, Forfeited | 15.39 |
Weighted Average Exercise Price, Expired | 25.66 |
Weighted Average Exercise Price, Ending balance | 8.83 |
Weighted Average Exercise Price, Exercisable | 6.82 |
Weighted Average Exercise Price, Vested and expected to vest | $ 8.64 |
Weighted Average Remaining Contractual Term, Outstanding | 7 years 5 months 11 days |
Weighted Average Remaining Contractual Term, Exercisable | 6 years 4 months 14 days |
Weighted Average Remaining Contractual Term, Vested and expected to vest | 7 years 4 months 7 days |
Aggregate Intrinsic Value, Ending balance | $ | $ 4,044 |
Aggregate Intrinsic Value, Exercisable | $ | 3,778 |
Aggregate Intrinsic Value, Vested and expected to vest | $ | $ 3,995 |
Equity Incentive Plan and Sto32
Equity Incentive Plan and Stock-Based Compensation - Summary of Restricted Stock Units Activity (Detail) - Restricted Stock Units (RSUs) [Member] | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Number of RSUs | |
Number of RSUs, Beginning balance | shares | 944,734 |
Number of RSUs, Granted | shares | 1,520,780 |
Number of RSUs, Vested | shares | (186,286) |
Number of RSUs, Forfeited | shares | (196,980) |
Number of RSUs, Ending balance | shares | 2,082,248 |
Weighted Average Grant Date Fair Value | |
Weighted Average Grant Date Fair Value, Beginning Balance | $ 22.76 |
Weighted Average Grant Date Fair Value, Granted | 10.22 |
Weighted Average Grant Date Fair Value, Vested | 26.23 |
Weighted Average Grant Date Fair Value, Forfeited | 15.55 |
Weighted Average Grant Date Fair Value, Ending Balance | $ 13.98 |
Net Loss Per Share - Schedule o
Net Loss Per Share - Schedule of Securities Excluded from Calculation of Weighted Average Common Shares Outstanding (Detail) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Warrant [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from calculation of weighted average common shares outstanding | 0 | 3,743 | 0 | 3,743 |
Stock Options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from calculation of weighted average common shares outstanding | 1,594,507 | 1,518,737 | 1,594,507 | 1,518,737 |
Restricted Stock Units (RSUs) [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from calculation of weighted average common shares outstanding | 2,082,248 | 691,864 | 2,082,248 | 691,864 |
Segment and Geographic Inform34
Segment and Geographic Information - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2015segment | |
Segment Reporting [Abstract] | |
Number of reportable segment | 1 |
Number of operating segment | 1 |
Segment and Geographic Inform35
Segment and Geographic Information - Summary of Revenue by Geography (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 24,379 | $ 20,966 | $ 71,151 | $ 61,074 |
Domestic [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 18,429 | 16,222 | 54,652 | 47,220 |
Non-US [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | $ 5,950 | $ 4,744 | $ 16,499 | $ 13,854 |