The Company and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
The Company and Summary of Significant Accounting Policies | ' |
The Company and Summary of Significant Accounting Policies |
Synacor, Inc., together with its consolidated subsidiary, Synacor Canada, Inc. (collectively, the “Company”), is a leading provider of start experiences (startpages and homescreens), TV Everywhere, Identity Management (“IDM”) and various cloud-based services across multiple devices for cable, satellite, telecom and consumer electronics companies. The Company is also a leading provider of authentication and aggregation solutions enabling the delivery of personalized online content. The Company's technology allows its customers to package a wide array of personalized online content and cloud-based services with their high-speed Internet, communications, television and other digital offerings. The Company's customers offer the Company's services under their own brands on Internet-enabled devices such as PCs, tablets, smartphones and connected TVs. |
Basis of Presentation — The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise have the power to control, are accounted for using the equity method and are included as investments in equity interest on the condensed consolidated balance sheets. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (as amended). |
Accounting Estimates — The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the consolidated financial statements. Accordingly, actual results may differ from estimated amounts. |
Concentrations of Risk — As of December 31, 2013 and September 30, 2014, and for the three and nine months ended September 30, 2013 and 2014, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows: |
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| Accounts Receivable | | | | | | |
| December 31, | | September 31, | | | | | | |
2013 | 2014 | | | | | | |
Google | 47 | % | | 22 | % | | | | | | |
Display Advertising Partner | 11 | % | | 10 | % | | | | | | |
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| Revenue | | Revenue |
| Three Months Ended | | Nine Months Ended |
September 30, | September 30, |
| 2013 | | 2014 | | 2013 | | 2014 |
Google | 50 | % | | 39 | % | | 52 | % | | 45 | % |
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For the three and nine months ended September 30, 2013 and 2014, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences: |
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| Cost of Revenue | | Cost of Revenue |
| Three Months Ended | | Nine Months Ended |
September 30, | September 30, |
| 2013 | | 2014 | | 2013 | | 2014 |
Customer A | 24 | % | | 22 | % | | 21 | % | | 23 | % |
Customer B | 13 | % | | 14 | % | | 13 | % | | 13 | % |
Customer C (1) | 10 | % | | N/A | | | 11 | % | | 10 | % |
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Customer D | 15 | % | | 16 | % | | 13 | % | | 12 | % |
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Notes: |
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-1 | For the three months ended September 30, 2014, the cost of revenue-share payments received by Customer C were less than 10%. | | | | | | | | | | |
Sale of Domain — In June 2014, the Company executed a transaction to sell a domain name of its legacy business. The sale amounted to $1.0 million and the entire amount was recorded as a gain on the sale in the consolidated statement of operations during the second quarter of 2014. |
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Rights Plan — On July 14, 2014 the board of directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock and adopted a stockholder rights plan (the “Rights Plan”). The dividend was paid on July 14, 2014 to the stockholders of record at the close of business on that date. Each Right allows its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock (a “ Series A Junior Preferred Share”) for $10.00 per share (the “Exercise Price”), if the Rights become exercisable. This portion of a Series A Junior Preferred Share will give the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights. On July 14, 2014, in conjunction with the adoption of the Rights Plan, the Company designated 2,000,000 shares of its Preferred Stock as Series A Junior Participating Preferred Stock. |
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The Rights will not be exercisable until 10 days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownership of 10% or more of the Company’s outstanding common stock (the “Distribution Date”). If a person or group becomes an Acquiring Person, each Right will entitle its holder (other than such Acquiring Person) to purchase for $10.00 per share, a number of shares of the Company’s common stock having a market value of twice such price based on the market price of the common stock prior to such acquisition. Additionally, if the Company is acquired in a merger or similar transaction after the Distribution Date, each Right will entitle its holder (other than such Acquiring Person) to purchase for $10.00 per share, a number of shares of the acquiring corporation with a market value of $20.00 per share based on the market price of the acquiring corporation’s stock, prior to such merger. In addition, at any time after a person or group becomes an Acquiring Person, but before such Acquiring Person or group owns 50% or more of the Company’s common stock, the board of directors may exchange one share of the Company’s common stock for each outstanding Right (other than Rights owned by such Acquiring Person, which would have become void). An Acquiring Person will not be entitled to exercise the Rights. |
The Rights will expire on July 14, 2017, provided that if the Company’s stockholders have not ratified the Rights Plan by July 14, 2015, the Rights will expire on such date. |
Reduction In Workforce — On September 28, 2014, the Company's board of directors approved a cost reduction plan. The plan involves a reduction in the Company’s workforce by approximately 70 employees. The pretax severance charge and outplacement services resulting from the reduction in workforce, combined with the Company's separation from its former Chief Operating Officer, amounted to $1.3 million. Of the $1.3 million in costs, $0.5 million was recorded to research and development, $0.2 million was recorded to sales and marketing and $0.6 million was recorded to general and administrative in the accompanying statement of operations for the three and nine months ended September 30, 2014. As of September 30, 2014, $1.1 million of the reduction in workforce costs remain in accrued expenses and other current liabilities on the condensed consolidated balance sheet. |
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Recent Accounting Pronouncements — In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09 (ASU 2014-09) "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the consolidated financial statements. |