Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation |
The accompanying consolidated financial statements include those of the Company and its subsidiaries, after elimination of all intercompany accounts and transactions. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). |
Use of Estimates | Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, judgments and assumptions, including those related to revenue recognition, stock-based compensation, goodwill and acquired intangible assets, capitalization of software and website development costs and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from these estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments |
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, are used to measure fair value: |
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| • | | Level 1 — Quoted prices in active markets for identical assets or liabilities. | | | | | | | | | | | | | |
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| • | | Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | | | | | | | | | | | | | |
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| • | | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | | | | | | | | | | | | | |
During the years ended December 31, 2014, 2013 and 2012, there were no transfers between Level 1, Level 2 and Level 3. |
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The following tables present the Company’s fair value hierarchy for its assets which are measured at fair value on a recurring basis as of December 31, 2014 and 2013: |
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| | Fair Value Measurements at December 31, 2014 Using | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Financial Assets: | | | | | | | | | | | | | | | | |
Money Market Instruments | | $ | 5,885 | | | $ | — | | | $ | — | | | $ | 5,885 | |
United States Treasury Notes | | | 20,006 | | | | — | | | | — | | | | 20,006 | |
Corporate and Agency Bonds | | | — | | | | 37,316 | | | | — | | | | 37,316 | |
Commercial Paper | | | — | | | | 999 | | | | — | | | | 999 | |
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Total | | $ | 25,891 | | | $ | 38,315 | | | $ | — | | | $ | 64,206 | |
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| | Fair Value Measurements at December 31, 2013 Using | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Financial Assets: | | | | | | | | | | | | | | | | |
Money Market Instruments | | $ | 23,444 | | | $ | — | | | $ | — | | | $ | 23,444 | |
United States Treasury Notes | | | 27,035 | | | | — | | | | — | | | | 27,035 | |
Corporate and Agency Bonds | | | — | | | | 12,688 | | | | — | | | | 12,688 | |
Commercial Paper | | | — | | | | 1,000 | | | | — | | | | 1,000 | |
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Total | | $ | 50,479 | | | $ | 13,688 | | | $ | — | | | $ | 64,167 | |
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The Company had a contingent consideration liability associated with the acquisition of SinglePlatform, Corp. (“SinglePlatform”) in June 2012, which had been assessed at $0 as of December 31, 2013. The final measurement period for achievement of the goals related to the contingent consideration ended on June 30, 2014 and resulted in no payout of consideration. Prior to June 30, 2014, contingent consideration was measured at fair value and was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy. The valuation of the contingent consideration liability used assumptions and estimates to forecast a range of outcomes for the contingent consideration. The Company assessed these assumptions and estimates on a quarterly basis as additional data impacting the assumptions was obtained. Changes in the fair value of the contingent consideration liability related to updated assumptions and estimates were recognized within the consolidated statements of operations. There were no changes to the fair value of the contingent consideration liability for either of the years ended December 31, 2014 or 2013. The change in the fair value of the contingent consideration liability from the date of the SinglePlatform acquisition through December 31, 2012 resulted from reductions to the SinglePlatform revenue forecast scenarios. The revenue forecast scenarios were decreased due to SinglePlatform’s actual operating results and reduced productivity of its sales organization during 2012. |
Changes in the fair value of the Level 3 contingent consideration liability associated with the acquisition were as follows: |
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| | Contingent Consideration | | | | | | | | | | | | | |
Liability | | | | | | | | | | | | |
Acquisition of SinglePlatform in June 2012 | | $ | 12,152 | | | | | | | | | | | | | |
Change in fair value of contingent consideration liability, included in acquisition costs and other related charges in 2012 | | | (12,152 | ) | | | | | | | | | | | | |
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Balance at December 31, 2012, 2013 and 2014 | | $ | — | | | | | | | | | | | | | |
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Fair Value Option for Financial Assets and Financial Liabilities | Fair Value Option for Financial Assets and Financial Liabilities |
Authoritative guidance allows companies to choose to measure many financial instruments and certain other items at fair value. The Company has elected not to apply the fair value option to any of its financial assets or liabilities. |
Cash and Cash Equivalents | Cash and Cash Equivalents |
The Company considers all highly liquid investments with original maturities of three months or less at the time of acquisition to be cash equivalents. The Company also considers receivables related to customer credit card purchases of $1,502 and $2,901 at December 31, 2014 and 2013, respectively, to be equivalent to cash. Cash equivalents are stated at fair value. |
Marketable Securities | Marketable Securities |
The Company’s marketable securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of other income (expense), net based on the specific identification method. Fair value is determined based on quoted market prices. At December 31, 2014, marketable securities by security type consisted of: |
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| | Amortized | | | Gross | | | Gross | | | Estimated | |
Cost | Unrealized | Unrealized | Fair |
| Gains | Losses | Value |
United States Treasury Notes | | $ | 20,000 | | | $ | 6 | | | $ | — | | | $ | 20,006 | |
Corporate and Agency Bonds | | | 37,330 | | | | 2 | | | | (16 | ) | | | 37,316 | |
Commercial Paper | | | 999 | | | | — | | | | — | | | | 999 | |
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Total | | $ | 58,329 | | | $ | 8 | | | $ | (16 | ) | | $ | 58,321 | |
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At December 31, 2014, marketable securities consisted of investments that mature within one year with the exception of government treasuries and corporate and agency bonds with a fair value of $6,644, which have maturities within two years. |
At December 31, 2013, marketable securities by security type consisted of: |
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| | Amortized | | | Gross | | | Gross | | | Estimated | |
Cost | Unrealized | Unrealized | Fair |
| Gains | Losses | Value |
United States Treasury Notes | | $ | 27,022 | | | $ | 13 | | | $ | — | | | $ | 27,035 | |
Corporate and Agency Bonds | | | 12,684 | | | | 4 | | | | — | | | | 12,688 | |
Commercial Paper | | | 1,000 | | | | — | | | | — | | | | 1,000 | |
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Total | | $ | 40,706 | | | $ | 17 | | | $ | — | | | $ | 40,723 | |
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Accounts Receivable | Accounts Receivable |
Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. The Company reserves for receivables that are determined to be uncollectible, if any, in its allowance for doubtful accounts. After the Company has exhausted all collection efforts, the outstanding receivable is written off against the allowance. |
Concentration of Credit Risk and Significant Products and Customers | Concentration of Credit Risk and Significant Products and Customers |
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. At December 31, 2014 and 2013, the Company had substantially all cash balances at certain financial institutions without or in excess of federally insured limits, however, the Company maintains its cash balances and custody of its marketable securities with accredited financial institutions. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. |
For the years ended December 31, 2014, 2013 and 2012, revenue from the Company’s email marketing product alone as a percentage of total revenue was approximately 80%, 84% and 85%, respectively. No customer accounted for more than 10% of total revenue during these years. |
Goodwill and Acquired Intangible Assets | Goodwill and Acquired Intangible Assets |
The Company records goodwill when consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. The Company performs its annual assessment for impairment of goodwill on November 30th of each year and has determined that there is a single reporting unit for the purpose of conducting this annual goodwill impairment assessment. For purposes of assessing potential impairment, the Company annually estimates the fair value of the reporting unit (based on the Company’s market capitalization) and compares this amount to the carrying value of the reporting unit (as reflected by the Company’s total stockholders’ equity). If the Company determines that the carrying value of the reporting unit exceeds its fair value, an impairment charge would be required. |
Intangible assets are recorded at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis. |
Property and Equipment | Property and Equipment |
Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets or, where applicable and if shorter, over the lease term. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to the statement of operations. Repairs and maintenance costs are expensed as incurred. |
Estimated useful lives of assets are as follows: |
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Computer equipment | | 3 years | | | | | | | | | | | | | | |
Software | | 3 years | | | | | | | | | | | | | | |
Furniture and fixtures | | 5 years | | | | | | | | | | | | | | |
Leasehold improvements | | Shorter of life of lease or | | | | | | | | | | | | | | |
estimated useful life | | | | | | | | | | | | | | |
Long-Lived Assets | Long-Lived Assets |
The Company reviews the carrying values of its long-lived assets for possible impairment when events or changes in circumstance indicate that the related carrying amount may not be recoverable. Undiscounted cash flows are compared to the carrying value and when required, impairment losses on assets to be held and used are recognized based on the excess of the asset’s carrying amount over the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. |
Revenue Recognition | Revenue Recognition |
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The Company provides access to its products primarily through subscription arrangements whereby the customer is charged a fee for access for a defined term. Subscription arrangements include access to use the Company’s software via the Internet and support services, such as telephone, email and chat support. When there is evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured, the Company recognizes revenue on a daily basis over the subscription period as the services are delivered. Delivery is considered to have commenced at the time the customer has paid for the products and has access to the account via a log-in and password. The Company also offers ancillary services to its customers related to its subscription-based products such as custom services and training. When sold together, revenue from custom services, training and subscription products are accounted for separately based on vendor-specific objective evidence of fair value of each of the services as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria. Revenue from custom services and training is recognized as the services are performed. Revenue from transaction-based products and services is recognized based on the transactional fee charged when there is evidence of an arrangement, the fee is fixed or determinable, collectability is deemed reasonably assured and the transaction has occurred. |
Deferred Revenue | Deferred Revenue |
Deferred revenue consists of payments received in advance of delivery of the Company’s on-demand products described above and is recognized as the revenue recognition criteria are met. The Company’s customers generally pay for services in advance on a monthly, semiannual or annual basis. |
Software and Website Development Costs | Software and Website Development Costs |
Research and development costs are expensed as incurred and primarily include salaries, fees to consultants, and other related costs. Relative to development costs of its on-demand products and website, the Company capitalizes certain direct costs to develop functionality as well as certain upgrades and enhancements that are probable to result in additional functionality. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized as part of property and equipment until the software is substantially complete and ready for its intended use. Capitalized software is amortized over a three-year period in the expense category to which the software relates. |
Foreign Currency Translation | Foreign Currency Translation |
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The functional currency of the Company’s operations in the United Kingdom is deemed to be the British pound. Accordingly, the assets and liabilities of the Company’s United Kingdom subsidiary are translated into United States dollars using the period-end exchange rate, and income and expense items are translated using the average exchange rate during the period. Cumulative translation adjustments are reflected as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are charged to Other income (expense), net and were not material to the Company’s operations. |
Comprehensive Income | Comprehensive Income |
Comprehensive income includes net income, as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only elements of other comprehensive income (loss) are unrealized gains and losses on available-for-sale securities and translation adjustments. |
Segment Data | Segment Data |
The Company manages its operations as a single segment for purposes of assessing performance and making operating decisions. Revenue is generated predominately in the United States and all significant assets are held in the United States. |
Net Income Per Share | Net Income Per Share |
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Basic net income per share is computed by dividing net income by the weighted average number of unrestricted common shares outstanding during the period. |
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Diluted net income per share is computed by dividing net income by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted common stock and restricted stock units using the “treasury stock” method when the effect is not anti-dilutive. |
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The following is a summary of the shares used in computing diluted net income per share: |
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| | Years ended December 31, | | | | | |
| | 2014 | | | 2013 | | | 2012 | | | | | |
| | (in thousands) | | | | | |
Weighted average shares used in calculating basic net income per share | | | 31,619 | | | | 30,730 | | | | 30,386 | | | | | |
Stock options | | | 1,100 | | | | 524 | | | | 581 | | | | | |
Warrants | | | — | | | | 1 | | | | 1 | | | | | |
Unvested restricted stock and restricted stock units | | | 117 | | | | 101 | | | | 35 | | | | | |
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Shares used in computing diluted net income per share | | | 32,836 | | | | 31,356 | | | | 31,003 | | | | | |
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The Company excluded the following common stock equivalents from the computation of diluted net income per share because they had an anti-dilutive impact because the proceeds under the treasury stock method were in excess of the average fair market value for the period: |
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| | Years ended December 31, | | | | | |
| | 2014 | | | 2013 | | | 2012 | | | | | |
| | (in thousands) | | | | | |
Options to purchase common stock | | | 1,278 | | | | 3,586 | | | | 3,342 | | | | | |
Unvested restricted stock and restricted stock units | | | 200 | | | | 176 | | | | 110 | | | | | |
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Total options exercisable into common stock, restricted stock units issuable in common stock and restricted stock | | | 1,478 | | | | 3,762 | | | | 3,452 | | | | | |
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Advertising Expense | Advertising Expense |
The Company expenses advertising as incurred. Advertising expense was $42,234, $39,796 and $35,350 during the years ended December 31, 2014, 2013 and 2012, respectively. |
Accounting for Stock-Based Compensation | Accounting for Stock-Based Compensation |
The Company values all stock-based compensation, including grants of stock options, restricted stock and restricted stock units, at fair value on the date of grant, and expenses the fair value over the applicable service period. The straight-line method is applied to all grants with service and market conditions, while the graded vesting method is applied to all grants with both service and performance conditions. |
Income Taxes | Income Taxes |
Income taxes are provided for tax effects of transactions reported in the financial statements and consist of income taxes currently due plus deferred income taxes related to timing differences between the basis of certain assets and liabilities for financial statement and income tax reporting purposes. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. |
The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements |
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In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new guidance is effective for the Company commencing January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that this guidance will have on its consolidated financial statements. |
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In August 2014, FASB issued new guidance, Presentation of Financial Statements—Going Concern. The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the effect that this guidance will have on its consolidated financial statements. |