Significant Accounting Policies | 2. Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. The results of operations for companies acquired are included in the consolidated financial statements from the effective date of the acquisition. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated 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 and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience, current business factors and other available information. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition and deferred revenue, allowance for doubtful accounts, internal software development costs and website development costs, valuation of long-lived assets, goodwill and other intangible assets, income taxes and stock-based compensation. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the December 31, 2015 presentation. Initial Public Offering On April 2, 2014, the Company closed its initial public offering of common stock (“IPO”). The IPO, including the additional shares issued and sold on April 30, 2014 pursuant to the underwriters’ exercise of their over-allotment option, resulted in net proceeds of $70,622, after deducting underwriting discounts and commissions and offering costs borne by the Company totaling $8,848. As a result of the IPO, the Company issued and sold 5,676,414 shares of common stock at a public offering price of $14.00 per share, and all of the Company’s redeemable convertible preferred stock outstanding automatically converted into an aggregate of 18,457,235 shares of common stock, including 577,055 additional shares of common stock related to the Series G redeemable convertible preferred stock ratchet provision (refer to Note 10 for further discussion). In addition, certain selling stockholders exercised stock options and warrants for an aggregate of 339,053 shares of common stock, 149,839 shares of common stock were issued upon the automatic net exercise of a warrant, and outstanding warrants to purchase 222,977 shares of redeemable convertible preferred stock automatically converted into warrants to purchase an aggregate of 148,650 shares of common stock, which resulted in the reclassification of the preferred stock warrant liability of $1,140 to additional paid-in capital. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash equivalents principally consist of the Company’s investment in U.S. Treasury securities and other money market funds. The fair value of these investment funds is based on quoted market prices, which are Level 1 inputs, pursuant to the fair value accounting standard, which establishes a framework for measuring fair value and requires disclosures about fair value measurements by establishing a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the lease term or the estimated useful life of the improvement. Operating Leases The Company recognizes rent expense on a straight-line basis, including predetermined fixed escalations, over the initial lease term including reasonably assured renewal periods, net of lease incentives, from the time that the Company controls the leased property. Tenant improvement allowances are recognized as a reduction to rent expense on a straight-line basis over the lease term. Internal Software Development Costs The Company incurs costs to develop software for internal use. The Company expenses all costs that relate to the planning and post-implementation phases of development as product development expense. Costs incurred in the application development phase, consisting principally of payroll and related benefits, are capitalized. Upon completion, the capitalized costs are amortized using the straight-line method over their estimated useful lives, which is generally three years. Website Development Costs The Company incurs costs to develop its websites, tools and applications. The Company expenses all costs that relate to the planning and post-implementation phases of website development as product development expense. Costs incurred in the development phase, consisting principally of third-party consultants and related charges, and the costs of content determined to provide a future economic benefit, are capitalized. Upon completion, the capitalized costs are amortized using the straight-line method over their estimated useful lives, which is generally three years. Goodwill Goodwill represents the excess cost over fair value of the identifiable net assets of acquired businesses. Goodwill is tested for impairment on an annual basis as of October 1, and whenever events or circumstances indicate that the carrying value of the asset may not be recoverable. An initial qualitative analysis is performed evaluating whether any events and circumstances occurred or exist that provide evidence that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on this analysis, indicators deem it more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step quantitative impairment test is performed; otherwise, no further step is required. If and when needed to complete the two-step quantitative assessment, the fair value of goodwill is estimated using a combination of an income approach based on the present value of estimated future cash flows, and a market approach examining transactions in the marketplace involving the sale of stocks of similar publicly traded companies, or the sale of entire companies engaged in operations similar to those of the Company. As the Company has one operating segment and one reporting unit, the first step of the impairment test requires a comparison of the fair value of the reporting unit, or business enterprise value as a whole, to the carrying value of the Company’s invested capital. If the carrying amount exceeds the fair value, there is indication that an impairment may exist, and a second step must be performed. If the carrying amount is less than the fair value, no indication of impairment exists, and a second step is not performed. The evaluation of the Company’s goodwill indicated that the carrying value of the asset was less than the fair value and, accordingly, there was no impairment loss recognized for the years ended December 31, 2015, 2014 and 2013. Long-Lived Assets The Company reviews long-lived assets, including property and equipment and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The intangible assets with definite lives consist principally of trade names and customer relationships. Definite-lived intangible assets are amortized over their estimated useful lives, ranging from three to ten years, using the straight-line method which approximates the pattern in which economic benefits are consumed. In accordance with its policy, the Company reviews the estimated useful lives of its intangible assets and other long-lived assets on an ongoing basis. During the year ended December 31, 2015, an impairment charge of $1,416 was recorded related to certain software development projects which the Company decided not to move forward with. The $1,416 charge is included in product development expense in the accompanying consolidated statements of operations. There were no indicators of impairment of the Company’s long-lived assets during the year ended December 31, 2014. During the year ended December 31, 2013, the Company recorded an impairment charge of $1,190 related to the consolidation and reorganization of certain website content and tools. This $1,190 charge is included in product development expense in the accompanying consolidated statements of operations. Revenue Recognition and Deferred Revenue The Company generates its revenue from (i) advertising and sponsorships and (ii) premium services, including consumer subscriptions, SaaS-based licensing fees and other licensing fees. Advertising revenue is recognized in the period in which the advertisement is delivered. Revenue from sponsorships, which includes time and materials based creative services, is recognized over the period the Company substantially satisfies its contractual obligations as required under the respective sponsorship agreements. When contractual arrangements contain multiple elements, revenue is allocated to each element based on its relative fair value determined using prices charged when elements are sold separately. In instances where individual deliverables are not sold separately, or when third-party evidence is not available, fair value is determined based on management’s best estimate of selling price. Subscriptions are generally paid in advance on a monthly, quarterly or annual basis. Subscription revenue, after deducting refunds and charge-backs, is recognized on a straight-line basis ratably over the subscription periods. SaaS and other licensing revenue is generally recognized on a straight-line basis ratably over the life of the contract. Deferred revenue relates to: (i) subscription fees for which amounts have been collected but for which revenue has not been recognized, and (ii) advertising and sponsorship fees and licensing fees billed in advance of when the revenue is to be earned. Cost of Revenues Cost of revenues consists principally of the expenses associated with aggregating the total audience across the Company’s websites, including (i) royalty expenses for licensing content for certain websites and for the portion of advertising revenue the Company pays to the owners of certain other websites, and (ii) media costs associated with audience aggregation activities. Cost of revenues also includes market research incentives, direct mail marketing and fulfillment costs, as well as out-of-pocket costs related to creative services and costs associated with subscription fees for our premium services, ad serving and other expenses. Royalty expense amounted to $23,805, $20,937 and $18,673 for the years ended December 31, 2015, 2014 and 2013, respectively. Media costs consist primarily of fees paid to online publishers, Internet search companies and other media channels for search engine and database marketing, and display and television advertising. These media activities are attributable to revenue-generating and audience aggregation events, designed to increase the audience to the websites the Company operates, increase the number of subscribers to premium services and grow the Company’s registered user base. Media costs totaled $32,198, $24,973 and $22,437 for the years ended December 31, 2015, 2014 and 2013, respectively. Other Expense There were no charges reflected as other expense for the years ended December 31, 2015 and 2013. In connection with the refinancing of its credit facilities in 2014, the Company wrote-off unamortized deferred financing costs totaling $2,845 and incurred prepayment fees of $1,016, which, together with the mark-to-market adjustment on certain preferred stock warrants of $253, is reflected as other expense in the accompanying consolidated statements of operations for the year ended December 31, 2014. Income Taxes The Company accounts for taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the tax and financial statement reporting basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reduces the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that the Company will not realize some or all of the deferred tax asset. As a result of the Company’s historical operating performance and the cumulative net losses incurred to date, the Company does not have sufficient objective evidence to support the recovery of the net deferred tax assets. Accordingly, the Company has established a valuation allowance against net deferred tax assets for financial reporting purposes to the extent it is determined that such deferred tax assets are not more likely than not to be realized. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is “more likely than not” that the position will be sustained upon examination. Potential interest and penalties associated with unrecognized tax positions are recognized in income tax expense. Comprehensive Income (Loss) Other than the Series G preferred stock deemed dividend reflected in the accompanying statement of operations for the year end December 31, 2014 (see Note 10), the Company has no items of other comprehensive income (loss). Fair Value of Financial Instruments Due to their short-term maturities, the carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value. Cash equivalents principally consist of the Company’s investment in U.S. Treasury securities and other highly liquid money market funds. The fair value of these investment funds is based on quoted market prices, which are Level 1 inputs, pursuant to the fair value accounting standard, which establishes a framework for measuring fair value and requires disclosures about fair value measurements by establishing a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value of the Company’s debt approximates the recorded amounts as the interest rates on the credit facilities are based on market interest rates. Stock-Based Compensation The Company accounts for all share-based payments, including grants of employee stock options and restricted stock units, based on the fair value of the award measured at the grant date. The Company uses the Black-Scholes option pricing model to estimate the fair value of the stock option awards and stock purchase rights provided under the 2014 Employee Stock Purchase Plan, or ESPP. The fair value of restricted stock unit awards represents the closing price of the Company’s common stock on the date of grant. Stock-based compensation expense is recognized over the period during which the recipient provides services, generally the vesting period, net of estimated forfeitures. Business Concentrations, Accounts Receivable and Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash and cash equivalents includes U.S. Treasury securities and other money market funds. Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers comprising the Company’s customer base and the ongoing credit evaluation of its customers. For the years ended December 31, 2015 and 2014, no advertising customer accounted for greater than 10% of total revenues. For the year ended December 31, 2013, one advertising customer accounted for 12% of total revenues. As of December 31, 2015 and 2014, no advertising customers accounted for greater than 10% of total accounts receivable. As many of the Company’s advertising customers work through the same advertising agencies, the Company also monitors the concentration of accounts receivable at the agency level. As of December 31, 2015 and 2014, no advertising agency accounted for greater than 10% of accounts receivable. The Company’s net accounts receivable balance of $90,356 and $68,007 reflected in the accompanying balance sheets as of December 31, 2015 and 2014, respectively, include unbilled accounts receivable of $12,224 and $7,064 as of December 31, 2015 and 2014, respectively, which primarily represent revenue earned and accrued in the respective fiscal years, billed subsequent to year end. An allowance for doubtful accounts is established with respect to accounts receivable that the Company has determined to be doubtful of collection, based upon factors surrounding the credit risk of customers, historical experience and other information. The following table summarizes the activity of the allowance for doubtful accounts: Year Ended December 31, 2015 2014 2013 Balance at beginning of year $ 637 $ 530 $ 651 Bad debt provision 326 384 251 Write-offs (54 ) (277 ) (372 ) Balance at end of year $ 909 $ 637 $ 530 Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. During the measurement period, which is up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, based on additional information impacting the assigned estimated fair values. Segment Information The Company and its subsidiaries are organized in a single operating segment, providing digital health marketing and communications solutions, and the Company also has one reportable segment. Substantially all of the Company’s revenues are derived from U.S. sources. Net Income (Loss) Attributable to Common Stockholders per Common Share Basic net income (loss) attributable to common stockholders per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net income (loss) attributable to common stockholders per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, adjusted to reflect potentially dilutive securities. Potentially dilutive securities consist of incremental shares issuable upon the assumed exercise of stock options, restricted stock units and warrants using the treasury stock method, convertible preferred shares using the “if converted” method, and employee withholdings to purchase common stock under the Company’s ESPP. Due to the net losses for the years ended December 31, 2015 and 2013, the aforementioned potentially dilutive securities were not included in the computation of diluted net loss per common share because the effect would have been anti-dilutive. The basic and diluted net income (loss) attributable to common stockholders per common share is calculated as follows for the periods presented: Year Ended December 31, 2015 2014 2013 Numerator: Income (loss) from continuing operations $ (11,640 ) $ 12,683 $ (12,997 ) Loss from discontinued operations, net of tax — — (5,239 ) Net income (loss) (11,640 ) 12,683 (18,236 ) Series G preferred stock deemed dividend — (8,079 ) — Net income (loss) attributable to common stockholders $ (11,640 ) $ 4,604 $ (18,236 ) Denominator: Weighted-average number of common shares outstanding for basic net income (loss) attributable to common stockholders per common share 31,977,246 24,259,395 5,103,351 Dilutive securities: Stock option awards — 2,235,059 — Warrants to purchase common stock — 412,305 — Employee stock purchase plan — 5,023 — Total weighted-average diluted shares 31,977,246 26,911,782 5,103,351 Basic net income (loss) attributable to common stockholders per common share: Income (loss) from continuing operations $ (0.36 ) $ 0.19 $ (2.55 ) Loss from discontinued operations, net of tax — — (1.03 ) Net income (loss) attributable to common stockholders $ (0.36 ) $ 0.19 $ (3.57 ) Diluted net income (loss) attributable to common stockholders per common share: Income (loss) from continuing operations $ (0.36 ) $ 0.17 $ (2.55 ) Loss from discontinued operations, net of tax — — (1.03 ) Net income (loss) attributable to common stockholders $ (0.36 ) $ 0.17 $ (3.57 ) The following securities were outstanding for the periods presented below and have been excluded from the calculation of diluted net income (loss) attributable to common stockholders per common share because the effect is anti-dilutive: Year Ended December 31, 2015 2014 2013 Warrants to purchase common stock 76,659 — 583,247 Warrants to purchase redeemable convertible preferred stock — — 148,650 Redeemable convertible preferred stock — — 17,880,180 Stock option awards 6,252,223 1,337,766 5,366,785 Unvested RSU awards 453,349 — — Employee stock purchase plan 100,722 — — Total weighted-average anti-dilutive securities 6,882,953 1,337,766 23,978,862 Foreign Currency The financial statements and transactions of the Company’s foreign subsidiary are maintained in its local currency. The translation of foreign currencies into United States dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date, and for revenue and expense accounts using average exchange rates during the year. Foreign currency gains or losses are included in the consolidated statements of operations and were not material in any of the periods presented. Recently Issued and Adopted Accounting Standards In April 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance for reporting discontinued operations. Under the new guidance, only disposals that represent a strategic shift having a material impact on an entity’s operations and financial results shall be reported as discontinued operations, with expanded disclosures. This amendment will be effective for the first annual reporting period beginning after December 15, 2015. The Company does not expect the impact of the adoption of this guidance to be material to the consolidated financial statements. In May 2014, the FASB issued guidance which provides a comprehensive new revenue recognition model. The core principle of the guidance is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance was originally to be effective for annual and interim periods beginning after December 15, 2016. In August 2015, the FASB approved a one year deferral of the effective date to December 15, 2017 and early adoption is permitted, but not before the original effective date of December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is currently evaluating the effect that the new standard will have on the consolidated financial statements and related disclosures. In June 2014, the FASB issued updated guidance on stock compensation accounting requiring that a performance target that affects vesting and could be achieved after the requisite service period should be treated as a performance condition. Current GAAP does not contain explicit guidance on how to account for such share-based payments. This updated guidance is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the impact of the adoption of this guidance to be material to the consolidated financial statements. In April 2015, the FASB issued updated guidance on the presentation of debt issuance costs in financial statements. The new guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance will be effective for the Company beginning in the first quarter of 2016 on a retrospective basis for all periods presented, with early adoption optional. The Company does not expect the impact of the adoption of this guidance to be material to the consolidated financial statements. In September 2015, the FASB issued updated guidance on business combinations accounting requiring the acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Previously, such adjustments were required to be retrospectively recorded in prior period financial information. The amended guidance will be effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The standard is to be applied prospectively, with early adoption permitted. The Company does not expect the impact of the adoption of this guidance to be material to the consolidated financial statements. In November 2015, the FASB issued updated guidance on balance sheet classification of deferred taxes, requiring all deferred tax assets and liabilities, and any related valuation allowance, to be classified as non-current on the balance sheet. The classification change for all deferred taxes as non-current simplifies entities’ processes as it eliminates the need to separately identify the net current and net non-current deferred tax asset or liability in each jurisdiction and allocate valuation allowances. This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with earlier application permitted. The Company elected to early adopt this guidance on a retrospective basis effective December 31, 2014. As a result of the retrospective adoption, the Company reclassified $656 from current deferred tax assets to non-current deferred tax liabilities in the 2014 balance sheet. The adoption of this guidance had no impact on net income (loss). In February 2016, the FASB issued updated guidance on leases which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. We are currently evaluating the effects of the adoption and have not yet determined the impact the revised guidance will have on our consolidated financial statements and related disclosures. |