Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 26, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | Control4 Corp | |
Entity Central Index Key | 1,259,515 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 26,708,202 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 35,373 | $ 29,761 |
Restricted cash | 264 | 273 |
Short-term investments | 54,544 | 44,057 |
Accounts receivable, net | 34,157 | 29,925 |
Inventories | 41,621 | 37,171 |
Prepaid expenses and other current assets | 5,058 | 4,369 |
Total current assets | 171,017 | 145,556 |
Property and equipment, net | 8,684 | 7,337 |
Long-term investments | 1,085 | 12,038 |
Intangible assets, net | 21,962 | 26,081 |
Goodwill | 21,598 | 21,867 |
Other assets | 1,330 | 1,618 |
Total assets | 225,676 | 214,497 |
Current liabilities: | ||
Accounts payable | 26,932 | 25,654 |
Accrued liabilities | 8,431 | 10,835 |
Current portion of deferred revenue | 5,121 | 4,538 |
Total current liabilities | 40,484 | 41,027 |
Other long-term liabilities | 4,500 | 3,942 |
Total liabilities | 44,984 | 44,969 |
Commitments and contingencies (Note 11) | ||
Stockholders' equity: | ||
Common stock, $0.0001 par value; 500,000,000 shares authorized; 26,707,025 and 25,832,895 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 3 | 3 |
Additional paid-in capital | 240,394 | 242,281 |
Accumulated deficit | (58,908) | (72,225) |
Accumulated other comprehensive loss | (797) | (531) |
Total stockholders' equity | 180,692 | 169,528 |
Total liabilities and stockholders' equity | $ 225,676 | $ 214,497 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 26,707,025 | 25,832,895 |
Common stock, shares outstanding | 26,707,025 | 25,832,895 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Revenue | $ 71,594 | $ 64,583 | $ 199,971 | $ 176,043 |
Cost of revenue | 34,484 | 31,520 | 95,760 | 86,572 |
Gross margin | 37,110 | 33,063 | 104,211 | 89,471 |
Operating expenses: | ||||
Research and development | 11,144 | 10,347 | 32,595 | 30,246 |
Sales and marketing | 13,520 | 12,692 | 38,608 | 36,082 |
General and administrative | 6,913 | 5,109 | 19,534 | 16,413 |
Total operating expenses | 31,577 | 28,148 | 90,737 | 82,741 |
Income from operations | 5,533 | 4,915 | 13,474 | 6,730 |
Other income (expense), net: | ||||
Interest, net | 327 | 125 | 819 | 224 |
Other income (expense), net | (82) | 79 | (864) | 183 |
Total other income (expense), net | 245 | 204 | (45) | 407 |
Income before income taxes | 5,778 | 5,119 | 13,429 | 7,137 |
Income tax expense (benefit) | 67 | 85 | 112 | (2,459) |
Net income | $ 5,711 | $ 5,034 | $ 13,317 | $ 9,596 |
Net income per common share: | ||||
Basic (in dollars per share) | $ 0.22 | $ 0.20 | $ 0.51 | $ 0.39 |
Diluted (in dollars per share) | $ 0.21 | $ 0.19 | $ 0.48 | $ 0.36 |
Weighted-average number of shares: | ||||
Basic (in shares) | 26,397 | 25,050 | 26,116 | 24,551 |
Diluted (in shares) | 27,671 | 27,122 | 27,489 | 26,393 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 5,711 | $ 5,034 | $ 13,317 | $ 9,596 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment, net of tax | (105) | (155) | (263) | 383 |
Net unrealized gain (losses) on available-for-sale investments, net of tax | 32 | 6 | (3) | 3 |
Total other comprehensive income (loss) | (73) | (149) | (266) | 386 |
Comprehensive income | $ 5,638 | $ 4,885 | $ 13,051 | $ 9,982 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Thousands | 9 Months Ended | |
Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | |
Operating activities | ||
Net income | $ 13,317 | $ 9,596 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation expense | 2,852 | 2,703 |
Amortization of intangible assets | 4,286 | 3,885 |
Loss (gain) on disposal of fixed assets | 5 | (1) |
Provision for doubtful accounts | 760 | 491 |
Investment discount and premium amortization | (349) | (57) |
Stock-based compensation | 10,085 | 9,191 |
Tax benefit from business acquisition | (2,415) | |
Changes in assets and liabilities: | ||
Accounts receivable, net | (5,353) | (4,890) |
Inventories | (5,015) | (5,347) |
Prepaid expenses and other current assets | (644) | 390 |
Other assets | 255 | (1,018) |
Accounts payable | 1,816 | 3,495 |
Accrued liabilities | (1,223) | (1,675) |
Deferred revenue | 574 | 870 |
Other long-term liabilities | 622 | 171 |
Net cash provided by operating activities | 21,988 | 15,389 |
Investing activities | ||
Purchases of available-for-sale investments | (51,538) | (52,472) |
Proceeds from sales of available-for-sale investments | 1,000 | 1,950 |
Proceeds from maturities of available-for-sale investments | 51,350 | 34,580 |
Purchases of property and equipment | (3,914) | (3,003) |
Business acquisitions, net of cash acquired | (1,411) | (7,881) |
Net cash used in investing activities | (4,513) | (26,826) |
Financing activities | ||
Proceeds from exercise of options for common stock | 10,729 | 11,290 |
Payments for withholding taxes related to net share settlement of equity awards | (6,378) | (4,591) |
Repurchase of common stock | (15,957) | (1,821) |
Payment of debt issuance costs | (113) | |
Net cash (used in) provided by financing activities | (11,719) | 4,878 |
Effect of exchange rate changes on cash and cash equivalents | (153) | 397 |
Net change in cash and cash equivalents | 5,603 | (6,162) |
Unrestricted and restricted cash and cash equivalents at beginning of period | 30,034 | 35,060 |
Unrestricted and restricted cash and cash equivalents at end of period | 35,637 | 28,898 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 105 | 65 |
Cash paid for taxes | 988 | 1,120 |
Supplemental schedule of non-cash investing and financing activities | ||
Business acquisitions holdback liability | 1,068 | |
Purchases of property and equipment financed by accounts payable | 689 | 396 |
Net unrealized gains (losses) on available-for-sale investments | $ (3) | $ 3 |
Description of Business and Sum
Description of Business and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Description of Business and Summary of Significant Accounting Policies | |
Description of Business and Summary of Significant Accounting Policies | 1. Description of Business and Summary of Significant Accounting Policies Control4 Corporation (‘‘Control4’’ or the ‘‘Company’’) is a leading provider of smart home and business solutions that are designed to personalize and enhance how consumers engage with an ever-changing connected world. Our entertainment, smart lighting, comfort and convenience, safety and security, and networking solutions unlock the potential of connected devices, making entertainment systems easier to use and more accessible, homes and businesses more comfortable and energy efficient, and individuals more secure . The Company was incorporated in the state of Delaware on March 27, 2003. Unaudited Interim Financial Statements The accompanying condensed consolidated financial statements are unaudited. These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the Company’s financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or any other future interim or annual period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 15, 2018. The December 31, 2017 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in the unaudited condensed consolidated financial statements. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as one operating segment. Concentrations of Risk The Company’s accounts receivable are derived from revenue earned from its worldwide network of independent dealers and distributors. The Company’s sales to dealers and distributors located outside the United States are generally denominated in U.S. dollars, except for sales to dealers and distributors located in the United Kingdom, Canada, Australia, and the European Union, which are generally denominated in pounds sterling, Canadian dollars, Australian dollars, and euros, respectively. There were no individual account balances greater than 10% of total accounts receivable as of September 30, 2018 and December 31, 2017. No dealer or distributor accounted for more than 10% of total revenue for the three and nine months ended September 30, 2018 and 2017. While the Company partners with many manufacturers, generally one manufacturer is our sole source for a particular product or product family. A significant disruption in the operations of one of these manufacturers would impact the production of the Company’s products for a substantial period of time, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Use of Accounting Estimates The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, sales returns, provisions for doubtful accounts, product warranty, inventory obsolescence, litigation, determination of fair value of stock options, deferred tax asset valuation allowances and income taxes. Actual results may differ from those estimates. Limited Product Warranties The Company provides its customers a limited product warranty of two, three, or ten years depending on product type and brand. The limited product warranties require the Company, at its option, to repair or replace defective products during the warranty period at no cost to the customer or refund the purchase price. The Company estimates the costs that may be incurred to replace, repair or issue a refund for defective products and records a reserve at the time revenue is recognized. Factors that affect the Company’s warranty liability include the cost of the products sold, the Company’s historical experience, and management’s judgment regarding anticipated rates of product warranty returns, net of refurbished products. The Company assesses the adequacy of its recorded warranty liability each period and makes adjustments to the liability as necessary. Warranty costs accrued include amounts accrued for products at the time of shipment, adjustments for changes in estimated costs for warranties on products shipped in the period, and changes in estimated costs for warranties on products shipped in prior periods. It is not practicable for the Company to determine the amounts applicable to each of these components. The following table presents the changes in the product warranty liability for the nine months ended September 30, 2018 (in thousands): Warranty Liability Balance at December 31, 2017 $ 2,032 Warranty costs accrued 2,452 Warranty claims (2,375) Balance at September 30, 2018 $ 2,109 Net Income Per Share Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period that have a dilutive effect on net income per share. Potentially dilutive common shares result from the assumed exercise of outstanding stock options and settlement of restricted stock units. The following table presents the reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Numerator: Net income $ 5,711 $ 5,034 $ 13,317 $ 9,596 Denominator: Weighted average common stock outstanding for basic net income per common share 26,397 25,050 26,116 24,551 Effect of dilutive securities—stock options and restricted stock units 1,274 2,072 1,373 1,842 Weighted average common shares and dilutive securities outstanding 27,671 27,122 27,489 26,393 Potentially dilutive securities, including common equivalent shares, in which the assumed proceeds exceed the average market price of common stock for the applicable period, were not included in the calculation of diluted net income per share as their impact would be anti-dilutive. The following weighted-average common stock equivalents were anti-dilutive and therefore were excluded from the calculation of diluted net income per share (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Options to purchase common stock — 23 — 881 Restricted stock units 7 — 122 6 Total 7 23 122 887 Restricted Cash Restricted cash as of September 30, 2018 and December 31, 2017 is composed of a guarantee made by the Company’s subsidiary in the United Kingdom to HM Revenue & Customs related to a customs duty deferment account. Recent Accounting Pronouncements In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. This analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective as of November 5, 2018. The Company does not expect the adoption of this final rule to have a material impact on the consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from non-employees. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company elected to early-adopt this standard in the current period; the adoption of this standard did not impact the consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash ,” which provides amendments to current guidance to address the classifications and presentation of changes in restricted cash in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “ Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory .” The amendments in this update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for annual and interim periods beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. For trade receivables, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The guidance is effective for fiscal years beginning after December 31, 2019, including interim periods within those years. Early application of the guidance is permitted for all entities for fiscal years beginning after December 15, 2018, including the interim periods within those fiscal years. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this update on the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “ Leases (Topic 842 ) ,” which supersedes the guidance in ASC 840, “Leases .” The purpose of the new standard is to improve transparency and comparability related to the accounting and reporting of leasing arrangements. The guidance will require balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Although the standard initially required the modified retrospective approach for adoption, in July 2018, the FASB issued ASU 2018-18, allowing companies to initially apply the new lease requirements at the effective date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Early adoption is permitted. The Company expects the standard will have a material impact on the Company’s consolidated balance sheets but will not have a material impact on the consolidated statements of operations. The most significant impact will be the recognition of right of use assets and lease liabilities for operating leases. In connection with the adoption of the new lease accounting standard, the Company has completed scoping reviews and continues to make progress implementing new processes, systems, accounting policies and internal controls relevant to the standard. We anticipate adopting this standard on January 1, 2019 using the prospective adoption approach and electing the practical expedients allowed under the standard. |
Balance Sheet Components
Balance Sheet Components | 9 Months Ended |
Sep. 30, 2018 | |
Balance Sheet Components | |
Balance Sheet Components | 2. Balance Sheet Components Inventories consisted of the following (in thousands): September 30, December 31, 2018 2017 Finished goods $ 37,801 $ 33,050 Component parts 3,773 4,025 Work-in-process 47 96 $ 41,621 $ 37,171 Property and equipment, net consisted of the following (in thousands): September 30, December 31, 2018 2017 Computer equipment and software $ 5,137 $ 5,030 Manufacturing tooling and test equipment 4,297 4,894 Lab and warehouse equipment 5,692 4,869 Leasehold improvements 5,059 3,960 Furniture and fixtures 4,457 3,698 Other 1,086 1,086 25,728 23,537 Less: accumulated depreciation (17,044) (16,200) $ 8,684 $ 7,337 Accrued liabilities consisted of the following (in thousands): September 30, December 31, 2018 2017 Sales returns and current portion of warranty liability $ 2,517 $ 2,872 Compensation accruals 5,014 5,241 Other accrued liabilities 900 2,722 $ 8,431 $ 10,835 Other long-term liabilities consisted of the following (in thousands): September 30, December 31, 2018 2017 Deferred revenue $ 3,096 $ 3,143 Warranty 621 600 Other 783 199 $ 4,500 $ 3,942 |
Financial Instruments
Financial Instruments | 9 Months Ended |
Sep. 30, 2018 | |
Financial Instruments | |
Financial Instruments | 3. Financial Instruments Fair Value Measurements The Company’s financial assets that are measured at fair value on a recurring basis consist of money market funds and available-for-sale investments. The following three levels of inputs are used to measure the fair value of financial instruments: Level 1: Quoted prices in active markets for identical assets or liabilities; Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3: Unobservable inputs are used when little or no market data is available. The fair values for substantially all of the Company’s financial assets are based on quoted prices in active markets or observable inputs. For Level 2 securities, the Company uses a third-party pricing service which provides documentation on an ongoing basis that includes, among other things, pricing information with respect to reference data, methodology, inputs summarized by asset class, pricing application and corroborative information. Cash, Cash Equivalents and Marketable Securities The Company determines realized gains or losses on the sale of marketable securities on a specific identification method. During the three and nine months ended September 30, 2018 and 2017, the Company did not record significant realized gains or losses on the sales of available-for-sale investments. The following tables show the Company’s cash and available-for-sale investments’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category, recorded as cash and cash equivalents or short- or long-term investments as of September 30, 2018 and December 31, 2017 (in thousands): September 30, 2018 Cash and Adjusted Unrealized Unrealized Cash Short-term Long-term Cost Gains Losses Fair Value Equivalents Investments Investments Cash $ 28,687 $ — $ — $ 28,687 $ 28,687 $ — $ — Level 1: Money market funds 5,039 — — 5,039 5,039 — — U.S. government notes 8,958 — (29) 8,929 — 8,929 — Subtotal 13,997 — (29) 13,968 5,039 8,929 — Level 2: Corporate bonds 25,755 1 (37) 25,719 — 24,634 1,085 Commercial paper 22,628 — — 22,628 1,647 20,981 — Subtotal 48,383 1 (37) 48,347 1,647 45,615 1,085 Total $ 91,067 $ 1 $ (66) $ 91,002 $ 35,373 $ 54,544 $ 1,085 December 31, 2017 Cash and Adjusted Unrealized Unrealized Cash Short-term Long-term Cost Gains Losses Fair Value Equivalents Investments Investments Cash $ 24,367 $ — $ — $ 24,367 $ 24,367 $ — $ — Level 1: Money market funds 5,394 — — 5,394 5,394 — — U.S. government notes 9,060 — (13) 9,047 — 4,098 4,949 Subtotal 14,454 — (13) 14,441 5,394 4,098 4,949 Level 2: Corporate bonds 24,943 — (49) 24,894 — 17,805 7,089 Commercial paper 22,154 — — 22,154 — 22,154 — Subtotal 47,097 — (49) 47,048 — 39,959 7,089 Total $ 85,918 $ — $ (62) $ 85,856 $ 29,761 $ 44,057 $ 12,038 As of September 30, 2018, the Company considers the declines in market value of its investment portfolio to be temporary in nature and does not consider any of its investments other-than-temporarily impaired. During the three and nine months ended September 30, 2018 and 2017, the Company did not recognize any significant impairment charges. The Company invests in highly-rated securities, and its investment policy limits the amount of credit exposure to any one issuer. The policy requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. Fair values were determined for each individual security in the investment portfolio. The maturities of the Company’s long-term investments range from one to two years. When evaluating an investment for other-than-temporary impairment the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and the Company’s intent to sell, as well as the fact it is not more likely than not that the Company will be required to sell the investment before recovery of the investment’s cost basis, which may be maturity. Fair Value of Other Financial Instruments The carrying amounts reported in the accompanying condensed consolidated financial statements for restricted cash, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of the accounts. Derivative Financial Instruments The Company has foreign currency exposure related to the operations in the United Kingdom, Canada, Australia, the European Union, as well as other foreign locations. The Company has entered into forward contracts to help offset the exposure to movements in foreign currency exchange rates in relation to certain U.S. dollar denominated balance sheet accounts of its subsidiaries in the United Kingdom and Australia. The foreign currency derivatives are not designated as accounting hedges. The Company recognizes these derivative instruments as either assets or liabilities in the accompanying condensed consolidated balance sheets at fair value. The Company records changes in the fair value (i.e. gains or losses) of these derivative instruments in the accompanying condensed consolidated statement of operations as other income (expense), net. The Company settles its foreign exchange contracts on the last day of every month and enters into a new forward contract for the next month. As a result, there are no assets or liabilities recorded in the accompanying condensed consolidated balance sheets related to derivative instruments as of September 30, 2018. The following table shows the pre-tax income (losses) of the Company’s derivative instruments not designated as hedging instruments (in thousands): Three Months Ended Nine Months Ended September 30, September 30, Income Statement Location 2018 2017 2018 2017 Foreign exchange forward contracts Other income (expense), net $ 64 $ (501) $ 10 $ (1,433) |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2018 | |
Acquisitions | |
Acquisitions | 4. Acquisitions ihiji Acquisition On December 22, 2017, the Company acquired the intellectual property and key operating assets of ihiji, a provider of remote management services for technical integrators servicing connected home customers. Total consideration transferred for this acquisition was immaterial. The majority of the consideration transferred was allocated to a developed technology intangible asset. In accordance with the purchase agreement, a portion of the purchase price was withheld at the acquisition date to cover any of the sellers’ post-closing obligations and was subsequently distributed to the shareholders during the second quarter of 2018. Acquisition of Triad Holdings, Inc. On February 27, 2017, the Company entered into a definitive agreement to acquire Triad Holdings, Inc., (“Triad Holdings”), along with its wholly owned subsidiary Triad Speakers, Inc. (“Triad Speakers” and together with Triad Holdings “Triad”) through the purchase of all the outstanding shares of common stock of Triad for a purchase price of $9.2 million, which included cash acquired of $0.3 million. In accordance with the purchase agreement, $1.4 million of the purchase price was to be held for up to 18 months from the acquisition date to cover any of the sellers’ post-closing obligations, including without limitation any indemnification obligations that may arise (the “Holdback”). Due to customary working capital adjustments after the acquisition date, the Holdback was reduced to $1.1 million and was subsequently distributed during the third quarter of 2018. The Company determined the Triad acquisition was not a significant acquisition under Rule 3-05 of Regulation S‑X. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 5. Goodwill and Intangible Assets Goodwill Changes in the carrying amount of goodwill consisted of the following (in thousands): Amount Balance at December 31, 2017 $ 21,867 Measurement period adjustments (37) Foreign currency translation adjustment (232) Balance at September 30, 2018 $ 21,598 Goodwill represents the excess of consideration transferred over the fair value of assets acquired and liabilities assumed. Amortizable Intangible Assets The Company’s intangible assets and related accumulated amortization consisted of the following as of September 30, 2018 and December 31, 2017 (in thousands): September 30, 2018 Gross Carrying Accumulated Amount Amortization Net Developed technology $ 17,428 $ (9,281) $ 8,147 Customer relationships 12,009 (3,677) 8,332 Trademark/trade name 6,776 (1,293) 5,483 Non-competition agreements 295 (295) — Total intangible assets $ 36,508 $ (14,546) $ 21,962 December 31, 2017 Gross Carrying Accumulated Amount Amortization Net Developed technology $ 19,626 $ (8,914) $ 10,712 Customer relationships 12,009 (2,556) 9,453 Trademark/trade name 6,776 (869) 5,907 Non-competition agreements 295 (286) 9 Total intangible assets $ 38,706 $ (12,625) $ 26,081 The weighted average amortization period for developed technology, customer relationships, and trademarks/trade names is 6.9 years, 8.4 years, and 12.0 years, respectively; and 7.3 years for all amortizable intangible assets in total. The Company recorded amortization expense during the three and nine month periods ended September 30, 2018 and 2017 for these intangible assets as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Cost of revenue $ 888 $ 802 $ 2,733 $ 2,367 Research and development 17 50 63 145 Sales and marketing 496 482 1,490 1,373 Total amortization of intangible assets $ 1,401 $ 1,334 $ 4,286 $ 3,885 Amortization of finite lived intangible assets as of September 30, 2018 for the next five years is as follows (in thousands): Amount Remainder of 2018 $ 1,366 2019 5,593 2020 4,611 2021 2,256 2022 2,093 Thereafter 6,043 $ 21,962 |
Long-Term Obligations
Long-Term Obligations | 9 Months Ended |
Sep. 30, 2018 | |
Long-Term Obligations | |
Long-Term Obligations | 6. Long-Term Obligations Loan and Security Agreement On February 6, 2018, Control4 entered into the 2018 Loan Amendment with SVB, which amends the 2013 Loan Agreement. In the 2018 Loan Amendment, Control4 increased the revolving credit facility from $30.0 million to $40.0 million under the terms of the 2013 Loan Agreement (the “New Credit Facility”). All borrowings under the New Credit Facility are collateralized by the general assets of the Company. Amounts borrowed under the New Credit Facility are due and payable in full on the maturity date, which is January 29, 2020. Advances made pursuant to the New Credit Facility depend on Control4’s leverage ratio and are either: (i) Prime Rate Advances, which bear interest at the Prime Rate plus a Prime Rate Margin of either 0% or 0.25%, or (ii) LIBOR Rate Advances, which bear interest at the LIBOR Rate plus a LIBOR Rate Margin of either 2.50% or 2.75%. Control4 will be assessed an unused revolving line facility fee of 0.25% in any quarter wherein the amount of advances under the New Credit Facility is less than $15.0 million. As of September 30, 2018, Control4 had no outstanding borrowings under the revolving credit facility. The 2018 Loan Amendment contains various restrictive and financial covenants, and the Company was in compliance with each of these covenants as of September 30, 2018. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2018 | |
Revenue Recognition | |
Revenue Recognition | 7. Revenue Recognition ASC 606 Adoption On January 1, 2018, the Company adopted “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”) utilizing the full retrospective method of transition, which required a retrospective adjustment of each prior reporting period presented. The Company applied the new standard using a practical expedient where the consideration allocated to the remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed. Upon adoption of ASC 606, t he Company implemented internal controls over revenue recognition and related financial statement disclosures. Adoption of ASC 606 did not have a significant impact on the Company’s financial statements, however, while preparing for the adoption of ASC 606, the Company evaluated the accounting for technical support and unspecified upgrade rights, which the Company considered inconsequential under ASC 605. While the Company determined that these services are immaterial in the context of the contract under ASC 606, the Company believes that as product offerings continue to mature these services will become more material over time. Accordingly, under ASC 606, the Company will account for technical support and unspecified upgrade rights as a performance obligation, distinct from the hardware product and embedded software, with the associated revenue satisfied over time. The adoption of ASC 606 impacted the Company’s previously reported results as follows (in thousands, except share data): Three Months Ended Nine Months Ended September 30, September 30, 2017 2017 As previously reported ASC 606 adjustment As As previously reported ASC 606 adjustment As Revenue $ 64,742 $ (159) $ 64,583 $ 176,386 $ (343) $ 176,043 Income tax expense (benefit) 93 (8) 85 (2,441) (18) (2,459) Net income 5,185 (151) 5,034 9,921 (325) 9,596 Basic earnings per share $ 0.21 $ (0.01) $ 0.20 $ 0.40 $ (0.01) $ 0.39 Diluted earnings per share $ 0.19 $ — $ 0.19 $ 0.38 $ (0.02) $ 0.36 December 31, 2017 As previously reported ASC 606 adjustment As Other assets $ 1,576 $ 42 $ 1,618 Current portion of deferred revenue 2,311 2,227 4,538 Other long-term liabilities 882 3,060 3,942 Stockholders’ equity 174,773 (5,245) 169,528 Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration expected to be received in exchange for those products or services. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Shipping charges billed to dealers and distributors are included in product revenue and related shipping costs are included in cost of revenue. The Company has elected to account for shipping and handling activities performed after control has been transferred to the customer as a fulfillment cost and accrues for these costs if revenue is recognized before contractually agreed-upon shipping and handling occurs. Solution Products Revenue The Company sells its solution products through a network of independent dealers, distributors and retailers. These dealers, distributors and retailers generally sell the Company’s products as part of a bundled sale, which typically includes other third‑party products and related services, project design, installation services and on‑going support. The Company’s products are generally highly dependent on, and interrelated with, the underlying operating system and cannot function without the operating system. In these cases, the hardware and software license are accounted for as a single performance obligation and revenue is recognized at the point in time when ownership is transferred to dealers, distributors, and retailers, which is typically at the time the product is shipped. In cases where revenue is allocated to software updates and technical support, primarily because the updates and technical support are provided at no additional charge, revenue is recognized as the updates and technical support are provided, which is ratably over the estimated life of the related device. Certain customers may receive cash-based incentives or credits; which are accounted for as variable consideration. The Company records estimated reductions to revenue for dealer incentives at the time of the initial sale. The estimated reductions to revenue are based on the sales terms and the Company’s historical experience and trend analysis. The most common incentive relates to amounts paid or credited to dealers for achieving defined volume levels or growth objectives. Subscription Service Revenue The Company offers a subscription service that allows consumers to control and monitor their homes remotely and allows the consumer’s respective Control4 dealer to perform remote diagnostic services. Subscription revenue is deferred at the time of payment and recognized ratably over the contract period which is typically one year. Third-Party Product Revenue The Company recognizes revenue net of cost of revenue for non-inventoried, third‑party products sold through the Company’s online ordering system. The Company’s primary role is to arrange for another entity to provide the goods or services and the Company does not control the promised good or service before it is transferred to the customer. Significant Judgments The Company’s contracts with dealers, distributors, and retailers can include promises to transfer multiple products and services. Determining whether multiple products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation. The Company uses a single amount to estimate SSP for items that are not sold separately, including software updates and technical support provided at no additional charge. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the SSP is determined using information that may include market conditions and other observable inputs. The Company’s products are generally sold with a limited right of return and the Company may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Disaggregated Revenue The Company’s revenue includes amounts earned through sales to dealers and distributors located outside of the United States. There was no single foreign country that accounted for more than 10% of total revenue for the three and nine months ended September 30, 2018 and 2017. The following table sets forth revenue from the United States, Canada and all other international dealers and distributors combined (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Revenue-United States $ 49,780 $ 44,728 $ 139,021 $ 122,751 Revenue-Canada 5,812 5,386 16,714 14,882 Revenue-all other international sources 16,002 14,469 44,236 38,410 Total revenue $ 71,594 $ 64,583 $ 199,971 $ 176,043 International revenue (excluding Canada) as a percent of total revenue % % % % Contract Balances As of September 30, 2018 and December 31, 2017, accounts receivable, net of allowance for doubtful accounts, were $34.2 million and $29.9 million, respectively. The Company extends credit to some of its dealers and distributors, which consist primarily of small, local businesses. Issuance of credit is based on ongoing credit evaluations by the Company of dealers’ and distributors’ financial condition and generally requires no collateral. Trade accounts receivable are recorded at the invoiced amount and do not generally bear interest. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance is based upon the creditworthiness of the Company’s dealers and distributors, the dealers’ and distributors’ historical payment experience, the age of the receivables and current market and economic conditions. Provisions for potentially uncollectible receivables are recorded in sales and marketing expenses. The Company writes off accounts receivable balances to the allowance for doubtful accounts when it becomes likely that they will not be collected. The following table presents the changes in the allowance for doubtful accounts (in thousands): Allowance Balance at December 31, 2017 $ 1,147 Provision 760 Write-offs (365) Balance at September 30, 2018 $ 1,542 Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined the contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, not to receive financing from customers, such as invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period. Deferred revenue is comprised mainly of unearned revenue related to subscription services as well as revenue deferred on the sale of solution products for software updates and technical support. The following table presents the changes in deferred revenue for the nine months ended September 30, 2018 (in thousands): Deferred Revenue Balance at December 31, 2017 $ 7,682 Deferred revenue 6,253 Recognition of deferred revenue (5,718) Balance at September 30, 2018 $ 8,217 Revenue allocated to remaining performance obligations represent contracted revenue that has not yet been recognized (“contracted not recognized”), which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but not recognized revenue was $9.1 million as of September 30, 2018, of which the Company expects to recognize approximately 42% of the revenue over the next 12 months and the remainder over a period of three to four years. Assets Recognized from the Costs to Obtain a Contract with a Customer The Company has elected to immediately expense contract acquisition costs that would be amortized in one year or less. The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year; these incremental costs were immaterial during both periods presented. |
Equity Compensation
Equity Compensation | 9 Months Ended |
Sep. 30, 2018 | |
Equity Compensation | |
Equity Compensation | 8. Equity Compensation Stock Options In 2003, the Board of Directors adopted the 2003 Equity Incentive Plan (the “2003 Plan”), which provided for the granting of nonqualified and incentive stock options, stock appreciation rights, stock awards, restricted stock units and restricted stock awards. Under the 2003 Plan, the Company was able to grant nonqualified and incentive stock options to directors, employees and non-employees providing services to the Company. On June 11, 2013, the Company’s Board of Directors adopted the 2013 Stock Option and Incentive Plan (the “2013 Plan”), which was subsequently approved by the Company’s stockholders. The 2013 Plan became effective as of the closing of the Company’s initial public offering. To the extent that any awards outstanding under the 2003 Plan are forfeited or lapse unexercised after August 1, 2013, the shares of common stock subject to such awards will become available for issuance under the 2013 Plan. The 2013 Plan provides for annual increases in the number of reserved shares of 5% of the outstanding number of shares of the Company’s Common Stock as of the preceding December 31. On January 1, 2018, the number of reserved shares was increased by 1,291,644 in accordance with the provisions of the 2013 Plan. A summary of stock option activity for the nine months ended September 30, 2018 is presented below: Weighted Average Shares Subject Weighted Remaining to Options Average Contractual Outstanding Exercise Price Life (Years) Balance at December 31, 2017 2,069,802 12.13 Exercised (942,665) 11.38 Expired (2,809) 5.72 Forfeited (5,048) 13.42 Balance at September 30, 2018 1,119,280 12.77 Exercisable options at September 30, 2018 1,031,009 12.93 4.7 Vested and expected to vest at September 30, 2018 1,119,280 12.77 4.9 The following table summarizes information about stock options outstanding and exercisable at September 30, 2018: Options Outstanding Options Exercisable Weighted- Weighted- Weighted Average Average Average Number of Remaining Number of Remaining Exercise Underlying Contractual Underlying Contractual Range of Exercise Prices Price Shares Life (in years) Shares Life (in years) $ - 6.12 315,730 2.8 309,965 2.7 $ - 10.51 287,084 5.5 228,793 5.3 $ - 15.60 284,397 6.1 260,182 6.1 $ - 21.15 232,069 5.4 232,069 5.4 1,119,280 1,031,009 For the stock option awards vested during the three and nine months ended September 30, 2018, the total fair value was $0.4 million and $1.6 million, respectively. The following table summarizes the aggregate intrinsic-value of options exercised, exercisable and vested and expected to vest (in thousands): For the Nine Months Ended and as of September 30, 2018 2017 Options Exercised $ 18,077 $ 8,927 Options Exercisable 22,068 39,360 Options Vested and Expected to Vest 24,130 45,152 Restricted stock units A summary of restricted stock unit activity for the nine months ended September 30, 2018 is presented below: Number of Weighted Average Shares Grant Date Fair Value Non-vested balance at December 31, 2017 1,290,660 $ 9.75 Awarded 461,350 28.46 Vested (743,514) 10.04 Forfeited (53,880) 11.18 Non-vested balance at September 30, 2018 954,616 18.49 During the nine months ended September 30, 2018, 743,514 restricted stock units vested of which 242,531 shares were withheld for tax purposes resulting in the issuance of 500,983 shares of common stock. Company Matching Contribution to our 401(k) Plan The Company offers a 401(k) Plan and in November 2016, the Company’s Board of Directors authorized a matching contribution by the Company starting in 2017. Matching contributions are as follows: the Company will match 100% of the first 1% of salary contributed by a participant, and 50% of the next 5% of salary contributed by a participant, for a maximum matching contribution of 3.5% of the salary of a participant up to the limit on contributions imposed by the Internal Revenue Service (“IRS”) . Currently, the Company funds its match in contribution with shares of Control4’s common stock. During the nine months ended September 30, 2018, the Company contributed 30,482 shares of stock to employees under this plan and recorded $1.1 million of expenses associated with this contribution. Stock-based compensation expense Total stock-based compensation expense has been classified as follows in the accompanying Condensed Consolidated Statements of Operations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Cost of revenue $ 59 $ 66 $ 182 $ 185 Research and development 1,115 1,031 3,233 3,210 Sales and marketing 941 883 2,877 2,831 General and administrative 1,314 1,048 3,793 2,965 Total stock-based compensation expense $ 3,429 $ 3,028 $ 10,085 $ 9,191 At September 30, 2018, there was $1.0 million of total unrecognized compensation cost related to non-vested stock option awards that will be recognized over a weighted-average period of 0.5 years. At September 30, 2018, there was $13.4 million of total unrecognized compensation cost related to non-vested restricted stock units that will be recognized over a weighted-average period of 1.8 years if all vesting conditions are met. |
Share Repurchases
Share Repurchases | 9 Months Ended |
Sep. 30, 2018 | |
Share Repurchases | |
Share Repurchases | 9. Share Repurchases In February 2018, the Company’s Board of Directors authorized the repurchase of up to $20.0 million in Control4 common stock from time to time on the open market. During the nine months ended September 30, 2018, the Company repurchased 600,000 shares for $16.0 million compared to 119,007 shares for $1.8 million in the same period in 2017. In October 2018, the Company’s Board of Directors authorized the expansion of the repurchase program providing approval for the Company to repurchase an additional $20 million in Control4 common stock from time to time on the open market until December 31, 2019. As a result, t he Company has $24.0 million remaining under the share repurchase program. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Taxes | |
Income Taxes | 10. Income Taxes On December 22, 2017, the United States enacted tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (“the Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018. The Company is required to recognize the effect of the tax law changes in the period of enactment. In order to calculate this effect, the Company must determine the transition tax amount and remeasure U.S. deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Where the Company has been able to make reasonable estimates of the effects of the Tax Act for which its analysis is not yet complete, the Company has recorded provisional amounts in accordance with SAB 118. Where the Company has not yet been able to make reasonable estimates of the impact of certain elements of the Tax Act, the Company has not recorded any amounts related to those elements and has continued accounting for them in accordance with the tax laws in effect immediately prior to the enactment of the Tax Act. Although the accounting for the Tax Act is incomplete, the Company was able to make reasonable estimates of certain effects of the Tax Act and record provisional amounts at December 31, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 34% to 21% for tax years beginning after December 31, 2017. The Company evaluated the decrease in the tax rate and in 2017 recorded a provisional, one-time tax expense of approximately $9.0 million. This expense was offset by an equal change in the valuation allowance, resulting in a net tax expense or benefit of $0. The Company also recorded a one-time tax benefit and corresponding reduction to the valuation allowance of $0.4 million related to Alternative Minimum Tax credit carryforwards that are expected to be refundable; the Tax Act contributed to $0.2 million of this tax benefit. During the three and six months ended June 30, 2018, the Company recorded the federal income tax impact of the one-time mandatory transition tax on unrepatriated foreign earnings resulting in a one-time deferred tax expense of $0.4 million. As anticipated, the Company fully offset the one-time deferred tax expense with a corresponding reduction to the valuation allowance of $0.4 million. During the three and nine months ended September 30, 2018, the Company recorded an additional $0.1 million expense for the transition tax on unrepatriated foreign earnings due to new regulations the Treasury Department issued during the third quarter. This additional expense was also fully offset by a corresponding reduction in the valuation allowance of $0.1 million. The total impact of the one-time mandatory transition tax on unrepatriated foreign earnings reduced the Company’s net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes by $2.2 million, from $66.7 million to $64.5 million at December 31, 2017. The financial statements for the three and nine months ended September 30, 2018 do not reflect the impact of certain aspects of the Tax Act as the Company did not have the necessary information available, prepared, or analyzed in sufficient detail to determine an actual or provisional amount for the tax effects of the Tax Act. Although the Company completed its accounting for the federal income tax impact of the one-time tax on unrepatriated foreign earnings as of September 30, 2018, it was not able to complete the accounting for state income tax items related to this one-time tax. As a result, no provisional amounts have been recorded for the state tax impact of the one-time tax. Additionally, the Company is still evaluating the unrecognized deferred tax liability related to investment in foreign subsidiaries that will remain indefinitely reinvested subsequent to the one-time transition tax. The Company anticipates that this will not impact tax expense, as the Company intends to continue indefinitely reinvesting its unremitted foreign earnings in Australia and the U.K. During the three and nine months ended September 30, 2018, the Company concluded a U.S. federal income tax examination with the IRS for the tax years ended December 31, 2015 and December 31, 2016. The examination resulted in reductions to U.S. federal NOL carryovers of $0.6 million. The Company recognized a deferred tax expense of $0.1 million as a result of the IRS exam, which was offset by a corresponding reduction in the valuation allowance and a deferred tax benefit of $0.1 million, for a net tax impact of $0. The Tax Act also creates a new requirement on global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries. The GILTI provisions require foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s assets to be included in the Company’s U.S. income tax return. Under U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into the Company's measurement of its deferred taxes. The Company is estimating a taxable income inclusion related to GILTI for the three and nine months ended September 30, 2018 and has made the election to account for GILTI as a component of current taxes incurred rather than as a component of deferred taxes. In order to determine the quarterly provision for income taxes, the Company considers the estimated annual effective tax rate, which is based on expected annual taxable income and statutory tax rates in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter. Income tax expense was $0.1 million for the three months ended September 30, 2018, compared to $0.1 million for the three months ended September 30, 2017, or approximately 1% and 2% of income before income taxes, respectively. Income tax expense was $0.1 million for the nine months ended September 30, 2018 compared to income tax benefit of $2.5 million for the nine months ended September 30, 2017, or approximately 1% and 34% of income before taxes, respectively. The effective tax rate for the three and nine months ended September 30, 2018 differs from the U.S. federal statutory rate of 21% primarily due to the domestic valuation allowance offsetting most of the statutory rate. The rate is increased by foreign income taxes, state income taxes or taxes in states for which net operating loss carryforwards are not available, and the impact of incentive stock options as well as other permanent differences. As of December 31, 2017, the Company’s NOL carryforward amounts for U.S. federal income and state tax purposes were $63.9 million and $67.8 million, respectively. The NOL carryforwards will expire between 2020 and 2037. In addition to the NOL carryforwards, as of December 31, 2017, the Company had U.S. federal and state research and development credit carryforwards of $6.6 million and $2.8 million, respectively, which will expire between 2018 and 2034. Significant judgment is required in determining the Company’s provision for income taxes, recording valuation allowances against deferred tax assets and evaluating the Company’s uncertain tax positions. In evaluating the ability to recover its deferred tax assets, in full or in part, the Company considers all available positive and negative evidence, including past operating results, forecast of future market growth, forecasted earnings, future taxable income and prudent and feasible tax planning strategies. Due to historical net losses incurred and the uncertainty of realizing the deferred tax assets, for all the periods presented, the Company has a full valuation allowance against domestic deferred tax assets. To the extent that the Company generates positive income and expects, with reasonable certainty, to continue to generate positive domestic income, the Company may release the valuation allowance in a future period. This release would result in the recognition of certain deferred tax assets, resulting in a decrease to income tax expense for the period such release is made. In addition, the effective tax rate in subsequent periods would increase, and more closely approximate the federal statutory rate of 21%, after giving consideration to state income taxes, foreign income taxes, tax credits, the effect of stock-based compensation windfalls or shortfalls, and the exercise of incentive stock options. The Company files income tax returns in the United States, including various state and local jurisdictions. The Company’s subsidiaries file income tax returns in the United Kingdom, Australia, China, Germany, India and Serbia. We are subject to federal income tax as well as income tax of multiple state and foreign jurisdictions. We are no longer subject to income tax examinations for the following jurisdictions and years: federal, for years before 2015; state and local, for years before 2013; or foreign, for years before 2012. However, federal net operating loss and credit carryforwards from all years are subject to examination and adjustments for at least three years following the year in which the attributes are used. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Operating Leases The Company leases office and warehouse space under operating leases that expire between 2019 and 2025. The terms of the leases include periods of free rent, options for the Company to extend the leases (three to five years) and increasing rental rates over time. The Company recognizes rental expense under these operating leases on a straight-line basis over the lives of the leases and has accrued for rental expense recorded but not paid. Rental expense was approximately $1.0 million and $0.7 million for the three months ended September 30, 2018 and 2017, respectively, and $2.7 million and $2.2 million for the nine months ended September 30, 2018 and 2017, respectively. Future minimum rental payments required under non-cancelable operating leases with initial or remaining terms in excess of one year consist of the following as of September 30, 2018 (in thousands): Remainder of 2018 $ 1,166 2019 4,860 2020 4,598 2021 2,391 2022 866 Thereafter 1,313 $ 15,194 Purchase Commitments The Company had non-cancellable purchase commitments for the purchase of inventory, which extend through August 2019 totaling approximately $54.2 million as of September 30, 2018. Indemnification of Directors and Officers The Company has agreed to indemnify its officers and directors for certain events or occurrences while the officer or director is or was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has a directors’ and officers’ insurance policy that provides corporate reimbursement coverage that limits its exposure and enables it to recover a portion of any future amounts paid. The Company has no liabilities recorded for these agreements as of September 30, 2018, as there were no outstanding claims. Legal Matters From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings, that if determined adversely to us, we believe would individually or in the aggregate have a material adverse effect on our business, results of operations, financial condition or cash flows. |
Description of Business and S_2
Description of Business and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Description of Business and Summary of Significant Accounting Policies | |
Unaudited Interim Financial Statements | Unaudited Interim Financial Statements The accompanying condensed consolidated financial statements are unaudited. These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the Company’s financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or any other future interim or annual period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 15, 2018. The December 31, 2017 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date. |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in the unaudited condensed consolidated financial statements. |
Segment Reporting | Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as one operating segment. |
Concentrations of Risk | Concentrations of Risk The Company’s accounts receivable are derived from revenue earned from its worldwide network of independent dealers and distributors. The Company’s sales to dealers and distributors located outside the United States are generally denominated in U.S. dollars, except for sales to dealers and distributors located in the United Kingdom, Canada, Australia, and the European Union, which are generally denominated in pounds sterling, Canadian dollars, Australian dollars, and euros, respectively. There were no individual account balances greater than 10% of total accounts receivable as of September 30, 2018 and December 31, 2017. No dealer or distributor accounted for more than 10% of total revenue for the three and nine months ended September 30, 2018 and 2017. While the Company partners with many manufacturers, generally one manufacturer is our sole source for a particular product or product family. A significant disruption in the operations of one of these manufacturers would impact the production of the Company’s products for a substantial period of time, which could have a material adverse effect on the Company’s business, financial condition and results of operations. |
Use of Accounting Estimates | Use of Accounting Estimates The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, sales returns, provisions for doubtful accounts, product warranty, inventory obsolescence, litigation, determination of fair value of stock options, deferred tax asset valuation allowances and income taxes. Actual results may differ from those estimates. |
Limited Product Warranties | Limited Product Warranties The Company provides its customers a limited product warranty of two, three, or ten years depending on product type and brand. The limited product warranties require the Company, at its option, to repair or replace defective products during the warranty period at no cost to the customer or refund the purchase price. The Company estimates the costs that may be incurred to replace, repair or issue a refund for defective products and records a reserve at the time revenue is recognized. Factors that affect the Company’s warranty liability include the cost of the products sold, the Company’s historical experience, and management’s judgment regarding anticipated rates of product warranty returns, net of refurbished products. The Company assesses the adequacy of its recorded warranty liability each period and makes adjustments to the liability as necessary. Warranty costs accrued include amounts accrued for products at the time of shipment, adjustments for changes in estimated costs for warranties on products shipped in the period, and changes in estimated costs for warranties on products shipped in prior periods. It is not practicable for the Company to determine the amounts applicable to each of these components. The following table presents the changes in the product warranty liability for the nine months ended September 30, 2018 (in thousands): Warranty Liability Balance at December 31, 2017 $ 2,032 Warranty costs accrued 2,452 Warranty claims (2,375) Balance at September 30, 2018 $ 2,109 |
Net Income Per Share | Net Income Per Share Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period that have a dilutive effect on net income per share. Potentially dilutive common shares result from the assumed exercise of outstanding stock options and settlement of restricted stock units. The following table presents the reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Numerator: Net income $ 5,711 $ 5,034 $ 13,317 $ 9,596 Denominator: Weighted average common stock outstanding for basic net income per common share 26,397 25,050 26,116 24,551 Effect of dilutive securities—stock options and restricted stock units 1,274 2,072 1,373 1,842 Weighted average common shares and dilutive securities outstanding 27,671 27,122 27,489 26,393 Potentially dilutive securities, including common equivalent shares, in which the assumed proceeds exceed the average market price of common stock for the applicable period, were not included in the calculation of diluted net income per share as their impact would be anti-dilutive. The following weighted-average common stock equivalents were anti-dilutive and therefore were excluded from the calculation of diluted net income per share (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Options to purchase common stock — 23 — 881 Restricted stock units 7 — 122 6 Total 7 23 122 887 |
Restricted Cash | Restricted Cash Restricted cash as of September 30, 2018 and December 31, 2017 is composed of a guarantee made by the Company’s subsidiary in the United Kingdom to HM Revenue & Customs related to a customs duty deferment account. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. This analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective as of November 5, 2018. The Company does not expect the adoption of this final rule to have a material impact on the consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from non-employees. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company elected to early-adopt this standard in the current period; the adoption of this standard did not impact the consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash ,” which provides amendments to current guidance to address the classifications and presentation of changes in restricted cash in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, “ Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory .” The amendments in this update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for annual and interim periods beginning after December 15, 2017. The Company adopted the standard effective January 1, 2018; the adoption of this standard did not have a material impact on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. For trade receivables, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The guidance is effective for fiscal years beginning after December 31, 2019, including interim periods within those years. Early application of the guidance is permitted for all entities for fiscal years beginning after December 15, 2018, including the interim periods within those fiscal years. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this update on the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “ Leases (Topic 842 ) ,” which supersedes the guidance in ASC 840, “Leases .” The purpose of the new standard is to improve transparency and comparability related to the accounting and reporting of leasing arrangements. The guidance will require balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Although the standard initially required the modified retrospective approach for adoption, in July 2018, the FASB issued ASU 2018-18, allowing companies to initially apply the new lease requirements at the effective date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Early adoption is permitted. The Company expects the standard will have a material impact on the Company’s consolidated balance sheets but will not have a material impact on the consolidated statements of operations. The most significant impact will be the recognition of right of use assets and lease liabilities for operating leases. In connection with the adoption of the new lease accounting standard, the Company has completed scoping reviews and continues to make progress implementing new processes, systems, accounting policies and internal controls relevant to the standard. We anticipate adopting this standard on January 1, 2019 using the prospective adoption approach and electing the practical expedients allowed under the standard. |
Description of Business and S_3
Description of Business and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Description of Business and Summary of Significant Accounting Policies | |
Schedule of changes in the product warranty liability | The following table presents the changes in the product warranty liability for the nine months ended September 30, 2018 (in thousands): Warranty Liability Balance at December 31, 2017 $ 2,032 Warranty costs accrued 2,452 Warranty claims (2,375) Balance at September 30, 2018 $ 2,109 |
Schedule of reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share | The following table presents the reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Numerator: Net income $ 5,711 $ 5,034 $ 13,317 $ 9,596 Denominator: Weighted average common stock outstanding for basic net income per common share 26,397 25,050 26,116 24,551 Effect of dilutive securities—stock options and restricted stock units 1,274 2,072 1,373 1,842 Weighted average common shares and dilutive securities outstanding 27,671 27,122 27,489 26,393 |
Schedule of anti-dilutive weighted-average common stock equivalents excluded from the calculation of diluted net income per share | The following weighted-average common stock equivalents were anti-dilutive and therefore were excluded from the calculation of diluted net income per share (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Options to purchase common stock — 23 — 881 Restricted stock units 7 — 122 6 Total 7 23 122 887 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Balance Sheet Components | |
Schedule of inventories | Inventories consisted of the following (in thousands): September 30, December 31, 2018 2017 Finished goods $ 37,801 $ 33,050 Component parts 3,773 4,025 Work-in-process 47 96 $ 41,621 $ 37,171 |
Schedule of property and equipment, net | Property and equipment, net consisted of the following (in thousands): September 30, December 31, 2018 2017 Computer equipment and software $ 5,137 $ 5,030 Manufacturing tooling and test equipment 4,297 4,894 Lab and warehouse equipment 5,692 4,869 Leasehold improvements 5,059 3,960 Furniture and fixtures 4,457 3,698 Other 1,086 1,086 25,728 23,537 Less: accumulated depreciation (17,044) (16,200) $ 8,684 $ 7,337 |
Schedule of accrued liabilities | Accrued liabilities consisted of the following (in thousands): September 30, December 31, 2018 2017 Sales returns and current portion of warranty liability $ 2,517 $ 2,872 Compensation accruals 5,014 5,241 Other accrued liabilities 900 2,722 $ 8,431 $ 10,835 |
Schedule of other long-term liabilities | Other long-term liabilities consisted of the following (in thousands): September 30, December 31, 2018 2017 Deferred revenue $ 3,096 $ 3,143 Warranty 621 600 Other 783 199 $ 4,500 $ 3,942 |
Financial Instruments (Tables)
Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Financial Instruments | |
Schedule of cash and available-for-sale investments' adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short- or long-term investments | The following tables show the Company’s cash and available-for-sale investments’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category, recorded as cash and cash equivalents or short- or long-term investments as of September 30, 2018 and December 31, 2017 (in thousands): September 30, 2018 Cash and Adjusted Unrealized Unrealized Cash Short-term Long-term Cost Gains Losses Fair Value Equivalents Investments Investments Cash $ 28,687 $ — $ — $ 28,687 $ 28,687 $ — $ — Level 1: Money market funds 5,039 — — 5,039 5,039 — — U.S. government notes 8,958 — (29) 8,929 — 8,929 — Subtotal 13,997 — (29) 13,968 5,039 8,929 — Level 2: Corporate bonds 25,755 1 (37) 25,719 — 24,634 1,085 Commercial paper 22,628 — — 22,628 1,647 20,981 — Subtotal 48,383 1 (37) 48,347 1,647 45,615 1,085 Total $ 91,067 $ 1 $ (66) $ 91,002 $ 35,373 $ 54,544 $ 1,085 December 31, 2017 Cash and Adjusted Unrealized Unrealized Cash Short-term Long-term Cost Gains Losses Fair Value Equivalents Investments Investments Cash $ 24,367 $ — $ — $ 24,367 $ 24,367 $ — $ — Level 1: Money market funds 5,394 — — 5,394 5,394 — — U.S. government notes 9,060 — (13) 9,047 — 4,098 4,949 Subtotal 14,454 — (13) 14,441 5,394 4,098 4,949 Level 2: Corporate bonds 24,943 — (49) 24,894 — 17,805 7,089 Commercial paper 22,154 — — 22,154 — 22,154 — Subtotal 47,097 — (49) 47,048 — 39,959 7,089 Total $ 85,918 $ — $ (62) $ 85,856 $ 29,761 $ 44,057 $ 12,038 |
Schedule of pre-tax income (losses) not designated as hedging instruments | The following table shows the pre-tax income (losses) of the Company’s derivative instruments not designated as hedging instruments (in thousands): Three Months Ended Nine Months Ended September 30, September 30, Income Statement Location 2018 2017 2018 2017 Foreign exchange forward contracts Other income (expense), net $ 64 $ (501) $ 10 $ (1,433) |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets | |
Schedule of changes in carrying amount of goodwill | Changes in the carrying amount of goodwill consisted of the following (in thousands): Amount Balance at December 31, 2017 $ 21,867 Measurement period adjustments (37) Foreign currency translation adjustment (232) Balance at September 30, 2018 $ 21,598 |
Schedule of company's intangible assets and related accumulated amortization | The Company’s intangible assets and related accumulated amortization consisted of the following as of September 30, 2018 and December 31, 2017 (in thousands): September 30, 2018 Gross Carrying Accumulated Amount Amortization Net Developed technology $ 17,428 $ (9,281) $ 8,147 Customer relationships 12,009 (3,677) 8,332 Trademark/trade name 6,776 (1,293) 5,483 Non-competition agreements 295 (295) — Total intangible assets $ 36,508 $ (14,546) $ 21,962 December 31, 2017 Gross Carrying Accumulated Amount Amortization Net Developed technology $ 19,626 $ (8,914) $ 10,712 Customer relationships 12,009 (2,556) 9,453 Trademark/trade name 6,776 (869) 5,907 Non-competition agreements 295 (286) 9 Total intangible assets $ 38,706 $ (12,625) $ 26,081 |
Schedule of amortization expense during the respective periods | The Company recorded amortization expense during the three and nine month periods ended September 30, 2018 and 2017 for these intangible assets as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Cost of revenue $ 888 $ 802 $ 2,733 $ 2,367 Research and development 17 50 63 145 Sales and marketing 496 482 1,490 1,373 Total amortization of intangible assets $ 1,401 $ 1,334 $ 4,286 $ 3,885 |
Schedule of amortization of finite lived intangible assets | Amortization of finite lived intangible assets as of September 30, 2018 for the next five years is as follows (in thousands): Amount Remainder of 2018 $ 1,366 2019 5,593 2020 4,611 2021 2,256 2022 2,093 Thereafter 6,043 $ 21,962 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue Recognition | |
Schedule of adoption of ASC 606 impacted the Company’s previously reported results | The adoption of ASC 606 impacted the Company’s previously reported results as follows (in thousands, except share data): Three Months Ended Nine Months Ended September 30, September 30, 2017 2017 As previously reported ASC 606 adjustment As As previously reported ASC 606 adjustment As Revenue $ 64,742 $ (159) $ 64,583 $ 176,386 $ (343) $ 176,043 Income tax expense (benefit) 93 (8) 85 (2,441) (18) (2,459) Net income 5,185 (151) 5,034 9,921 (325) 9,596 Basic earnings per share $ 0.21 $ (0.01) $ 0.20 $ 0.40 $ (0.01) $ 0.39 Diluted earnings per share $ 0.19 $ — $ 0.19 $ 0.38 $ (0.02) $ 0.36 December 31, 2017 As previously reported ASC 606 adjustment As Other assets $ 1,576 $ 42 $ 1,618 Current portion of deferred revenue 2,311 2,227 4,538 Other long-term liabilities 882 3,060 3,942 Stockholders’ equity 174,773 (5,245) 169,528 |
Schedule of revenue from United States, Canada and all other international dealers and distributors combined | The following table sets forth revenue from the United States, Canada and all other international dealers and distributors combined (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Revenue-United States $ 49,780 $ 44,728 $ 139,021 $ 122,751 Revenue-Canada 5,812 5,386 16,714 14,882 Revenue-all other international sources 16,002 14,469 44,236 38,410 Total revenue $ 71,594 $ 64,583 $ 199,971 $ 176,043 International revenue (excluding Canada) as a percent of total revenue % % % % |
Summary of changes in the allowance for doubtful accounts | The following table presents the changes in the allowance for doubtful accounts (in thousands): Allowance Balance at December 31, 2017 $ 1,147 Provision 760 Write-offs (365) Balance at September 30, 2018 $ 1,542 |
Schedule of changes in deferred revenue | The following table presents the changes in deferred revenue for the nine months ended September 30, 2018 (in thousands): Deferred Revenue Balance at December 31, 2017 $ 7,682 Deferred revenue 6,253 Recognition of deferred revenue (5,718) Balance at September 30, 2018 $ 8,217 |
Equity Compensation (Tables)
Equity Compensation (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity Compensation | |
Summary of stock option activity | Weighted Average Shares Subject Weighted Remaining to Options Average Contractual Outstanding Exercise Price Life (Years) Balance at December 31, 2017 2,069,802 12.13 Exercised (942,665) 11.38 Expired (2,809) 5.72 Forfeited (5,048) 13.42 Balance at September 30, 2018 1,119,280 12.77 Exercisable options at September 30, 2018 1,031,009 12.93 4.7 Vested and expected to vest at September 30, 2018 1,119,280 12.77 4.9 |
Summary of stock options outstanding and exercisable | The following table summarizes information about stock options outstanding and exercisable at September 30, 2018: Options Outstanding Options Exercisable Weighted- Weighted- Weighted Average Average Average Number of Remaining Number of Remaining Exercise Underlying Contractual Underlying Contractual Range of Exercise Prices Price Shares Life (in years) Shares Life (in years) $ - 6.12 315,730 2.8 309,965 2.7 $ - 10.51 287,084 5.5 228,793 5.3 $ - 15.60 284,397 6.1 260,182 6.1 $ - 21.15 232,069 5.4 232,069 5.4 1,119,280 1,031,009 |
Summary of aggregate intrinsic-value of options exercised, exercisable, and vested and expected to vest | The following table summarizes the aggregate intrinsic-value of options exercised, exercisable and vested and expected to vest (in thousands): For the Nine Months Ended and as of September 30, 2018 2017 Options Exercised $ 18,077 $ 8,927 Options Exercisable 22,068 39,360 Options Vested and Expected to Vest 24,130 45,152 |
Summary of restricted stock unit activity | Number of Weighted Average Shares Grant Date Fair Value Non-vested balance at December 31, 2017 1,290,660 $ 9.75 Awarded 461,350 28.46 Vested (743,514) 10.04 Forfeited (53,880) 11.18 Non-vested balance at September 30, 2018 954,616 18.49 |
Schedule of total stock-based compensation expense classified in Statements of Operations | Total stock-based compensation expense has been classified as follows in the accompanying Condensed Consolidated Statements of Operations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Cost of revenue $ 59 $ 66 $ 182 $ 185 Research and development 1,115 1,031 3,233 3,210 Sales and marketing 941 883 2,877 2,831 General and administrative 1,314 1,048 3,793 2,965 Total stock-based compensation expense $ 3,429 $ 3,028 $ 10,085 $ 9,191 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies | |
Schedule of future minimum rental payments required under non-cancelable operating leases | Future minimum rental payments required under non-cancelable operating leases with initial or remaining terms in excess of one year consist of the following as of September 30, 2018 (in thousands): Remainder of 2018 $ 1,166 2019 4,860 2020 4,598 2021 2,391 2022 866 Thereafter 1,313 $ 15,194 |
Description of Business and S_4
Description of Business and Summary of Significant Accounting Policies (Segment) (Details) | 9 Months Ended |
Sep. 30, 2018segment | |
Segment Reporting | |
Number of operating segments | 1 |
Description of Business and S_5
Description of Business and Summary of Significant Accounting Policies (Concentrations of Risk) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Segment Reporting | ||||
Revenue concentration | $ 0 | $ 0 | $ 0 | $ 0 |
Concentration risk, percentage | 10.00% | 10.00% | 10.00% | 10.00% |
Description of Business and S_6
Description of Business and Summary of Significant Accounting Policies (Warranties) (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Changes in the product warranty liability | |
Balance at the beginning of the period | $ 2,032 |
Warranty costs accrued | 2,452 |
Warranty claims | (2,375) |
Balance at the end of the period | $ 2,109 |
Alternate | |
Product Warranty | |
Product warranty period | 3 years |
Minimum | |
Product Warranty | |
Product warranty period | 2 years |
Maximum | |
Product Warranty | |
Product warranty period | 10 years |
Description of Business and S_7
Description of Business and Summary of Significant Accounting Policies (EPS) (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Numerator: | ||||
Net income | $ 5,711 | $ 5,034 | $ 13,317 | $ 9,596 |
Denominator: | ||||
Weighted average common stock outstanding for basic net income per common share (in shares) | 26,397 | 25,050 | 26,116 | 24,551 |
Effect of dilutive securities—stock options and restricted stock units (in shares) | 1,274 | 2,072 | 1,373 | 1,842 |
Weighted average common shares and dilutive securities outstanding (in shares) | 27,671 | 27,122 | 27,489 | 26,393 |
Description of Business and S_8
Description of Business and Summary of Significant Accounting Policies (Anti-dilutive) (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Anti-dilutive weighted-average common stock equivalents excluded from the calculation of diluted net income per share | ||||
Total (in shares) | 7 | 23 | 122 | 887 |
Options | Common Stock | ||||
Anti-dilutive weighted-average common stock equivalents excluded from the calculation of diluted net income per share | ||||
Total (in shares) | 23 | 881 | ||
Restricted stock units | ||||
Anti-dilutive weighted-average common stock equivalents excluded from the calculation of diluted net income per share | ||||
Total (in shares) | 7 | 122 | 6 |
Balance Sheet Components (Inven
Balance Sheet Components (Inventories, Property and Equipment) (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished goods | $ 37,801 | $ 33,050 |
Component parts | 3,773 | 4,025 |
Work-in-process | 47 | 96 |
Total inventories | 41,621 | 37,171 |
Property and equipment, net | ||
Property and equipment, gross | 25,728 | 23,537 |
Less: accumulated depreciation | (17,044) | (16,200) |
Property and equipment, net | 8,684 | 7,337 |
Computer equipment and software | ||
Property and equipment, net | ||
Property and equipment, gross | 5,137 | 5,030 |
Manufacturing tooling and test equipment | ||
Property and equipment, net | ||
Property and equipment, gross | 4,297 | 4,894 |
Lab and warehouse equipment | ||
Property and equipment, net | ||
Property and equipment, gross | 5,692 | 4,869 |
Leasehold improvements | ||
Property and equipment, net | ||
Property and equipment, gross | 5,059 | 3,960 |
Furniture and fixtures | ||
Property and equipment, net | ||
Property and equipment, gross | 4,457 | 3,698 |
Other | ||
Property and equipment, net | ||
Property and equipment, gross | $ 1,086 | $ 1,086 |
Balance Sheet Components (Accru
Balance Sheet Components (Accrued liabilities) (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Accrued liabilities | ||
Sales returns and current portion of warranty liability | $ 2,517 | $ 2,872 |
Compensation accruals | 5,014 | 5,241 |
Other accrued liabilities | 900 | 2,722 |
Total accrued liabilities | $ 8,431 | $ 10,835 |
Balance Sheet Components (Other
Balance Sheet Components (Other long-term liabilities) (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Balance Sheet Components | ||
Deferred revenue | $ 3,096 | $ 3,143 |
Warranty | 621 | 600 |
Other | 783 | 199 |
Total other long-term liabilities | $ 4,500 | $ 3,942 |
Financial Instruments (Details)
Financial Instruments (Details) - Measured on a recurring basis - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Fair Value Measurements | ||
Adjusted Cost, assets | $ 91,067 | $ 85,918 |
Unrealized Gains, available-for-sale securities | 1 | |
Unrealized Losses, available-for-sale securities | (66) | (62) |
Fair Value, assets | 91,002 | 85,856 |
Cash and Cash Equivalents | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 35,373 | 29,761 |
Short-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 54,544 | 44,057 |
Long-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 1,085 | 12,038 |
Cash | ||
Fair Value Measurements | ||
Fair value, cash and cash equivalents | 28,687 | 24,367 |
Cash | Cash and Cash Equivalents | ||
Fair Value Measurements | ||
Fair value, cash and cash equivalents | 28,687 | 24,367 |
Level 1 | ||
Fair Value Measurements | ||
Adjusted Cost, assets | 13,997 | 14,454 |
Unrealized Losses, available-for-sale securities | (29) | (13) |
Fair Value, assets | 13,968 | 14,441 |
Level 1 | Cash and Cash Equivalents | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 5,039 | 5,394 |
Level 1 | Short-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 8,929 | 4,098 |
Level 1 | Long-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 4,949 | |
Level 1 | Money market funds | ||
Fair Value Measurements | ||
Fair value, cash and cash equivalents | 5,039 | 5,394 |
Level 1 | Money market funds | Cash and Cash Equivalents | ||
Fair Value Measurements | ||
Fair value, cash and cash equivalents | 5,039 | 5,394 |
Level 1 | U.S. government notes | ||
Fair Value Measurements | ||
Adjusted Cost, available-for-sale securities | 8,958 | 9,060 |
Unrealized Losses, available-for-sale securities | (29) | (13) |
Fair Value, available-for-sale investments | 8,929 | 9,047 |
Level 1 | U.S. government notes | Short-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 8,929 | 4,098 |
Level 1 | U.S. government notes | Long-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 4,949 | |
Level 2 | Available-for-sale investments | ||
Fair Value Measurements | ||
Adjusted Cost, available-for-sale securities | 48,383 | 47,097 |
Unrealized Gains, available-for-sale securities | 1 | |
Unrealized Losses, available-for-sale securities | (37) | (49) |
Fair Value, available-for-sale investments | 48,347 | 47,048 |
Level 2 | Available-for-sale investments | Cash and Cash Equivalents | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 1,647 | |
Level 2 | Available-for-sale investments | Short-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 45,615 | 39,959 |
Level 2 | Available-for-sale investments | Long-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 1,085 | 7,089 |
Level 2 | Corporate bonds | ||
Fair Value Measurements | ||
Adjusted Cost, available-for-sale securities | 25,755 | 24,943 |
Unrealized Gains, available-for-sale securities | 1 | |
Unrealized Losses, available-for-sale securities | (37) | (49) |
Fair Value, available-for-sale investments | 25,719 | 24,894 |
Level 2 | Corporate bonds | Short-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 24,634 | 17,805 |
Level 2 | Corporate bonds | Long-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 1,085 | 7,089 |
Level 2 | Commercial paper | ||
Fair Value Measurements | ||
Adjusted Cost, available-for-sale securities | 22,628 | 22,154 |
Fair Value, available-for-sale investments | 22,628 | 22,154 |
Level 2 | Commercial paper | Cash and Cash Equivalents | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | 1,647 | |
Level 2 | Commercial paper | Short-term investments | ||
Fair Value Measurements | ||
Fair Value, available-for-sale investments | $ 20,981 | $ 22,154 |
Financial Instruments (Investme
Financial Instruments (Investment and Derivative Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Foreign exchange contracts | ||||
Fair Value Measurements | ||||
Assets related to derivative instruments | $ 0 | $ 0 | ||
Liabilities related to derivative instruments | 0 | 0 | ||
Foreign exchange contracts | Other income (expense), net | Not designated as hedging instrument | ||||
Fair Value Measurements | ||||
Foreign exchange forward contracts | $ 64 | $ (501) | $ 10 | $ (1,433) |
Minimum | ||||
Fair Value Measurements | ||||
Maturity period of long-term investments | 1 year | |||
Maximum | ||||
Fair Value Measurements | ||||
Maturity period of long-term investments | 2 years |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Thousands | Feb. 27, 2017 | Sep. 30, 2017 |
Business Acquisition [Line Items] | ||
Business acquisitions holdback liability | $ 1,068 | |
Triad Holdings, Inc. | ||
Business Acquisition [Line Items] | ||
Purchase price to acquire common stock | $ 9,200 | |
Cash acquired in acquisition | 300 | |
Business acquisitions holdback liability | $ 1,400 | |
Purchase agreement, portion of purchase price held, period from acquisition date (in months) | 18 months |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Goodwill) (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Business Combination - Goodwill | |
Balance at beginning of the period | $ 21,867 |
Measurement period adjustments | (37) |
Foreign currency translation adjustment | (232) |
Balance at end of the period | $ 21,598 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Intangible Assets) (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Intangible assets | ||
Gross Carrying Amount | $ 36,508 | $ 38,706 |
Accumulated Amortization | (14,546) | (12,625) |
Intangible assets, net | $ 21,962 | 26,081 |
Weighted average amortization period | 7 years 3 months 18 days | |
Developed technology | ||
Intangible assets | ||
Gross Carrying Amount | $ 17,428 | 19,626 |
Accumulated Amortization | (9,281) | (8,914) |
Intangible assets, net | $ 8,147 | 10,712 |
Weighted average amortization period | 6 years 10 months 24 days | |
Customer relationships | ||
Intangible assets | ||
Gross Carrying Amount | $ 12,009 | 12,009 |
Accumulated Amortization | (3,677) | (2,556) |
Intangible assets, net | $ 8,332 | 9,453 |
Weighted average amortization period | 8 years 4 months 24 days | |
Trademark/trade name | ||
Intangible assets | ||
Gross Carrying Amount | $ 6,776 | 6,776 |
Accumulated Amortization | (1,293) | (869) |
Intangible assets, net | $ 5,483 | 5,907 |
Weighted average amortization period | 12 years | |
Non-competition agreements | ||
Intangible assets | ||
Gross Carrying Amount | $ 295 | 295 |
Accumulated Amortization | $ (295) | (286) |
Intangible assets, net | $ 9 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets (Amortization Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Amortization expense | ||||
Amortization of intangible assets | $ 1,401 | $ 1,334 | $ 4,286 | $ 3,885 |
Cost of revenue | ||||
Amortization expense | ||||
Amortization of intangible assets | 888 | 802 | 2,733 | 2,367 |
Research and development | ||||
Amortization expense | ||||
Amortization of intangible assets | 17 | 50 | 63 | 145 |
Sales and marketing | ||||
Amortization expense | ||||
Amortization of intangible assets | $ 496 | $ 482 | $ 1,490 | $ 1,373 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets (Amortization) (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Amortization of finite-lived intangible assets | ||
Remainder of 2018 | $ 1,366 | |
2,019 | 5,593 | |
2,020 | 4,611 | |
2,021 | 2,256 | |
2,022 | 2,093 | |
Thereafter | 6,043 | |
Intangible assets, net | $ 21,962 | $ 26,081 |
Long-Term Obligations (Details)
Long-Term Obligations (Details) - USD ($) $ in Millions | Feb. 06, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Long-Term Obligations | |||
Maximum borrowing capacity | $ 40 | $ 30 | |
Revolving credit facility | |||
Long-Term Obligations | |||
Outstanding borrowings | $ 0 | ||
Commitment fee for quarterly unused capacity (as a percent) | 0.25% | ||
Unused line of credit fee threshold | $ 15 | ||
Minimum | Prime Rate | |||
Long-Term Obligations | |||
Basis spread on variable rate (as a percent) | 0.00% | ||
Minimum | LIBOR | |||
Long-Term Obligations | |||
Basis spread on variable rate (as a percent) | 2.50% | ||
Maximum | Prime Rate | |||
Long-Term Obligations | |||
Basis spread on variable rate (as a percent) | 0.25% | ||
Maximum | LIBOR | |||
Long-Term Obligations | |||
Basis spread on variable rate (as a percent) | 2.75% |
Revenue Recognition (ASC 606 Ad
Revenue Recognition (ASC 606 Adoption) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenue | $ 71,594 | $ 64,583 | $ 199,971 | $ 176,043 | |
Income tax expense (benefit) | 67 | 85 | 112 | (2,459) | |
Net income | $ 5,711 | $ 5,034 | $ 13,317 | $ 9,596 | |
Basic earnings per share (in dollars per share) | $ 0.22 | $ 0.20 | $ 0.51 | $ 0.39 | |
Diluted earnings per share (in dollars per share) | $ 0.21 | $ 0.19 | $ 0.48 | $ 0.36 | |
Other assets | $ 1,330 | $ 1,330 | $ 1,618 | ||
Current portion of deferred revenue | 5,121 | 5,121 | 4,538 | ||
Other long-term liabilities | 4,500 | 4,500 | 3,942 | ||
Stockholders' equity | $ 180,692 | $ 180,692 | 169,528 | ||
Accounting Standards Update 2014-09 | As previously reported | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenue | $ 64,742 | $ 176,386 | |||
Income tax expense (benefit) | 93 | (2,441) | |||
Net income | $ 5,185 | $ 9,921 | |||
Basic earnings per share (in dollars per share) | $ 0.21 | $ 0.40 | |||
Diluted earnings per share (in dollars per share) | $ 0.19 | $ 0.38 | |||
Other assets | 1,576 | ||||
Current portion of deferred revenue | 2,311 | ||||
Other long-term liabilities | 882 | ||||
Stockholders' equity | 174,773 | ||||
Accounting Standards Update 2014-09 | ASC 606 adjustment | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenue | $ (159) | $ (343) | |||
Income tax expense (benefit) | (8) | (18) | |||
Net income | $ (151) | $ (325) | |||
Basic earnings per share (in dollars per share) | $ (0.01) | $ (0.01) | |||
Diluted earnings per share (in dollars per share) | $ (0.02) | ||||
Other assets | 42 | ||||
Current portion of deferred revenue | 2,227 | ||||
Other long-term liabilities | 3,060 | ||||
Stockholders' equity | $ (5,245) |
Revenue Recognition (Disaggrega
Revenue Recognition (Disaggregated) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 71,594 | $ 64,583 | $ 199,971 | $ 176,043 |
International revenue (excluding Canada) as a percent of total revenue | 22.00% | 22.00% | 22.00% | 22.00% |
United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 49,780 | $ 44,728 | $ 139,021 | $ 122,751 |
Canada | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 5,812 | 5,386 | 16,714 | 14,882 |
All other international sources | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 16,002 | $ 14,469 | $ 44,236 | $ 38,410 |
Revenue Recognition (Contract B
Revenue Recognition (Contract Balances) (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Revenue Recognition | |||
Accounts receivable, net | $ 34,157 | $ 29,925 | |
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Balance at the beginning of the period | 1,147 | ||
Provision | 760 | $ 491 | |
Write-offs | (365) | ||
Balance at the end of the period | $ 1,542 | ||
Payment term, general requirement for payment | 30 days | ||
Balance at the beginning of the period | $ 7,682 | ||
Deferred revenue | 6,253 | ||
Recognition of deferred revenue | (5,718) | ||
Balance at the end of the period | 8,217 | ||
Contracted not recognized revenue | $ 9,100 |
Revenue Recognition (Performanc
Revenue Recognition (Performance obligation) (Details) | Sep. 30, 2018 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction | 12 months |
Percentage expected to be recognized | 42.00% |
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction | 3 years |
Maximum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction | 4 years |
Equity Compensation (Activity)
Equity Compensation (Activity) (Details) - Stock options - $ / shares | Jan. 01, 2018 | Sep. 30, 2018 | Jun. 11, 2013 |
Shares Subject to Options Outstanding | |||
Balance at the beginning of the period (in shares) | 2,069,802 | 2,069,802 | |
Exercised (in shares) | (942,665) | ||
Expired (in shares) | (2,809) | ||
Forfeited (in shares) | (5,048) | ||
Balance at the end of the period (in shares) | 1,119,280 | ||
Exercisable options (in shares) | 1,031,009 | ||
Vested and expected to vest at the end of the period (in shares) | 1,119,280 | ||
Weighted Average Exercise Price | |||
Balance at the beginning of the period (in dollars per share) | $ 12.13 | $ 12.13 | |
Exercised (in dollars per share) | 11.38 | ||
Expired (in dollars per share) | 5.72 | ||
Forfeited (in dollars per share) | 13.42 | ||
Balance at the end of the period (in dollars per share) | 12.77 | ||
Exercisable options at the end of the period (in dollars per share) | 12.93 | ||
Vested and expected to vest (in dollars per share) | $ 12.77 | ||
Weighted-Average Remaining Contractual Life | |||
Exercisable options | 4 years 8 months 12 days | ||
Vested and expected to vest | 4 years 10 months 24 days | ||
2013 Plan | |||
Stock options | |||
Potential annual increase in shares authorized for issuance as a percentage of shares outstanding as of the preceding December 31 | 5.00% | ||
Increase in number of shares authorized for issuance | 1,291,644 |
Equity Compensation (Range) (De
Equity Compensation (Range) (Details) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Options Outstanding | |
Number of Underlying Shares | shares | 1,119,280 |
Options Exercisable | |
Number of Underlying Shares | shares | 1,031,009 |
4.89-7.49 | |
Equity compensation | |
Range of Exercise Price, low end of range (in dollars per share) | $ 4.89 |
Range of Exercise Price, high end of range (in dollars per share) | 7.49 |
Options Outstanding | |
Weighted Average Exercise Price (in dollars per share) | $ 6.12 |
Number of Underlying Shares | shares | 315,730 |
Weighted-Average Remaining Contractual Life | 2 years 9 months 18 days |
Options Exercisable | |
Number of Underlying Shares | shares | 309,965 |
Weighted-Average Remaining Contractual Life | 2 years 8 months 12 days |
8.16-12.93 | |
Equity compensation | |
Range of Exercise Price, low end of range (in dollars per share) | $ 8.16 |
Range of Exercise Price, high end of range (in dollars per share) | 12.93 |
Options Outstanding | |
Weighted Average Exercise Price (in dollars per share) | $ 10.51 |
Number of Underlying Shares | shares | 287,084 |
Weighted-Average Remaining Contractual Life | 5 years 6 months |
Options Exercisable | |
Number of Underlying Shares | shares | 228,793 |
Weighted-Average Remaining Contractual Life | 5 years 3 months 18 days |
12.98-19.56 | |
Equity compensation | |
Range of Exercise Price, low end of range (in dollars per share) | $ 12.98 |
Range of Exercise Price, high end of range (in dollars per share) | 19.56 |
Options Outstanding | |
Weighted Average Exercise Price (in dollars per share) | $ 15.60 |
Number of Underlying Shares | shares | 284,397 |
Weighted-Average Remaining Contractual Life | 6 years 1 month 6 days |
Options Exercisable | |
Number of Underlying Shares | shares | 260,182 |
Weighted-Average Remaining Contractual Life | 6 years 1 month 6 days |
20.91-22.92 | |
Equity compensation | |
Range of Exercise Price, low end of range (in dollars per share) | $ 20.91 |
Range of Exercise Price, high end of range (in dollars per share) | 22.92 |
Options Outstanding | |
Weighted Average Exercise Price (in dollars per share) | $ 21.15 |
Number of Underlying Shares | shares | 232,069 |
Weighted-Average Remaining Contractual Life | 5 years 4 months 24 days |
Options Exercisable | |
Number of Underlying Shares | shares | 232,069 |
Weighted-Average Remaining Contractual Life | 5 years 4 months 24 days |
Equity Compensation (Fair Value
Equity Compensation (Fair Value) (Details) - Stock options - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Stock options | |||
Total fair value for the awards vested during the period | $ 400 | $ 1,600 | |
Intrinsic-value | |||
Options Exercised | 18,077 | $ 8,927 | |
Options Exercisable | 22,068 | 22,068 | 39,360 |
Options Vested and Expected to Vest | $ 24,130 | $ 24,130 | $ 45,152 |
Equity Compensation (Restricted
Equity Compensation (Restricted Stock Units) (Details) - Restricted stock units | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Restricted stock units | |
Non-vested balance at beginning of period (in shares) | 1,290,660 |
Awarded | 461,350 |
Vested | (743,514) |
Forfeited | (53,880) |
Non-vested balance at end of period (in shares) | 954,616 |
Weighted Average Grant Date Fair Value | |
Non-vested balance at beginning of period (in dollars per share) | $ / shares | $ 9.75 |
Awarded (in dollars per share) | $ / shares | 28.46 |
Vested (in dollars per share) | $ / shares | 10.04 |
Forfeited (in dollars per share) | $ / shares | 11.18 |
Non-vested balance at end of period (in dollars per share) | $ / shares | $ 18.49 |
Shares withheld for tax purposes (in shares) | 242,531 |
Issuance of shares net of shares withheld (in shares) | 500,983 |
Equity Compensation (401(k) Pla
Equity Compensation (401(k) Plan) (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Defined Contribution Plan Disclosure [Line Items] | ||
Maximum amount of employees' gross pay the employee may contribute (as a percent) | 3.50% | |
Shares contributed (in shares) | 30,482 | |
Expenses associated with contribution | $ 1.1 | |
First 1% of employees' salary | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Employer matching contribution (as a percent) | 100.00% | |
Employees' gross pay for which the employer contributes a matching contribution (as a percent) | 1.00% | |
Second 5% of employees' salary | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Employer matching contribution (as a percent) | 50.00% | |
Employees' gross pay for which the employer contributes a matching contribution (as a percent) | 5.00% |
Equity Compensation (Expense) (
Equity Compensation (Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Stock options | ||||
Total stock-based compensation expense | ||||
Total stock-based compensation expense | $ 3,429 | $ 3,028 | $ 10,085 | $ 9,191 |
Total unrecognized compensation cost related to non-vested stock option awards | 1,000 | $ 1,000 | ||
Weighted-average period over which unrecognized compensation cost will be recognized | 6 months | |||
Stock options | Cost of revenue | ||||
Total stock-based compensation expense | ||||
Total stock-based compensation expense | 59 | 66 | $ 182 | 185 |
Stock options | Research and development | ||||
Total stock-based compensation expense | ||||
Total stock-based compensation expense | 1,115 | 1,031 | 3,233 | 3,210 |
Stock options | Sales and marketing | ||||
Total stock-based compensation expense | ||||
Total stock-based compensation expense | 941 | 883 | 2,877 | 2,831 |
Stock options | General and administrative | ||||
Total stock-based compensation expense | ||||
Total stock-based compensation expense | 1,314 | $ 1,048 | 3,793 | $ 2,965 |
Restricted stock units | ||||
Total stock-based compensation expense | ||||
Total unrecognized compensation cost related to non-vested restricted stock units | $ 13,400 | $ 13,400 | ||
Weighted-average period over which unrecognized compensation cost will be recognized | 1 year 9 months 18 days |
Share Repurchases (Details)
Share Repurchases (Details) - USD ($) $ in Thousands | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Oct. 31, 2018 | Feb. 28, 2018 | |
Equity, Class of Treasury Stock [Line Items] | ||||
Common stock authorized for repurchase | $ 24,000 | |||
Number of common stock repurchased (in shares) | 600,000 | 119,007 | ||
Value of common stock repurchased | $ 15,957 | $ 1,821 | ||
Maximum | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Common stock authorized for repurchase | $ 20,000 | $ 20,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Income Taxes [Line Items] | |||||||
Income tax expense (benefit) | $ 67 | $ 85 | $ 112 | $ (2,459) | |||
Effective income tax rate (as a percent) | 1.00% | 2.00% | 1.00% | 34.00% | |||
U.S. federal statutory rate (as a percent) | 21.00% | 21.00% | 34.00% | ||||
One-time transition tax | $ 9,000 | ||||||
Valuation allowance decrease | $ 100 | $ 400 | $ 400 | $ 100 | 9,000 | ||
Net tax expense or benefit | 0 | ||||||
Transition tax, unrepatriated foreign earnings | 100 | $ 400 | $ 400 | 100 | |||
AMT credit carryforwards, one-time tax benefit | 400 | ||||||
AMT valuation allowance decrease | 400 | ||||||
Tax benefit arising from Tax Act | 200 | ||||||
Unrepatriated foreign earnings, incomplete accounting for tax effect | 0 | 0 | |||||
State | |||||||
Income Taxes [Line Items] | |||||||
Net operating loss | 67,800 | ||||||
Tax credit carryforwards | 2,800 | ||||||
Federal | |||||||
Income Taxes [Line Items] | |||||||
Income tax examination, deferred tax expense | 100 | 100 | |||||
Income tax examination, deferred tax benefit | 100 | 100 | |||||
Income tax examination, net tax impact | 0 | 0 | |||||
Tax credit carryforwards | 6,600 | ||||||
Federal | Before measurement period adjustment | |||||||
Income Taxes [Line Items] | |||||||
Net operating loss | 66,700 | ||||||
Federal | Measurement period adjustment | |||||||
Income Taxes [Line Items] | |||||||
Net operating loss | $ (600) | $ (600) | (2,200) | ||||
Federal | After measurement period adjustment | |||||||
Income Taxes [Line Items] | |||||||
Net operating loss | 63,900 | ||||||
Federal | Amount after transition tax pursuant to Tax Cuts and Jobs Act | |||||||
Income Taxes [Line Items] | |||||||
Net operating loss | $ 64,500 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018USD ($)claim | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)claim | Sep. 30, 2017USD ($) | |
Operating Leases | ||||
Rental expense | $ 1,000,000 | $ 700,000 | $ 2,700,000 | $ 2,200,000 |
Future minimum rental payments | ||||
Remainder of 2018 | 1,166,000 | 1,166,000 | ||
2,019 | 4,860,000 | 4,860,000 | ||
2,020 | 4,598,000 | 4,598,000 | ||
2,021 | 2,391,000 | 2,391,000 | ||
2,022 | 866,000 | 866,000 | ||
Thereafter | 1,313,000 | 1,313,000 | ||
Total | 15,194,000 | 15,194,000 | ||
Purchase Commitments | ||||
Non-cancellable purchase commitments | 54,200,000 | 54,200,000 | ||
Indemnification agreements | ||||
Indemnification | ||||
Accrued liability | $ 0 | $ 0 | ||
Number of outstanding claims | claim | 0 | 0 | ||
Minimum | ||||
Operating Leases | ||||
Extension term of leases | P3Y | |||
Maximum | ||||
Operating Leases | ||||
Extension term of leases | P5Y |