Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |
In Millions, except Share data, unless otherwise specified | Dec. 31, 2014 | Mar. 20, 2015 |
Document And Entity Information Abstract | ||
Entity Registrant Name | RIGHTSIDE GROUP, LTD. | |
Entity Central Index Key | 1589094 | |
Document Type | 10-K | |
Document Period End Date | 31-Dec-14 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Public Float | $172.90 | |
Entity Common Stock, Shares Outstanding | 18,753,206 | |
Document Fiscal Year Focus | 2014 | |
Document Fiscal Period Focus | FY |
Balance_Sheets
Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets | ||
Cash and cash equivalents | $49,743 | $66,833 |
Accounts receivable | 14,256 | 9,176 |
Prepaid expenses and other current assets | 6,898 | 4,395 |
Deferred registration costs | 73,289 | 66,273 |
Total current assets | 144,186 | 146,677 |
Deferred registration costs | 14,502 | 12,514 |
Property and equipment, net | 11,527 | 14,456 |
Intangible assets, net | 37,116 | 15,268 |
Goodwill | 103,042 | 103,042 |
Deferred tax assets | 9,483 | 6,314 |
gTLD deposits | 21,180 | 21,252 |
Other assets | 3,298 | 1,998 |
Total assets | 344,334 | 321,521 |
Current liabilities | ||
Accounts payable | 7,190 | 7,585 |
Accrued expenses and other current liabilities | 21,313 | 18,787 |
Debt | 1,500 | |
Deferred tax liabilities | 27,886 | 24,157 |
Deferred revenue | 93,683 | 80,999 |
Total current liabilities | 151,572 | 131,528 |
Deferred revenue, less current portion | 19,195 | 16,544 |
Debt, less current portion | 23,605 | |
Other liabilities | 1,117 | 693 |
Total liabilities | 195,489 | 148,765 |
Commitments and contingencies (Note 9) | ||
Stockholders' equity | ||
Common stock, $0.0001 per share Authorized shares: 100,000 and 0 Shares issued and outstanding: 18,661 and 0 | 2 | |
Preferred stock, $0.0001 par value per share Authorized shares: 20,000 and 0 Shares issued and outstanding: 0 and 0 | ||
Additional paid in capital | 141,709 | |
Accumulated other comprehensive income | 577 | |
Retained earnings | 7,134 | |
Parent company investment | 172,179 | |
Total stockholders' equity | 148,845 | 172,756 |
Total liabilities and stockholders' equity | $344,334 | $321,521 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, authorized shares | 100,000,000 | 0 |
Common stock, shares issued | 18,661,000 | 0 |
Common stock, shares outstanding | 18,661,000 | 0 |
Preferred stock, par value (in dollars per share) | $0.00 | |
Preferred stock, shares authorized | 20,000,000 | 0 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Statements_of_Operations
Statements of Operations (USD $) | 12 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Statement [Abstract] | |||
Revenue | $191,748 | $185,192 | $172,968 |
Cost of revenue (excluding depreciation and amortization) | 149,710 | 133,714 | 118,142 |
Sales and marketing | 9,461 | 10,210 | 8,725 |
Technology and development | 20,476 | 18,516 | 14,779 |
General and administrative | 21,157 | 24,191 | 18,914 |
Depreciation and amortization | 15,441 | 14,382 | 13,495 |
Gain on other assets, net | -22,103 | -4,232 | |
Interest expense | 1,988 | ||
Other expense (income), net | -1,196 | 58 | 64 |
Loss before income taxes | -3,186 | -11,647 | -1,151 |
Income tax benefit | -1,328 | -944 | -162 |
Net loss | ($1,858) | ($10,703) | ($989) |
Net loss per share attributable to common stockholders - Basic (in earnings per share) | ($0.10) | ($0.58) | ($0.05) |
Net loss per share attributable to common stockholders - Diluted (in earnings per share) | ($0.10) | ($0.58) | ($0.05) |
Weighted average shares outstanding, basic | 18,452 | 18,413 | 18,413 |
Weighted average shares outstanding, diluted | 18,452 | 18,413 | 18,413 |
Statements_of_Comprehensive_In
Statements of Comprehensive Income (Loss) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Statement of Comprehensive Income [Abstract] | |||
Net income (loss) | ($1,858) | ($10,703) | ($989) |
Other comprehensive income (loss): | |||
Unrealized gain (loss) on available-for-sale securities | -906 | 906 | |
Tax effect | 329 | -329 | |
Other comprehensive loss, net of tax | -577 | 577 | |
Comprehensive loss | ($2,435) | ($10,126) | ($989) |
Statement_of_Equity
Statement of Equity (USD $) | Parent company investment | Common stock | Additional paid-in capital | Retained earnings. | Accumulated other comprehensive income (loss) | Total |
In Thousands | ||||||
Balance at the beginning of the period at Dec. 31, 2011 | $80,641 | $80,641 | ||||
Net decrease in parent company investment | 64,975 | 64,975 | ||||
Net loss | -989 | -989 | ||||
Balance at the end of the period at Dec. 31, 2012 | 144,627 | 144,627 | ||||
Unrealized gain on available-for-sale securities | 577 | 577 | ||||
Net decrease in parent company investment | 38,255 | 38,255 | ||||
Net loss | -10,703 | -10,703 | ||||
Balance at the end of the period at Dec. 31, 2013 | 172,179 | 577 | 172,756 | |||
Realized gain on available for sale securities, net of tax | -577 | -577 | ||||
Net loss prior to spin-off | -8,992 | -8,992 | ||||
Net decrease in parent company investment | -28,043 | -28,043 | ||||
Capitalization at spin-off | -135,144 | 2 | 135,142 | |||
Capitalization at Spin-off (in shares) | 18,413 | |||||
Balance at the end of the period at Jul. 31, 2014 | 2 | 135,142 | 135,144 | |||
Balance at the end of the period (in shares) at Jul. 31, 2014 | 18,413 | |||||
Stock option exercises and vesting of restricted stock units | 51 | 51 | ||||
Stock option exercises and vesting of restricted stock units (in shares) | 248 | |||||
Stock warrants issued | 4,441 | 4,441 | ||||
Stock-based compensation | 2,380 | 2,380 | ||||
Tax withholdings on the vesting of restricted stock units | -305 | -305 | ||||
Net income after spin-off | 7,134 | 7,134 | ||||
Balance at the end of the period at Dec. 31, 2014 | $2 | $141,709 | $7,134 | $148,845 | ||
Balance at the end of the period (in shares) at Dec. 31, 2014 | 18,661 |
Statements_of_Cash_Flows
Statements of Cash Flows (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Cash flows from operating activities | |||
Net income (loss) | ($1,858) | ($10,703) | ($989) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||
Depreciation and amortization | 15,441 | 14,382 | 13,495 |
Amortization of Debt Discount (Premium) | 764 | ||
Deferred income taxes | -1,359 | -630 | 2,373 |
Stockbbased compensation | 5,836 | 9,463 | 10,112 |
Gain on gTLD application withdrawals, net | -22,103 | -4,232 | |
Gain on sale of marketable securities | -1,362 | ||
Other | 86 | -982 | -507 |
Change in operating assets and liabilities: | |||
Accounts receivable, net | -1,573 | 3,330 | -2,746 |
Prepaid expenses and other current assets | -428 | -326 | -420 |
Deferred registration costs | -9,004 | -9,749 | -8,848 |
Deposits with registries | 425 | -914 | 721 |
Other longbterm assets | -1,999 | -3,285 | -407 |
Accounts payable | -395 | 702 | 604 |
Accrued expenses and other liabilities | 3,159 | -325 | -227 |
Deferred revenue | 15,335 | 11,235 | 7,971 |
Net cash provided by operating activities | 965 | 7,966 | 21,132 |
Cash flows from investing activities | |||
Purchases of property and equipment | -4,818 | -8,445 | -7,917 |
Purchases of intangible assets | -2,104 | -2,921 | -3,307 |
Payments and deposits for gTLD applications | -32,028 | -3,949 | -18,202 |
Proceeds from gTLD withdrawals, net | 23,461 | 5,616 | |
Cash paid for acquisitions, net of cash acquired | -16,200 | ||
Issuance of note receivable | 2,500 | ||
Change in restricted cash | 1,563 | -855 | |
Proceeds from sale of marketable securities | 1,362 | ||
Other | 405 | 982 | 515 |
Net cash used in investing activities | -14,659 | -8,717 | -45,966 |
Cash flows from financing activities | |||
Principal payments on capital lease obligations | -101 | -241 | -222 |
Proceeds from debt | 30,000 | ||
Proceeds from stock options exercises | 51 | ||
Minimum tax withholding on restricted stock awards | -305 | ||
Issuance costs related to debt financings | -2,784 | ||
Net (decrease) increase in parent company investment | -29,215 | 27,882 | 54,664 |
Cash paid for acquisition holdback | -1,042 | -650 | |
Net cash (used in) provided by financing activities | -3,396 | 26,991 | 54,442 |
Change in cash and cash equivalents | -17,090 | 26,240 | 29,608 |
Cash and cash equivalents, beginning of period | 66,833 | 40,593 | 10,985 |
Cash and cash equivalents, end of period | 49,743 | 66,833 | 40,593 |
Supplemental Cash Flow Information [Abstract] | |||
Warrants issued in connection with debt | 4,441 | ||
Cash paid for interest | 1,142 | ||
Acquisition hold back | $1,800 |
Company_Background_and_Basis_o
Company Background and Basis of Presentation | 12 Months Ended |
Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Company Background, Separation from Demand Media and Basis of Presentation | 1. Company Background, Separation from Demand Media and Basis of Presentation |
Company Background | |
In February 2013, Demand Media, Inc. (“Demand Media”) announced that its board of directors authorized Demand Media to pursue the separation of its business into two distinct publicly traded entities: a new company named Rightside Group, Ltd. (“Rightside,” the “Company,” “our,” “we,” or “us”) focused on domain name services, and Demand Media, Inc. (“Demand Media”), a digital media company. On August 1, 2014, Demand Media completed a tax free distribution of all of the outstanding shares of our common stock on a pro rata basis to Demand Media stockholders (the “separation” or the “spin‑off”) as of the record date. After the spin‑off, we began operating as an independent, publicly traded company. | |
We were incorporated on July 11, 2013, as a direct, wholly owned subsidiary of Demand Media, a New York Stock Exchange (“NYSE”) listed company that, prior to the spin-off, was a diversified digital media and domain name services company. Prior to our separation from Demand Media on August 1, 2014, Demand Media owned all of the outstanding shares of our capital stock. We have one class of common stock issued and outstanding, and no preferred stock outstanding. In connection with the spin‑off, Demand Media contributed or transferred certain of the subsidiaries and assets relating to Demand Media’s domain name services business to us, and we or our subsidiaries assumed all of the liabilities relating to Demand Media’s domain name services business. | |
We provide domain name registration and related value‑added service subscriptions to third parties. We are also a participant in the expansion of generic Top Level Domains (“gTLDs”) by the Internet Corporation for Assigned Names and Numbers (“ICANN”), with the first gTLD launched in October 2013 (the “New gTLD Program”). As part of the New gTLD Program, our domain name services business entered into its first registry operator agreements with ICANN, becoming an accredited registry for new gTLDs. | |
Separation from Demand Media | |
Immediately prior to the separation, the authorized shares of Rightside capital stock were increased from 1,000 shares to 120.0 million shares, divided into the following classes: 100.0 million shares of common stock, par value $0.0001 per share, and 20.0 million shares of preferred stock, par value $0.0001 per share. The 1,000 shares of Rightside common stock, par value $0.0001 per share, that were previously issued and outstanding were automatically reclassified as and became 18.4 million shares of common stock, par value $0.0001 per share. The separation was effected by Demand Media through a tax-free transaction involving the distribution of all Rightside common stock held by Demand Media to Demand Media’s stockholders on August 1, 2014. | |
Upon effectiveness of the separation, holders of Demand Media common stock received one share of Rightside common stock for every five shares of Demand Media common stock they held on the record date. Following completion of the separation, Rightside became an independent, publicly traded company on the NASDAQ Global Select Market using the symbol: “NAME.” | |
As part of the separation, we entered into various agreements with Demand Media which provide for the allocation between Rightside and Demand Media of certain assets, liabilities, and obligations, and govern the relationship between Rightside and Demand Media after the separation. | |
Basis of Presentation | |
We have prepared the accompanying financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions were eliminated in consolidation. We will refer to combined and consolidated financial statements as “financial statements,” “balance sheets,” “statement of operations,” “statement of cash flow” and “statement of stockholders’ equity” herein. Throughout these financial statements we refer to our years ended December 31, 2014 , 2013 , and 2012 , as “2014,” “2013” and “2012.” | |
After The Separation on August 1, 2014 | |
Our financial statements are presented on a consolidated basis, as we became a separate consolidated group. Our balance sheet, statement of operations, statement of stockholders’ equity and statement of cash flows include the accounts of Rightside and our wholly-owned subsidiaries. These financial statements reflect our financial position, results of operations, statement of comprehensive income (loss), equity and cash flows as a separate company and have been prepared in accordance with GAAP. | |
Prior To The Separation on August 1, 2014 | |
Our financial statements are presented on a combined basis as carve-out financial statements, as we were not a separate consolidated group. Our financial statements were derived from the financial statements and accounting records of Demand Media. Our financial statements assume the allocation to us of certain Demand Media corporate expenses relating to Rightside (refer to Note 14—Transactions with Related Parties and Parent Company Investment for further information). The accounting for income taxes is computed for our company on a separate tax return basis (refer to Note 10—Income Taxes for further information). | |
All significant intercompany accounts and transactions, other than those with Demand Media, have been eliminated in preparing the financial statements. All transactions between us and Demand Media have been included in these financial statements and are deemed to be settled as of August 1, 2014. The total net effect of the settlement of these transactions is reflected in the statements of cash flow as a financing activity and in the balance sheets as “Parent company investment.” Parent company investment in the balance sheets represents Demand Media’s historical investment in our company, the net effect of cost allocations from transactions with Demand Media and our accumulated earnings. | |
These financial statements included expense allocations for certain: (1) corporate functions historically provided by Demand Media, including, but not limited to, finance, legal, information technology, human resources, communications, compliance, and other shared services; (2) employee benefits and incentives; and (3) stock-based compensation expense. These expenses have been allocated to us on a direct basis when identifiable, with the remainder allocated on a pro rata basis calculated as a percentage of our revenue, headcount or expenses to Demand Media’s consolidated results. We consider the basis on which these expenses were allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented. | |
The allocations do not reflect the expense that we would have incurred as an independent company for the periods presented. Actual costs that may have been incurred if we had been a stand‑alone company would depend on a number of factors, including, but not limited to, the chosen organizational structure, the costs of being a stand‑alone publicly-traded company, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. Following our separation from Demand Media, we will perform these functions using our own resources and purchased services. For an interim period, however, some of these functions will continue to be provided by Demand Media under a transition services agreement, which are planned to extend for a period up to 18 months. Costs incurred by Demand Media to complete the spin‑off were not allocated to us. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies and Recent Accounting Pronouncements | 12 Months Ended | |||
Dec. 31, 2014 | ||||
Accounting Policies [Abstract] | ||||
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements | |||
Use of Estimates | ||||
We prepared our financial statements in accordance with GAAP, which requires us to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis, which form the basis for making judgments about the carrying value of assets and liabilities. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. | ||||
Significant items subject to such estimates and assumptions include revenue, useful lives and impairment of property and equipment, intangible assets, goodwill, and deferred income tax assets and liabilities. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. | ||||
Revenue Recognition | ||||
We recognize revenue when four basic criteria are met: (1) persuasive evidence of a sales arrangement exists; (2) performance of services has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. We consider persuasive evidence of a sales arrangement to be the receipt of a signed contract. We assess collectability based on a number of factors, including transaction history and the credit worthiness of a customer. If we determine that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash. We recognize performance incentive rebates and certain other business incentives as a reduction in revenue. We record cash received in advance of revenue recognition as deferred revenue. | ||||
For arrangements with multiple deliverables, we allocate revenue to each deliverable if the delivered item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. We determine the fair value of the selling price for a deliverable using a hierarchy of (1) Company specific objective and reliable evidence, then (2) third‑party evidence, then (3) best estimate of selling price. We allocate any arrangement fee to each of the elements based on their relative selling prices. To the extent that we offer performance incentive rebates or certain other business incentives to our partners, those incentives will be recognized as a reduction to revenue. | ||||
Domain Name Registration Fees | ||||
We recognize revenue from registration fees charged to third parties in connection with new, renewed and transferred domain name registrations on a straight‑line basis over the registration term, which ranges from one to ten years. We record payments received in advance of the domain name registration term in deferred revenue in our balance sheets. The registration term and related revenue recognition commences once we confirm that the requested domain name has been recorded in the appropriate registry under accepted contractual performance standards. We defer the associated direct and incremental costs, which principally consist of registry and ICANN fees, and expense them as cost of revenue on a straight‑line basis over the registration term. | ||||
Our businesses, including eNom and Name.com, are ICANN accredited registrars. Thus, we are the primary obligor with our reseller and retail registrant customers and are responsible for the fulfillment of our registrar services to those parties. As a result, we report revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, we do not recognize any revenue related to transactions between its reseller customers and its ultimate retail customers. A portion of our resellers have contracted with us to provide billing and credit card processing services to the resellers’ retail customer base in addition to registration services. Under these circumstances, the cash collected from these resellers’ retail customer base exceeds the fixed amount per transaction that we charge for domain name registration services. Accordingly, we do not recognize the amounts that we collect for the benefit of the reseller as revenue and are recorded as a liability until we remit to the reseller on a periodic basis. We report revenue from these resellers on a net basis because the reseller determines the price to charge retail customers and maintains the primary customer relationship. | ||||
Value‑added Services | ||||
We recognize revenue from online registrar value‑added services, which include, but are not limited to, security certificates, domain name identification protection, charges associated with alternative payment methodologies, web hosting services and email services on a straight‑line basis over the period in which services are provided. We include payments received in advance of services being provided in deferred revenue. | ||||
Domain Name Monetization Services | ||||
Domain name monetization service revenue represents advertising revenue and primarily includes revenue derived from cost‑per‑click advertising links we place on websites owned by us, which we acquire and sell on a regular basis, and on websites owned by certain of our customers, with whom we have revenue sharing arrangements. Where we enter into revenue sharing arrangements with our customers, such as those relating to advertising on our customers’ domains, and when we are considered the primary obligor, we report the underlying revenue on a gross basis in our statements of operations, and record these revenue‑sharing payments to our customers as revenue‑sharing expenses, which are included in cost of revenue. | ||||
Also included under this heading is revenue which represents proceeds received from selling domain names from our portfolio, as well as proceeds received from selling domain names that are not renewed by customers of our registrar platform. Domain name sales are primarily conducted through our direct sales efforts as well as through our NameJet joint venture. While certain domain names sold are registered on our registrar platform upon sale, we have determined that sales revenue and related registration revenue represent separate units of accounting, because the domain name has value to the customers on a stand‑alone basis, where a customer could resell it separately, without the registration service, there is objective and reliable evidence of the fair value of the registration service and no general rights of return. We evaluated each deliverable, domain name sale and domain name registration, to determine whether vendor‑specific objective evidence (“VSOE”) or third‑party evidence of selling price (“TPE”) existed in order to determine the selling price for each unit of accounting. | ||||
We determined that there is VSOE for domain name registrations through analysis of historical stand‑alone transactions sold by us, which have been consistently priced with limited discounts. For domain name sales, we have determined that TPE is not a practical alternative due to uniqueness of domain names compared to those sold by competitors and the availability of relevant third‑party pricing information. We have not established VSOE for domain names due to the lack of pricing consistency and other factors. Accordingly, we allocate revenue to the domain name sale deliverable in the arrangement based on best estimate of the selling price (“BESP”). We determine BESP by reference to the total transaction price and an estimate of what a market participant would pay without the registration service. Based on the nature of the transaction and its elements, we believe that there are no meaningful discounts embedded in the overall arrangement. We recognize domain name sales revenue when title to the name is transferred to the buyer and the related registration fees are recognized on a straight‑ line basis over the registration term. If we sell a domain name, we recognize any unamortized cost basis as a cost of revenue. | ||||
For domain name sales generated through NameJet, we recognize revenue net of auction service fee payments to NameJet. We generated revenue of approximately $4.4 million and $5.1 million from domain name sales generated through NameJet for 2014 and 2013. | ||||
Intangible Assets | ||||
Registration and Acquisition Costs of Undeveloped Websites | ||||
We capitalize initial registration and acquisition costs of our undeveloped websites, and amortize these costs over the expected useful life of the underlying undeveloped websites on a straight‑line basis, which approximates the estimated pattern in which the underlying economic benefits are consumed. The expected useful lives of the undeveloped websites range from 12 months to 84 months. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience with domain names of similar quality and value. | ||||
In order to maintain the rights to each undeveloped website acquired, we pay periodic renewal registration fees, which generally cover a minimum period of twelve months. We record renewal registration fees of website name intangible assets in deferred registration costs and recognize the costs over the renewal registration period, which is included in cost of revenue. | ||||
Acquired in Business Combinations | ||||
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocate the purchase price of each acquired business to our respective net tangible and intangible assets. Acquired intangible assets include: trade names, non‑compete agreements, owned website names, customer relationships, and technology. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives of three to 20 years, using the straight‑line method, which approximates the pattern in which the economic benefits are consumed. | ||||
gTLDs | ||||
We capitalize payments for gTLD applications and other costs directly attributable to the acquisition of gTLD registry operator rights and include them in other long-term assets. We have received and may continue to receive partial cash refunds for certain gTLD applications, and to the extent we elect to sell or dispose of certain gTLD applications throughout the process, we may also incur gains or losses on amounts invested. These gains have been recorded as gains on other assets, net, on the Statements of Operations. As gTLDs become available for their intended use, gTLD application fees and acquisition related costs are reclassified as finite lived intangible assets and amortized on a straight-line basis over an estimated useful life of 10 years, which approximates the pattern in which the economic benefits are consumed. Other costs incurred as part of the gTLD initiative and not directly attributable to the acquisition of gTLD registry operator rights are expensed as incurred. | ||||
Goodwill | ||||
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and the identifiable intangible assets. Goodwill is not amortized; rather, goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter, or more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. First, we determine if the carrying value of our related reporting unit exceeds fair value, which would indicate that goodwill may be impaired. If we then determine that goodwill may be impaired, we compare the implied fair value of the goodwill to its carrying amount to determine if there is an impairment loss. | ||||
Our most recent annual impairment analysis was performed in the fourth quarter of 2014 and indicated that the fair value of our reporting unit exceeded the carrying value at that time. We recently experienced significant volatility in our stock price, however, and as of December 31, 2014, our market capitalization was less than our book value. Should this condition continue to exist for an extended period of time, we will consider this and other factors, including our anticipated future cash flows, to determine whether goodwill is impaired. If we are required to record a significant impairment charge against certain intangible assets reflected on our balance sheet during the period in which an impairment is determined to exist, we could report a greater loss in one or more future periods. Based on a review of events and changes in circumstances at the reporting unit level through December 31, 2014, we have not identified any indications that the carrying value of our goodwill is impaired. We will continue to perform our annual goodwill impairment test in the fourth quarter of the year ending December 31, 2015, consistent with our existing accounting policy. There were no charges recorded related to goodwill impairment during 2014, 2013 and 2012. | ||||
Long‑lived Assets | ||||
We evaluate the recoverability of our intangible assets, and other long‑ lived assets with finite useful lives for impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. These trigger events or changes in circumstances include, but are not limited to, a significant decrease in the market price of a long‑lived asset, a significant adverse change in the extent or manner in which a long‑ lived asset is being used, significant adverse changes in legal factors, including changes that could result from our inability to renew or replace material agreements with certain of our partners on favorable terms, significant adverse changes in the business climate including changes which may result from adverse shifts in technology in our industry and the impact of competition, a significant adverse deterioration in the amount of revenue or cash flows we expect to generate from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long‑lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of our long‑lived asset, or a current expectation that, more likely than not, a long‑lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In making this determination, we consider the specific operating characteristics of the relevant long‑lived assets, including (i) the nature of the direct and any indirect revenue generated by the assets; (ii) the interdependency of the revenue generated by the assets; and (iii) the nature and extent of any shared costs necessary to operate the assets in their intended use. An impairment test would be performed when the estimated undiscounted future cash flows expected to result from the use of the asset group is less than its carrying amount. Impairment is measured by assessing the usefulness of an asset by comparing its carrying value to its fair value. If an asset is considered impaired, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. Fair value is determined based upon estimated discounted future cash flows. The key estimates applied when preparing cash flow projections relate to revenue, operating margins, economic life of assets, taxation and discount rates. To date, we have not recognized any impairment loss associated with our long‑lived assets. | ||||
Income Taxes | ||||
Our operations have historically been included in the federal income tax return of Demand Media, as well as certain state tax returns where Demand Media files on a combined basis. For periods during which our operations were included with Demand Media, income taxes are presented in these financial statements as if we filed our own tax returns on a separate return basis. We account for our income taxes using the liability and asset method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or in our tax returns. In estimating future tax consequences, generally all expected future events other than enactments or changes in the tax law or rates are considered. Deferred income taxes are recognized for differences between financial reporting and tax bases of assets and liabilities at the enacted statutory tax rates in effect for the years in which the temporary differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. We evaluate the realizability of our deferred tax assets and valuation allowances are provided when necessary to reduce deferred tax assets to the amounts expected to be realized. | ||||
We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, and relevant tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies. | ||||
We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that we believe has a greater than 50% likelihood of being realized upon settlement. We recognize interest and penalties accrued related to unrecognized tax benefits in our income tax (benefit) provision in the accompanying statements of operations. | ||||
We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified. The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. | ||||
Cash and Cash Equivalents | ||||
We consider all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. We consider funds transferred from our credit card service providers but not yet deposited into our bank accounts at the balance sheet dates, as funds in transit and these amounts are recorded as unrestricted cash, since the amounts are generally settled the day after the outstanding date. Cash and cash equivalents consist primarily of checking accounts and money market accounts. | ||||
Accounts Receivable | ||||
Since our domain name registration services are primarily conducted on a prepaid basis through credit card or internet payments processed at the time a transaction is consummatied, we do not carry significant receivables related to these business activities. As a result and for each of the periods presented, we did not maintain an allowance for potentially uncollectible receivables from our customers. | ||||
Accounts receivable primarily consists of amounts due from registries and from certain domain reseller customers of our registrar service offering, as well as gTLD amounts due from our strategic collaboration agreement with Donuts. Receivables from registries represent refundable amounts for registrations that were placed on auto-renew status by the registries, but were not explicitly renewed by a registrant as of the balance sheet dates. We record registry services accounts receivable at the amount of the registration fees paid by us to a registry for all registrations placed on auto-renew status. Subsequent to the lapse of a prior registration period, a registrant either renews the applicable domain name with us, which results in the application of the refundable amount to a consummated transaction, or the registrant lets the domain name registration expire, which results in a refund of the applicable amount from a registry to us. | ||||
Deferred Revenue and Deferred Registration Costs | ||||
Deferred revenue consists primarily of amounts received from customers in advance of our performance for domain name registration services and online value‑added services. We recognize deferred revenue as revenue on a systematic basis that is proportionate to the unexpired term of the related domain name registration over online value‑added service period. | ||||
Deferred registration costs represent incremental direct costs paid in advance to registries, ICANN, and other third parties for domain name registrations and are recorded as a deferred cost. We record the amortization of deferred registration costs to cost of revenue on a straight‑line basis over the registration period. | ||||
Property and Equipment | ||||
We record property and equipment at cost and provide for depreciation and amortization using the straight-line method for financial reporting purposes over the estimated useful lives. | ||||
We capitalize certain costs of internally developed software or software purchased for internal use. We capitalize software development costs when application development begins, it is probable that the project will be completed, and the software will be used as intended. We expense costs associated with preliminary project stage activities, training, maintenance, and all other post-implementation stage activities as we incur these costs. Our policy provides for the capitalization of certain payroll, benefits, and other payroll-related costs for employees who are directly associated with internal-use software development projects, as well as external direct costs of materials and services associated with developing or obtaining internal-use software. We only capitalize personnel costs that relate directly to time spent on such projects. | ||||
The estimated useful lives by asset classification are as follows: | ||||
· | Computer hardware - 2 to 5 years | |||
· | Computer software - 2 to 3 years | |||
· | Internally developed software - 3 years | |||
· | Furniture and equipment - 7 to 10 years | |||
· | Leasehold improvements - Shorter of the estimated useful life or life of related lease | |||
During 2014, depreciation expense included the write-off of internally developed software of $0.8 million. There were no impairments related to property and equipment during 2013 and 2012. | ||||
Other Long‑Term Assets | ||||
ICANN approved a framework for the significant expansion of the number of gTLDs available for businesses and consumers to register as part of a domain name (“New gTLD Program”). The first new gTLDs launched in the fourth quarter of 2013. We capitalize the costs incurred to pursue the acquisition of gTLD operator rights. While there can be no assurance that gTLDs will be awarded to us, we reclassify the these payments as finite‑lived intangible assets following the delegation of operator rights for each gTLD by ICANN. Payments for gTLD applications primarily represent amounts paid directly to ICANN and/or third parties in the pursuit of gTLD operator rights. When two or more applicants apply for the same gTLD, an auction process is used to determine the eventual owner. If a private auction is used, the highest bidder is required to pay the other applicants the proceeds from the auction in return for the withdrawal of their application for the gTLD. We may also receive partial cash refunds from ICANN for certain gTLD applications, and to the extent we elect to sell or dispose of our interest in certain gTLD applications throughout the process, we may also incur gains or losses on amounts invested. | ||||
Gains on the withdrawal of our interest in gTLD applications are recognized when realized, while losses are recognized when deemed probable. Potential losses are limited to the non‑refundable portion of our deposits, while gains realized during the initial ICANN rights delegation phase are based on proceeds received from third parties and may be significant as compared to our initial investment (deposit) in a particular gTLD. We expense other costs incurred by us as part of our gTLD initiative not directly attributable to the acquisition of gTLD operator rights. We amortize capitalized costs on a straight‑line basis over the estimated useful life of the gTLD operator rights acquired commencing the date that each asset is available for its intended use. | ||||
Investments | ||||
We account for investments in entities over which we have the ability to exert significant influence, but do not control and are not the primary beneficiary of, including NameJet, LLC (“NameJet”), using the equity method of accounting. We include our proportionate share of earnings (losses) of our equity method investees in other income (expense), net in our statements of operations. Our proportional shares of affiliate earnings or losses accounted for under the equity method of accounting, were not material for all periods presented. Transactions with our equity method investees generated revenue of approximately $4.4 million, $5.1 million and $5.6 million for 2014, 2013 and 2012. | ||||
We account for investments in companies that we do not control or account for under the equity method either at fair value or under the cost method, as applicable. Investments in equity securities are carried at fair value if the fair value of the security is readily determinable. Equity investments carried at fair value are classified as available‑for‑sale securities. Realized gains and losses for available‑for‑sale securities are included in other income (expense), net in our statements of operations. Unrealized gains and losses, net of taxes, on available‑for‑sale securities are included in our financial statements as a component of other comprehensive income and accumulated other comprehensive income (“AOCI”), until realized. | ||||
We account for investments in equity securities that we do not control or account for under the equity method and do not have readily determinable fair values for under the cost method. We record cost method investments originally at cost. In determining whether other‑than‑temporary impairment exists for equity securities, management considers: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near‑term prospects of the issuer and (3) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. We have determined that there has been no impairment of our equity marketable securities to date. | ||||
The cost of marketable securities sold is based upon the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of other income (expense), net. | ||||
Leases | ||||
We lease office space and equipment under non-cancelable operating leases. The terms of our lease agreements generally provide for rental payments on a graduated basis. We record rent expense on a straight-line basis over the lease period and have accrued for rent expense incurred but not paid. | ||||
Advertising Costs | ||||
Advertising costs are expensed as incurred and generally consist of online advertising, sponsorships, and trade shows. Such costs are included in sales and marketing expense in our statements of operations. Advertising expense was $1.5 million, $0.7 million and $0.6 million for 2014, 2013 and 2012. | ||||
Stock-based compensation expense | ||||
We measure stock-based compensation expense at the grant date based on the fair value of the award. We recognize compensation expense on a straight-line basis over the requisite service period. The requisite service period is generally four years. The compensation cost is recognized net of estimated forfeiture activity. | ||||
Foreign Currency Transactions | ||||
We record realized and unrealized foreign currency transaction gains and losses as incurred. For 2014, 2013 and 2012, foreign currency transaction gains and losses are included in other income (expense) in our statements of operations. | ||||
Fair Value of Financial Instruments | ||||
Fair value represents 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. We measure our financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. | ||||
· | Level 1—valuations for assets and liabilities traded in active exchange markets, or interest in open‑end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds. | |||
· | Level 2—valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third‑party pricing services for identical or comparable assets or liabilities. | |||
· | Level 3—valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. | |||
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. | ||||
Assets and Liabilities Measure at Fair Value on a Nonrecurring Basis | ||||
Assets and liabilities recognized or disclosed at fair value in our consolidated financial statements on a nonrecurring basis include items such as property and equipment, cost and equity method investments, and other assets. These assets are measured at fair value if determined to be impaired. The fair values of these investments are determined based on valuation techniques using the best information available and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. | ||||
Assets and Liabilities Measure at Fair Value on a Recurring Basis | ||||
We have highly liquid investments classified as cash equivalents and short-term investments included in our consolidated balance sheets. Cash equivalents consist of financial instruments that have original maturities of 90 days or less. Short-term investments consist of financial instruments with maturities greater than 90 days , but that generally mature in less than 1 year. | ||||
Reclassifications | ||||
Certain prior year amounts have been reclassified to conform to the 2014 financial statement presentation. These reclassifications did not affect consolidated net income, cash flows, assets, liabilities or equity for the years presented. We made the following presentation changes to depreciation, cost of revenue and technology and development: | ||||
Depreciation | ||||
Depreciation is presented with amortization on the statement of operations. Depreciation was previously included with cost of revenue, sales and marketing, technology and development, and general and administrative costs. | ||||
Cost of Revenue | ||||
Cost of revenue consist primarily of direct costs we incur with selling an incremental product to our customers. Substantially all cost of revenue relates to domain name registration costs, payment processing fees, third-party commissions and customer care. Similar to our billing practices, we pay domain costs at the time of purchase, but recognize the costs of service ratably over the term of our customer contracts. Customer care expense represents the costs to consult, advise and service our customers’ needs. Customer care expenses primarily consist of personnel costs (including stock-based compensation expense). Domain costs include fees paid to the various domain registries and ICANN. We prepay these costs in advance for the life of the subscription. The terms of registry pricing are established by an agreement between registries and registrars. | ||||
Technology and Development | ||||
Technology and development consist primarily of costs associated with creation, development and distribution of our products and websites. Technology and development expenses primarily consist of headcount-related costs (including stock-based compensation expense) associated with the design, development, deployment, testing, operation and enhancement of our products, as well as costs associated with the data centers and systems infrastructure supporting those products. | ||||
Recent Accounting Pronouncements | ||||
In July 2013, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. This guidance is effective for fiscal years beginning after December 31, 2013 on either a prospective or retrospective basis. The adoption of this guidance on January 1, 2014, did not have a significant impact on our financial statements. | ||||
In April 2014, the FASB issued Accounting Standards Update 2014‑08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014‑08”). ASU 2014‑08 changes the requirements and disclosures for reporting discontinued operations. We are required to adopt the provisions of ASU 2014‑08 effective January 1, 2015, although early adoption is permitted. We do not expect the adoption of ASU 2014‑08 to have a significant impact on our financial position or results of operations. | ||||
In May 2014, the FASB issued ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is recorded. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. We are assessing the provisions of the guidance and have not determined the impact of the adoption of this guidance on our financial statements. | ||||
Property_and_Equipment
Property and Equipment | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||
Property and Equipment | 3. Property and Equipment | ||||||||||
Property and equipment consisted of the following (in thousands): | |||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Computers and other related equipment | $ | 17,199 | $ | 19,180 | |||||||
Purchased and internally developed software | 19,526 | 19,546 | |||||||||
Furniture and fixtures | 907 | 775 | |||||||||
Leasehold improvements | 1,342 | 1,278 | |||||||||
Property and equipment, gross | 38,974 | 40,779 | |||||||||
Less accumulated depreciation | -27,447 | -26,323 | |||||||||
Property and equipment, net | $ | 11,527 | $ | 14,456 | |||||||
The net book value of internally developed software costs was $5.8 million and $5.3 million as of December 31, 2014 and 2013 (net of $9.6 million and $8.1 million accumulated amortization). | |||||||||||
Depreciation expense, including the write-off of internally developed software of $0.8 million in 2014, is shown by classification below (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Sales and marketing | $ | 47 | $ | 101 | $ | 97 | |||||
Technology and development | 5,747 | 5,324 | 4,370 | ||||||||
General and administrative | 1,914 | 1,067 | 754 | ||||||||
Total depreciation expense | $ | 7,708 | $ | 6,492 | $ | 5,221 | |||||
Intangible_Assets
Intangible Assets | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||
Intangible Assets | 4. Intangible Assets | ||||||||||||||||||||||
Intangible assets consisted of the following (in thousands): | |||||||||||||||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||||||||||||||
Gross | Weighted | Gross | Weighted | ||||||||||||||||||||
carrying | Accumulated | average useful | carrying | Accumulated | average useful | ||||||||||||||||||
amount | amortization | Net | life (years) | amount | amortization | Net | life (years) | ||||||||||||||||
Owned website names | $ | 16,581 | $ | -11,402 | $ | 5,179 | 4.0 | $ | 18,580 | $ | -11,534 | $ | 7,046 | 4.2 | |||||||||
Customer relationships | 20,842 | -18,258 | 2,584 | 5.8 | 20,976 | -17,119 | 3,857 | 5.8 | |||||||||||||||
Technology | 7,954 | -7,915 | 39 | 4.8 | 7,990 | -7,896 | 94 | 4.8 | |||||||||||||||
Non-compete agreements | 207 | -81 | 126 | 5.0 | 207 | -42 | 165 | 5.0 | |||||||||||||||
Trade names | 5,477 | -2,151 | 3,326 | 18.3 | 5,468 | -1,743 | 3,725 | 18.3 | |||||||||||||||
gTLDs | 26,909 | -1,047 | 25,862 | 10.0 | 381 | - | 381 | 10.0 | |||||||||||||||
$ | 77,970 | $ | -40,854 | $ | 37,116 | $ | 53,602 | $ | -38,334 | $ | 15,268 | ||||||||||||
Identifiable finite‑lived intangible assets are amortized on a straight‑line basis over their estimated useful lives commencing on the date that the asset is available for its intended use. | |||||||||||||||||||||||
Amortization expense by classification (in thousands): | |||||||||||||||||||||||
Year ended December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||
Cost of revenue | $ | 6,021 | $ | 5,336 | $ | 6,292 | |||||||||||||||||
Sales and marketing | 1,247 | 2,264 | 1,754 | ||||||||||||||||||||
Technology and development | 19 | 19 | - | ||||||||||||||||||||
General and administrative | 446 | 271 | 228 | ||||||||||||||||||||
Total amortization expense | $ | 7,733 | $ | 7,890 | $ | 8,274 | |||||||||||||||||
Estimated future amortization expense related to intangible assets held at December 31, 2014 (in thousands): | |||||||||||||||||||||||
Years Ending December 31, | Amount | ||||||||||||||||||||||
2015 | $ | 7,218 | |||||||||||||||||||||
2016 | 5,098 | ||||||||||||||||||||||
2017 | 3,780 | ||||||||||||||||||||||
2018 | 3,716 | ||||||||||||||||||||||
2019 | 3,410 | ||||||||||||||||||||||
Thereafter | 13,894 | ||||||||||||||||||||||
Total | $ | 37,116 | |||||||||||||||||||||
Goodwill
Goodwill | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Goodwill. | |||||
Goodwill | 5. Goodwill | ||||
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and the identifiable intangible assets. Goodwill amounts are not amortized, but rather tested for impairment at least annually during the fourth quarter. Our most recent annual impairment analysis was performed in the fourth quarter of 2014, and indicated that the fair value exceeded the book values of our reporting unit, and therefore no impairment was identified. | |||||
The following table presents the changes in our goodwill balance (in thousands): | |||||
Amount | |||||
Balance as of December 31, 2012 | $ | 103,144 | |||
Working capital adjustment | -102 | ||||
Balance as of December 31, 2013 and 2014 | $ | 103,042 | |||
Other_Assets
Other Assets | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||
Other Assets | 6. gTLD Deposits and Other Assets | |||||||
gTLD deposits and other assets consisted of the following (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
gTLD deposits | $ | 21,180 | $ | 21,252 | ||||
Other assets | 3,298 | 1,998 | ||||||
gTLD Deposits | ||||||||
We made payments and deposits of $32.0 million and $3.9 million during 2014 and 2013, for certain gTLD applications under the New gTLD Program. Payments and deposits for gTLD applications represent amounts paid directly to ICANN or third parties in the pursuit of gTLD operator rights, the majority of which was paid to Donuts Inc. as described in Note 9— Commitments and Contingencies. These deposits are applied to the purchase of the gTLD when we are awarded the gTLD operator rights or these deposits may be returned to us if we withdraw our interest in the gTLD application. As of December 31, 2013, gTLD deposits included $0.7 million of restricted cash that was held at ICANN. | ||||||||
The net gain related to the withdrawals of our interest in certain gTLD applications was $22.1 million and $4.2 million for 2014 and 2013. We recorded these gains in gain on other assets, net on the statements of operations. | ||||||||
Other Assets | ||||||||
As of December 31, 2014, other assets include $2.6 million of deferred financing costs related to establishing our credit facilities. As of December 31, 2013, other assets include $0.9 million of restricted cash comprising a collateralized letter of credit connected with the SVB Credit Facility. | ||||||||
Other_Balance_Sheet_Items
Other Balance Sheet Items | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Balance Sheet Related Disclosures [Abstract] | ||||||||
Other Balance Sheet Items | 7. Other Balance Sheet Items | |||||||
Accounts receivable consisted of the following (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Accounts receivable—trade | $ | 7,101 | $ | 5,515 | ||||
Receivables from registries | 3,598 | 3,661 | ||||||
gTLD deposit receivable | 3,557 | - | ||||||
Accounts receivable | $ | 14,256 | $ | 9,176 | ||||
Based on the nature of our business transactions, we do not have an allowance for uncollectible receivables. | ||||||||
Prepaid expenses and other currents assets consisted of the following (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Prepaid expenses | $ | 2,799 | $ | 2,371 | ||||
Prepaid registry fees | 1,599 | 2,024 | ||||||
Note receivable | 2,500 | - | ||||||
Prepaid expenses and other current assets | $ | 6,898 | $ | 4,395 | ||||
Namecheap Senior Unsecured Promissory Note Receivable | ||||||||
In October 2014, we entered into an agreement with Namecheap, Inc. (“Namecheap”), whereby Namecheap issued a Senior Unsecured Promissory Note (the “Note”) to us for $2.5 million that accrues interest at a rate determined in part by reference to the six-month LIBOR rate. This Note was issued in connection with our Registrar Agreement dated December 23, 2013 (the “Letter Agreement”). The outstanding balance as of December 31, 2014, on the Note was $2.5 million, which we have included in prepaid expenses and other current assets on our balance sheet. Namecheap may use the proceeds from the Note for general corporate purposes. Once the Note has been repaid by Namecheap, no portion of the Note may be reborrowed. Subsequent to December 31, 2014, Namecheap made two principal payments totaling $1.5 million reducing the outstanding balance of the note receivable to $1.0 million. See Note 20— Subsequent Events for additional information. | ||||||||
Accrued expenses and other current liabilities consisted of the following (in thousands): | ||||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Customer deposits | $ | 8,404 | $ | 7,065 | ||||
Accrued payroll and related items | 2,927 | 3,052 | ||||||
Commissions payable | 2,244 | 2,209 | ||||||
Domain owners’ royalties payable | 1,901 | 1,193 | ||||||
Other | 5,837 | 5,268 | ||||||
Accrued expenses and other current liabilities | $ | 21,313 | $ | 18,787 | ||||
Debt
Debt | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Line of Credit Facility [Abstract] | |||||
Debt | 8. Debt | ||||
Silicon Valley Bank Credit Facility | |||||
In August 2014, we entered into a $30.0 million revolving credit facility (“SVB Credit Facility”) with Silicon Valley Bank (“SVB”). Under this facility we may repay and reborrow until the maturity date in August 2017. The SVB Credit Facility includes a letter of credit sub-limit of up to $15.0 million. | |||||
The SVB Credit Facility provides us with the option to select the annual interest rate on borrowings in an amount equal to: (1) a base rate determined by reference to the highest of: (a) the prime rate; (b) 0.50% per annum above the federal funds effective rate; and (c) the Eurodollar base rate for an interest period of one month plus 1.00%, plus a margin ranging from 1.00% to 1.50%, depending on our consolidated senior leverage ratio (as determined under the SVB Credit Facility), or (2) a Eurodollar base rate determined by reference to LIBOR for the interest period equivalent to such borrowing adjusted for certain reserve requirements, plus a margin ranging from 2.00% to 2.50%, depending on our consolidated senior leverage ratio (as determined under the SVB Credit Facility). In addition, we pay a 2.00% fee for the balance of letters of credit issued under the SVB Credit Facility. | |||||
We pay fees on the portion of the facility that is not drawn. The unused fee is payable to SVB in arrears on a quarterly basis in an amount equal to 0.25% multiplied by the daily amount by which the aggregate commitments exceed the sum of the outstanding amount of loans and the outstanding amount of letter of credit obligations. | |||||
The SVB Credit Facility allows SVB to require mandatory prepayments of outstanding borrowings from amounts otherwise required to prepay the term loan under the Tennenbaum Credit Facility. | |||||
The SVB Credit Facility contains customary representations and warranties, events of default and affirmative and negative covenants. This facility has financial covenants, including a requirement that we maintain a minimum consolidated fixed charge coverage ratio, a maximum consolidated senior leverage ratio, a maximum consolidated net leverage ratio, and minimum liquidity. As of December 31, 2014, we were in compliance with the covenants under the SVB Credit Facility. | |||||
We incurred $0.6 million in fees to establish this facility that we have capitalized on our balance sheet as deferred financing costs. We will amortize these costs on a straight-line basis into interest expense over the term of the SVB Credit Facility. | |||||
As of December 31, 2014, we had letters of credit with a face amount of $11.0 million that were issued under the SVB Credit Facility. We have made no other borrowings under this facility. | |||||
Tennenbaum Credit Facility | |||||
In August 2014, we entered into a $30.0 million term loan credit facility with certain funds managed by Tennenbaum Capital Partners LLC (“Tennenbaum Credit Facility”). Under this facility, interest is based on a rate per year equal to LIBOR plus 8.75%. Interest on the term loan is payable quarterly, beginning September 30, 2014. Quarterly principal payments of $375,000 on the term loan begin March 31, 2015. Once repaid, the term loan may not be reborrowed. All amounts outstanding under the facility are due and payable in full on the maturity date in August 2019. We may prepay any principal amount outstanding on the term loan plus a premium of 4.00% (if prepaid in the first year), 2.50% (second year), 1.00% (third year), and 0.00% thereafter, plus customary “breakage” costs with respect to LIBOR loans. | |||||
Under this facility we are subject to mandatory prepayments from 50% of excess cash flow, which is paid on the first of the following to occur: (1) maturity, termination or refinancing of the SVB Credit Facility or the acceleration and termination of the SVB Credit Facility, or (2) from the excess cash flow as of December 31, 2014, and each subsequent fiscal year thereafter. In addition, mandatory prepayments, to the extent not used to prepay loans and cash collateralize letters of credit and permanently reduce the commitments under the SVB Credit Facility, are required from certain asset sales and insurance and condemnation events, subject to customary reinvestment rights. Mandatory prepayments are also required from the issuances of certain indebtedness. These mandatory prepayments are subject to a prepayment premium that is the same as for voluntary prepayments. | |||||
Our obligations under the Tennenbaum Credit Facility are unconditionally guaranteed by, and secured by substantially all of the assets of Rightside. The Tennenbaum Credit Facility contains financial covenants and customary representations and warranties, events of default and affirmative and negative covenants. As of December 31, 2014, we were in compliance with the covenants under the Tennenbaum Credit Facility. | |||||
In connection with the Tennenbaum Credit Facility, we issued warrants to purchase up to an aggregate of 997,710 shares of common stock. The warrants have an exercise price of $15.05 per share and will be exercisable in accordance with their terms at any time on or after February 6, 2015, through August 6, 2019. The warrants contain a “cashless exercise” feature that allows the warrant holders to exercise such warrants by surrendering a number of shares underlying the portion of the warrant being exercised with a fair market value equal to the aggregate exercise price payable to us. | |||||
We estimated the fair value of the warrants by using the Black-Scholes Option Pricing Method ("Black-Scholes"). Under the Black-Scholes approach our key assumptions included the following: stock price of $14.49, strike price of $15.05, volatility of 42.44%, risk-free rate of 1.67%, dividend yield of 0% and 5 year term. We used the resulting fair value to allocate the proceeds from the Tennenbaum Credit Facility between liability and equity components. | |||||
Since the warrants are classified as equity, we allocated the proceeds from the debt and warrants using the relative fair value method. Under this method we allocated $4.4 million to the warrants which we recorded to equity, with the remaining portion assigned to the liability component. The excess of the principal amount of the credit facility over its carrying value of $25.6 million represents a note discount that we will amortize to interest expense over the term of the Tennenbaum Credit Facility. | |||||
We incurred $3.2 million in fees to establish the Tennenbaum Credit Facility, which includes $2.3 million of deferred financing costs and $0.9 million of note discount. We capitalized these fees on our balance sheet and will amortize the fees on an effective interest method into interest expense over the term of the Tennenbaum Credit Facility. | |||||
We estimated the fair value of the Tennenbaum Credit Facility using a discounted cash flow model with Level 3 inputs. Under this approach, we estimated the fair value to approximate its carrying value of $25.1 million as of December 31, 2014. | |||||
The following table presents our debt outstanding on the Tennenbaum Credit Facility as of December 31, 2014 (in thousands): | |||||
December 31, 2014 | |||||
Principal | $ | 30,000 | |||
Unamortized note discount | -4,895 | ||||
Carrying value | $ | 25,105 | |||
The following table presents the scheduled principal payments on the Tennenbaum Credit Facility (in thousands): | |||||
Years Ending December 31, | Amount | ||||
2015 | $ | 1,500 | |||
2016 | 1,500 | ||||
2017 | 1,500 | ||||
2018 | 1,500 | ||||
2019 | 24,000 | ||||
Total | $ | 30,000 | |||
There was no interest expense in 2013 and 2012. Interest expense for 2014 on the Tennenbaum Credit Facility consisted of the following (in thousands): | |||||
Year ended | |||||
December 31, 2014 | |||||
Cash interest expense | $ | 1,133 | |||
Amortization of issuance costs | 203 | ||||
Amortization of note discount | 481 | ||||
Total | $ | 1,817 | |||
Effective interest rate | 14.8 | % | |||
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Commitments and Contingencies | ||||||||||||||
Commitments and Contingencies | 9. Commitments and Contingencies | |||||||||||||
Leases | ||||||||||||||
We conduct our operations utilizing leased office facilities in various locations and lease certain equipment under non‑cancelable operating and capital leases. Our leases expire between December 2015 and April 2019. In February 2014, we executed the First Amendment to Lease to obtain additional space for our headquarters in Kirkland, Washington and to extend the lease to April 2019. Rent expense was $1.1 million, $1.2 million and $0.6 million for 2014, 2013 and 2012. | ||||||||||||||
Credit Facilities and Letters of Credit | ||||||||||||||
In August 2014, we entered into the $30.0 million Tennenbaum Credit Facility, which matures in August 2019. The principal amount of the term loan is scheduled to be repaid in quarterly installments of $375,000 beginning March 31, 2015. Once repaid, the term loan may not be reborrowed. All amounts outstanding under the facility are due and payable in full on the maturity date in August 2019. | ||||||||||||||
In August 2014, we entered a revolving credit facility with SVB for $30.0 million. This facility allows for the issuance of up to $15.0 million of letters of credit. As of December 31, 2014, we have letters of credit totaling $11.0 million under the SVB Credit Facility. | ||||||||||||||
Litigation | ||||||||||||||
From time to time, we are party to various litigation matters incidental to the conduct of our business. There is no pending or threatened legal proceeding to which we are a party that, in our belief, is likely to have a material adverse effect on our future financial results. | ||||||||||||||
Taxes | ||||||||||||||
From time to time, various federal, state and other jurisdictional tax authorities undertake review of us and our filings. In evaluating the exposure associated with various tax filing positions, we accrue charges for possible exposures. We believe any adjustments that may ultimately be required as a result of any of these reviews will not be material to our financial statements. | ||||||||||||||
Domain Name Agreement | ||||||||||||||
On April 1, 2011, we entered into an agreement with a customer to provide domain name registration services and manage certain domain names owned and operated by the customer (the “Domain Agreement”). In December 2013, we amended the Domain Agreement (as amended, the “Amended Domain Agreement”). The term of the Amended Domain Agreement expires in June 2015, but will automatically renew for successive one‑year periods unless terminated by either party. Pursuant to the Amended Domain Agreement, we are committed to purchase approximately $0.2 million of expired domain names every calendar quarter over the remaining term of the agreement. | ||||||||||||||
Donuts Agreement | ||||||||||||||
As part of our initiative to pursue the acquisition of gTLD operator rights, we have entered into a gTLD acquisition agreement (“gTLD Agreement”) with Donuts Inc. (“Donuts”). The gTLD Agreement provides us with rights to acquire the operating and economic rights to certain gTLDs. These rights are shared equally with Donuts and are associated with specific gTLDs (“Covered gTLDs”) for which Donuts is the applicant under the New gTLD Program. We have the right, but not the obligation, to make further deposits with Donuts in the pursuit of acquisitions of Covered gTLDs, for example as part of the ICANN auction process. The operating and economic rights for each Covered gTLD will be determined through a process whereby we and Donuts each select gTLDs from the pool of Covered gTLDs, with the number of selections available to each party based upon the proportion of the total acquisition price of all Covered gTLDs that they funded. Gains on sale of our interest in Covered gTLDs are recognized when realized, while losses are recognized when deemed probable. Separately, we entered into an agreement to provide certain back‑end registry services for gTLD operator rights owned by Donuts for a period of five years commencing from the launch of Donut’s first gTLD. Outside of the collaboration, we are not an investor in Donuts nor involved in any joint venture with Donuts or its affiliates. | ||||||||||||||
Indemnifications Arrangements | ||||||||||||||
In the normal course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. Those indemnities include intellectual property indemnities to our customers, indemnities to our directors and officers to the maximum extent permitted under the laws of the State of Delaware and indemnities related to our lease agreements. In addition, our advertiser and distribution partner agreements contain certain indemnification provisions, which are generally consistent with those prevalent in our industry. We have not incurred significant obligations under indemnification provisions historically and do not expect to incur significant obligations in the future. Accordingly, we have not recorded any liability for these indemnities, commitments and guarantees in the balance sheets. | ||||||||||||||
Our future minimum commitments under non-cancelable contractual obligations consisted of the following (in thousands): | ||||||||||||||
Lease | Purchase | |||||||||||||
Commitments | Obligations | |||||||||||||
Years Ending December 31, | Debt (1) | -2 | -3 | Total | ||||||||||
2015 | $ | 4,511 | $ | 1,363 | $ | 466 | $ | 6,340 | ||||||
2016 | 4,378 | 1,238 | - | 5,616 | ||||||||||
2017 | 4,125 | 1,200 | - | 5,325 | ||||||||||
2018 | 3,838 | 1,100 | - | 4,938 | ||||||||||
2019 | 25,328 | 356 | - | 25,684 | ||||||||||
Thereafter | - | - | - | - | ||||||||||
Total | $ | 42,180 | $ | 5,257 | $ | 466 | $ | 47,903 | ||||||
-1 | Includes principal and interest on our credit facilities. | |||||||||||||
-2 | Lease commitments are related to office facilities in various locations and lease certain equipment under non‑cancelable operating leases. | |||||||||||||
-3 | Purchase obligations consist of enforceable and legally binding arrangements with third parties related to services to support operations. | |||||||||||||
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Income Tax Disclosure [Abstract] | |||||||||||
Income Taxes | 10. Income Taxes | ||||||||||
Prior to the Separation, our operations were included in Demand Media’s U.S. federal and state income tax returns. For periods during which our operations were included with Demand Media, income taxes are presented in these financial statements as if we filed our own tax returns on a standalone basis. These amounts may not reflect tax positions taken or to be taken by Demand Media, and have been available for use by Demand Media and may remain with Demand Media after the separation from Demand Media. Prior to the Separation, current income tax liabilities were settled with Demand Media through parent company investment. | |||||||||||
Income/(loss) before income taxes consisted of the following (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Domestic | $ | -11,413 | $ | -8,386 | $ | -1,138 | |||||
Foreign | 8,227 | -3,261 | -13 | ||||||||
Loss before income taxes | $ | -3,186 | $ | -11,647 | $ | -1,151 | |||||
The income tax benefit (expense) consists of the following (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Current (expense) benefit: | |||||||||||
Federal | $ | - | $ | - | $ | 2,472 | |||||
State | -22 | -6 | -5 | ||||||||
Foreign | -9 | -10 | - | ||||||||
Deferred (expense) benefit: | |||||||||||
Federal | 1,454 | 1,136 | -2,324 | ||||||||
State | -95 | -176 | 19 | ||||||||
Total income tax benefit | $ | 1,328 | $ | 944 | $ | 162 | |||||
The reconciliation of the federal statutory income tax rate of 34% to our effective income tax rate is as follows (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Expected income tax benefit at U.S. statutory rate | $ | 1,083 | $ | 3,960 | $ | 387 | |||||
Foreign rate differential | 3,988 | -469 | - | ||||||||
State tax (expense) benefit, net of federal taxes | 163 | 160 | 72 | ||||||||
Non-deductible stock-based compensation expense | -2,343 | -1,749 | -196 | ||||||||
Meals and entertainment | -38 | -77 | -54 | ||||||||
State rate changes | -240 | -280 | -77 | ||||||||
Valuation allowance | -1,197 | -646 | - | ||||||||
Non-deductible warrant amortization | -135 | - | - | ||||||||
Other | 47 | 45 | 30 | ||||||||
Total income tax benefit | $ | 1,328 | $ | 944 | $ | 162 | |||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands): | |||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Deferred tax assets: | |||||||||||
Accrued liabilities not currently deductible | $ | 661 | $ | 1,155 | |||||||
Intangible assets - excess of financial statement amortization over tax basis | 4,956 | 4,800 | |||||||||
Indirect federal impact of deferred state taxes | 847 | 703 | |||||||||
Deferred revenue | 6,262 | 5,560 | |||||||||
Net operating losses | 13,764 | 7,261 | |||||||||
Stock-based compensation expense | 931 | 3,364 | |||||||||
Other | - | - | |||||||||
Total deferred tax assets | $ | 27,421 | $ | 22,843 | |||||||
Deferred tax liabilities: | |||||||||||
Deferred registration costs | $ | -26,956 | $ | -23,529 | |||||||
Prepaid expenses | -1,580 | -1,673 | |||||||||
Goodwill not amortized for financial reporting | -12,078 | -10,368 | |||||||||
Intangible assets - excess of financial basis over tax basis | -897 | -967 | |||||||||
Property and equipment | -2,020 | -3,080 | |||||||||
Other | -450 | -423 | |||||||||
Total deferred tax liabilities | $ | -43,981 | $ | -40,040 | |||||||
Valuation allowance | -1,843 | -646 | |||||||||
Net deferred tax liabilities | $ | -18,403 | $ | -17,843 | |||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Current deferred tax liabilities | $ | -27,886 | $ | -24,157 | |||||||
Non-current deferred tax assets | 9,483 | 6,314 | |||||||||
Net deferred tax liabilities | $ | -18,403 | $ | -17,843 | |||||||
As of December 31, 2014, the valuation allowance reduced our non-current deferred tax assets by $1.8 million. The table below presents our deferred tax asset valuation allowance activity (in thousands): | |||||||||||
2014 | 2013 | 2012 | |||||||||
Balance as of January 1, | $ | 646 | $ | - | $ | - | |||||
Charged to income tax expense | 1,197 | 646 | - | ||||||||
Balance as of December 31, | $ | 1,843 | $ | 646 | $ | - | |||||
We had federal net operating loss (“NOL”) carryforwards of approximately $31.9 million and $17.3 million as of December 31, 2014 and 2013, which expire between 2023 and 2034. The company also has an Irish NOL carryforward of $14.8 million that can be carried forward indefinitely. In addition, we had state NOL carryforwards of approximately $12.5 million and $8.1 million as of December 31, 2014 and 2013, which expire between 2028 and 2034. | |||||||||||
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, provide for annual limitations on the utilization of net operating loss and credit carryforwards if we were to undergo an ownership change, as defined in Section 382. Currently, we do not expect the utilization of our net operating loss and tax credit carry‑forwards to be materially affected by usage limitations. | |||||||||||
Accounting standards related to stock‑based compensation exclude tax attributes related to the exercise of employee stock options from being realized in the financial statements until they result in a decrease to taxes payable. Therefore, we have not included unrealized stock option tax attributes in our deferred tax assets. Cumulative tax attributes excluded through 2014 were $0.8 million. The benefit of these deferred tax assets will be recorded to equity when they reduce taxes payable. There can be no guarantee that the options will be exercised or reduce taxes payable. | |||||||||||
We are subject to the accounting guidance for uncertain income tax positions. We believe that our income tax positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material adverse effect on our financial condition, results of operations, or cash flow. | |||||||||||
Our policy for recording interest and penalties associated with audits and uncertain tax positions is to record such items as a component of income tax expense, and amounts recognized to date are insignificant. No uncertain income tax positions were recorded during 2014 or 2013 and we do not expect our uncertain tax position to change during the next twelve months. | |||||||||||
After the Separation, we will file tax returns on our own. Prior to the Separation, our results are included in Demand Media’s tax returns in U.S. federal, state and foreign jurisdictions. The tax years 2007‑2014 remain subject to examination by various taxing authorities. The Internal Revenue Service has selected the Demand Media consolidated 2012 income tax return for audit. The audit was not completed by the end of 2014. | |||||||||||
Through December 31, 2014, we were at break-even from various non US subsidiaries on a cumulative basis. Accordingly U.S. federal income and foreign withholding taxes were not provided. | |||||||||||
Employee_Benefit_Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2014 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plan | 11. Employee Benefit Plan |
In 2013, we started offering defined contribution plans covering eligible employees in the United States and foreign locations. Our expense associated with the contribution plans was $0.7 million and $0.6 million for 2014 and 2013. | |
Stock_based_Compensation_Expen
Stock based Compensation Expense | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||
Stock based Compensation Expense | 12. Stock‑based Compensation | |||||||||||||
Our stock-based award plan grants restricted stock, stock options, stock bonuses, stock appreciation rights, and restricted stock units (“RSUs”). | ||||||||||||||
On August 1, 2014, as part of the spin-off and the resulting conversion of equity awards, we had 1.1 million RSUs and options outstanding. Stock option holders received one Rightside stock option for every five Demand Media stock options. Holders of RSUs received 1.71 Rightside RSUs for every five Demand Media RSUs. | ||||||||||||||
As of December 31, 2014, we had 0.8 million shares of common stock reserved for future grants under our equity plan. Our stock-based awards generally vest over four years and are subject to the employee’s continued employment with us. We also estimate forfeiture rates at the time of grants and revise the estimates in subsequent periods if actual forfeitures differ from our estimates. We record stock-based compensation net of estimated forfeitures. | ||||||||||||||
Our stock‑based compensation expense related to stock‑based awards that has been included in the following line items within the statements of operations are as follows (in thousands): | ||||||||||||||
Year ended December 31, | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
Cost of revenue | $ | 372 | $ | 458 | $ | 407 | ||||||||
Sales and marketing | 1,178 | 1,598 | 1,816 | |||||||||||
Technology and development | 1,049 | 1,377 | 1,512 | |||||||||||
General and administrative | 3,237 | 6,030 | 6,377 | |||||||||||
Total stock-based compensation expense | $ | 5,836 | $ | 9,463 | $ | 10,112 | ||||||||
The table above includes allocated stock-based compensation expense of $0.8 million, $5.5 million and $6.9 million for 2014, 2013 and 2012, for the employees of Demand Media whose cost of services was partially allocated to us. | ||||||||||||||
The following table presents our stock option activity recast to reflect the conversion of five Demand Media stock options to one Rightside stock option on August 1, 2014 (in thousands, except for per share amounts and contractual term): | ||||||||||||||
Weighted | ||||||||||||||
Average | ||||||||||||||
Weighted | Remaining | |||||||||||||
Average | Contractual | Aggregate | ||||||||||||
Exercise Price | Term | Intrinsic | ||||||||||||
Shares | Per Share | (in years) | Value | |||||||||||
Outstanding as of December 31, 2013 | 335 | $ | 15.42 | |||||||||||
Exercised | -7 | 7.88 | ||||||||||||
Expired | -9 | 18.98 | ||||||||||||
Outstanding as of December 31, 2014 | 319 | 15.47 | 3.84 | $ | 40 | |||||||||
Exercisable as of December 31, 2014 | 319 | $ | 15.47 | 3.84 | $ | 40 | ||||||||
Information related to stock‑based compensation activity is as follows (in thousands): | ||||||||||||||
Year ended December 31, | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
Intrinsic value of options exercised | $ | 124 | $ | 590 | $ | 2,376 | ||||||||
Total fair value of restricted stock units vested (intrinsic value) | 4,962 | 3,884 | 3,189 | |||||||||||
The following table presents a summary of restricted stock unit award activity recast to reflect the conversion of five Demand Media RSUs to 1.71 Rightside RSUs (in thousands, except for per share amounts): | ||||||||||||||
Weighted | ||||||||||||||
Average Grant | ||||||||||||||
Shares | Date Share Value | |||||||||||||
Outstanding as of December 31, 2013 | 679 | $ | 24.54 | |||||||||||
Granted | 907 | 11.33 | ||||||||||||
Vested | -302 | 23.16 | ||||||||||||
Cancelled | -111 | 22.61 | ||||||||||||
Outstanding as of December 31, 2014 | 1,173 | $ | 14.86 | |||||||||||
As of December 31, 2014, we had $10.3 million of unrecognized stock-based compensation, net of estimated forfeitures, which is expected to be recognized over a weighted average period of 3.1 years. | ||||||||||||||
Business_Segments
Business Segments | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Segment Reporting [Abstract] | |||||||||||
Business Segments | 13. Business Segments | ||||||||||
We operate in one operating segment. Our chief operating decision maker (“CODM”) manages our operations on a combined basis for purposes of evaluating financial performance and allocating resources. The CODM reviews separate revenue information for our domain name services and aftermarket services. All other financial information is reviewed by the CODM on a combined basis. Our operations are located in the United States, Ireland, Canada, Australia and Cayman Islands. Revenue generated outside of the United States is not material for any of the periods presented. | |||||||||||
Revenue from our Domain name services and Aftermarket and other service offering are as follows (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Domain name services | $ | 161,585 | $ | 141,558 | $ | 126,854 | |||||
Aftermarket and other | 30,163 | 43,634 | 46,114 | ||||||||
Total revenue | $ | 191,748 | $ | 185,192 | $ | 172,968 | |||||
Transactions_with_Related_Part
Transactions with Related Parties and Parent Company Investment | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Related Party Transactions [Abstract] | |||||||||||
Transactions with Related Parties and Parent Company Investment | 14. Transactions with Related Parties and Parent Company Investment | ||||||||||
Prior to the separation on August 1, 2014, our financial statements included direct costs of Rightside incurred by Demand Media on our behalf and an allocation of certain general corporate costs incurred by Demand Media. Direct costs include finance, legal, human resources, technology development, and other services and have been determined based on a direct basis when identifiable, with the remainder allocated on a pro rata basis calculated as a percentage of our revenue, headcount or expenses to Demand Media’s consolidated results. General corporate costs include, but are not limited to, executive oversight, accounting, internal audit, treasury, tax, and legal. The allocations of general corporate costs are based primarily on estimated time incurred and/or activities associated with us. Management believes the allocations of corporate costs from Demand Media are reasonable. Costs incurred by Demand Media to complete the spin‑off have not been allocated to us. However, the financial statements may not include all of the costs that would have been incurred had we been a stand‑alone company during the periods presented and may not reflect our financial position, results of operations and cash flows had we been a stand‑alone company during the periods presented. | |||||||||||
Prior to the separation on August 1, 2014, we recorded the following costs incurred and allocated by Demand Media in our statements of operations as follows (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Sales and marketing | $ | 1,499 | $ | 2,083 | $ | 2,560 | |||||
Technology and development | 8,511 | 13,312 | 11,257 | ||||||||
General and administration | 11,500 | 20,906 | 18,223 | ||||||||
Total allocated expenses | $ | 21,510 | $ | 36,301 | $ | 32,040 | |||||
The table above includes allocated stock-based compensation expense of $0.8 million, $5.5 million and $6.9 million for 2014, 2013 and 2012, for the employees of Demand Media whose cost of services was partially allocated to us. | |||||||||||
The net decrease in the parent company investment of $28.0 million for 2014 includes cash transfers to Demand Media, net of allocated expenses, assets and liabilities. | |||||||||||
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||
Fair Value of Financial Instruments | 15. Fair Value of Financial Instruments | |||||||||||||
Our financial assets and liabilities measured at fair value as of December 31, 2014 and 2013, are summarized below: | ||||||||||||||
Fair Value Measurement Using | Assets at Fair | |||||||||||||
As of December 31, 2014 | Level 1 | Level 2 | Level 3 | Value | ||||||||||
Assets: | ||||||||||||||
Cash and cash equivalents | $ | 49,743 | $ | - | $ | - | $ | 49,743 | ||||||
Liabilities: | ||||||||||||||
Debt | $ | - | $ | - | $ | 25,105 | $ | 25,105 | ||||||
Fair Value Measurement Using | Assets at Fair | |||||||||||||
As of December 31, 2013 | Level 1 | Level 2 | Level 3 | Value | ||||||||||
Assets: | ||||||||||||||
Cash and cash equivalents | $ | 66,833 | $ | - | $ | - | $ | 66,833 | ||||||
Marketable securities | 906 | 906 | ||||||||||||
Restricted cash | 1,563 | - | - | 1,563 | ||||||||||
Total | $ | 69,302 | $ | - | $ | - | $ | 69,302 | ||||||
Earnings_loss_Per_Share
Earnings (loss) Per Share | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Earnings Per Share [Abstract] | |||||||||||
Earnings (loss) per share | 16. Earnings (loss) per share | ||||||||||
Basic and diluted earnings (loss) per share were calculated using the following (in thousands, except per share amounts): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Net loss | $ | -1,858 | $ | -10,703 | $ | -989 | |||||
Weighted average number of shares outstanding: | |||||||||||
Basic | 18,452 | 18,413 | 18,413 | ||||||||
Dilutive effect of stock-based equity awards | - | - | - | ||||||||
Dilutive effect of warrants | - | - | - | ||||||||
Diluted | 18,452 | 18,413 | 18,413 | ||||||||
Net loss per share attributable to common stockholders: | |||||||||||
Basic | $ | -0.1 | $ | -0.58 | $ | -0.05 | |||||
Diluted | $ | -0.1 | $ | -0.58 | $ | -0.05 | |||||
On August 1, 2014, the 1,000 shares of Rightside common stock, par value $0.0001 per share, issued and outstanding immediately prior to the separation from Demand Media, Inc. were automatically reclassified as and became 18.4 million shares of common stock, par value $0.0001 per share. Basic and diluted earnings per share and the weighted average number of shares outstanding were retrospectively updated to reflect these transactions. | |||||||||||
For 2014, we excluded 32,600 shares from the calculation of diluted weighted average shares outstanding as their inclusion would have been antidilutive. The $15.05 exercise price per share on the stock warrants related to the Tennenbaum Credit Facility did not have a dilutive effect for 2014. There were no antidilutive shares for 2013 and 2012. | |||||||||||
Business_Acquisitions
Business Acquisitions | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Business Acquisitions | |||||
Business Acquisitions | 17. Business Acquisitions | ||||
We account for acquisitions of businesses using the purchase method of accounting where we allocate the cost to the underlying net tangible and intangible assets acquired, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. | |||||
Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, estimates of advertiser and publisher turnover rates and estimates of terminal values. | |||||
On December 31, 2012, we completed the acquisition of the net assets of Name.com, a retail registrar company based in Denver, Colorado. The acquisition is intended to expand our retail business and provide a comprehensive platform for marketing and distribution of the new TLDs. In addition to identifiable assets acquired in this business combination, we acquired goodwill that primarily derives from the ability to generate synergies across our domain registration services. | |||||
The purchase consideration of $18.0 million comprised an initial cash payment of $16.2 million and the remaining $1.8 million was subject to a hold back to satisfy post‑closing indemnification obligations as well as a working capital adjustment and any remaining portion of such hold back amount that is not subject to then pending claims will be paid by us to the sellers prior to or on the 18‑month anniversary of the closing of the transaction. Owned website names have an average useful life of three years, developed technology and customer relationships have an average useful life of four years, non‑compete arrangements have a useful life of five years and trade names have a 10 year useful life. Goodwill, which is comprised of the excess of the purchase consideration over the fair value of the identifiable net assets acquired, is primarily derived from assembled workforce and our ability to generate synergies with its services. Goodwill of approximately $9.7 million is expected to be deductible for tax purposes. | |||||
The acquisition of Name.com is included in our financial statements as of the date of the acquisition. The following table summarizes the allocation of the purchase consideration during 2012 (in thousands): | |||||
Amount | |||||
Goodwill | $ | 10,313 | |||
Customer relationships | 5,094 | ||||
Owned website names | 1,885 | ||||
Trade names | 897 | ||||
Non-compete agreements | 205 | ||||
Technology | 76 | ||||
Other assets acquired and liabilities assumed, net | -470 | ||||
Total | $ | 18,000 | |||
During 2013, we made an adjustment to working capital for $0.1 million and we paid $0.7 million of the $1.8 million hold back. During 2014, we paid the remaining hold back balance of $1.0 million. | |||||
Supplemental Pro forma Information (unaudited) | |||||
Supplemental information on an unaudited pro forma basis, as if the 2012 acquisition had been consummated as of January 1, 2012, is as follows (in thousands): | |||||
Year ended | |||||
December 31, 2012 | |||||
Revenue | $ | 190,594 | |||
Net income | 828 | ||||
The unaudited pro forma supplemental information is based on estimates and assumptions which we believe are reasonable and reflect amortization of intangible assets as a result of the acquisition. The pro forma results are not necessarily indicative of the results that would have been realized had the acquisition occurred as of January 1, 2012. | |||||
Concentrations
Concentrations | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Risks and Uncertainties [Abstract] | |||||||||||
Concentrations | 18. Concentrations | ||||||||||
Cost of Registered Names | |||||||||||
A significant portion of the payments for the cost of registered names and prepaid registration fees were made to a single domain name registry, which is accredited by ICANN to be the exclusive registry for certain TLDs. This registry accounted for payments of 76%, 83% and 82% for 2014, 2013 and 2012. The failure of this registry to perform its operations may cause significant short‑term disruption to our domain registration business. | |||||||||||
Credit and Business Risk | |||||||||||
Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents, marketable securities and accounts receivable. | |||||||||||
At December 31, 2014 and 2013, our cash and cash equivalents and marketable securities were maintained primarily with one major U.S. financial institution and one foreign bank. We also used online payment processors in both periods. Deposits with these institutions at times exceed the federally insured limits, which potentially subjects us to concentration of credit risk. We have not experienced any losses related to these balances and believe there is minimal risk. | |||||||||||
Significant Customers | |||||||||||
A substantial portion of our revenue is generated through arrangements with two partners noted below. We may not be successful in renewing these agreements on commercially acceptable terms, or at all, and if they are renewed, they may not be on terms as favorable as the current agreements. The percentage of revenue generated through partners representing more than 10% of revenue is as follows: | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Advertising network partner | 11 | % | 12 | % | 14 | % | |||||
Registrar partner | 17 | % | 14 | % | 12 | % | |||||
Partners comprising more than 10% of the accounts receivable balance was as follows: | |||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Advertising network partner | 14 | % | 14 | % | |||||||
Registry partner | 18 | % | 26 | % | |||||||
Quarterly_Financial_Informatio
Quarterly Financial Information (Unaudited) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Quarterly Financial Information (Unaudited) | |||||||||||||||||
Selected Quarterly Financial Information | 19. Selected Quarterly Financial Information (Unaudited) | ||||||||||||||||
The following unaudited quarterly financial information presents our quarterly and full year financial information (in thousands, except per share information). | |||||||||||||||||
Three months ended | Year ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | December 31 | |||||||||||||
2014 | |||||||||||||||||
Revenue | $ | 44,552 | $ | 46,689 | $ | 48,774 | $ | 51,733 | $ | 191,748 | |||||||
Income (loss) before income taxes | -2,557 | -4,896 | 2,489 | 1,778 | -3,186 | ||||||||||||
Net income (loss) | -3,921 | -3,490 | 4,097 | 1,456 | -1,858 | ||||||||||||
Net income (loss) per share attributable to common stockholders: | |||||||||||||||||
Basic | $ | -0.21 | $ | -0.19 | $ | 0.22 | $ | 0.08 | $ | -0.1 | |||||||
Diluted | -0.21 | -0.19 | 0.22 | 0.08 | -0.1 | ||||||||||||
2013 | |||||||||||||||||
Revenue | $ | 45,897 | $ | 48,217 | $ | 45,506 | $ | 45,572 | $ | 185,192 | |||||||
Loss before income taxes | -2,338 | -642 | -3,928 | -4,739 | -11,647 | ||||||||||||
Net loss | -1,734 | -682 | -2,562 | -5,725 | -10,703 | ||||||||||||
Net loss per share attributable to common stockholders: | |||||||||||||||||
Basic | $ | -0.09 | $ | -0.04 | $ | -0.14 | $ | -0.31 | $ | -0.58 | |||||||
Diluted | -0.09 | -0.04 | -0.14 | -0.31 | -0.58 | ||||||||||||
Seasonality of Quarterly Results | |||||||||||||||||
In general, Internet usage and online commerce and advertising are seasonally strongest in the fourth quarter and generally slower during the summer months. While we believe that these seasonal trends have affected and will continue to affect our quarterly results, our rapid growth in operations may have overshadowed these effects to date. We believe that our business may become more seasonal in the future. | |||||||||||||||||
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
Subsequent Events | 20. Subsequent Events |
Namecheap Senior Unsecured Promissory Note Receivable | |
On February 4, 2015, we and Namecheap entered into an Amendment of Senior Unsecured Promissory Note and Amended and Restated Letter of Agreement (the “Amendment”), pursuant to which we agreed to extend the maturity date of the Note from December 31, 2014, to June 30, 2015 (the “New Maturity Date”), provided certain conditions are met. On January 27, 2015, Namecheap made a principal payment in the amount of $500,000, which represented the payment due in order to extend the original maturity date. All other payment obligations under the Note remain unchanged. | |
In addition, the Amendment also extends the term of the Letter of Agreement between Namecheap and eNom, Inc., dated April 1, 2011, as amended (the “Letter Agreement”) to expire on the New Maturity Date (the “Extended Letter Agreement Term”). The Amendment provides that the Letter Agreement, will automatically renew after the Extended Letter Agreement Term for one-year periods, unless either party provides notice of non-renewal at least 30 days prior to the automatic renewal date. | |
On February 27, 2015, Namecheap made an additional principal payment in the amount of $1.0 million, which reduced the outstanding balance of the note receiveable to $1.0 million. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Policies) | 12 Months Ended | |||
Dec. 31, 2014 | ||||
Accounting Policies [Abstract] | ||||
Use of Estimates | Use of Estimates | |||
We prepared our financial statements in accordance with GAAP, which requires us to make estimates and use assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis, which form the basis for making judgments about the carrying value of assets and liabilities. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. | ||||
Significant items subject to such estimates and assumptions include revenue, useful lives and impairment of property and equipment, intangible assets, goodwill, and deferred income tax assets and liabilities. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. | ||||
Revenue Recognition | Revenue Recognition | |||
We recognize revenue when four basic criteria are met: (1) persuasive evidence of a sales arrangement exists; (2) performance of services has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. We consider persuasive evidence of a sales arrangement to be the receipt of a signed contract. We assess collectability based on a number of factors, including transaction history and the credit worthiness of a customer. If we determine that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash. We recognize performance incentive rebates and certain other business incentives as a reduction in revenue. We record cash received in advance of revenue recognition as deferred revenue. | ||||
For arrangements with multiple deliverables, we allocate revenue to each deliverable if the delivered item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. We determine the fair value of the selling price for a deliverable using a hierarchy of (1) Company specific objective and reliable evidence, then (2) third‑party evidence, then (3) best estimate of selling price. We allocate any arrangement fee to each of the elements based on their relative selling prices. To the extent that we offer performance incentive rebates or certain other business incentives to our partners, those incentives will be recognized as a reduction to revenue. | ||||
Domain Name Registration Fees | ||||
We recognize revenue from registration fees charged to third parties in connection with new, renewed and transferred domain name registrations on a straight‑line basis over the registration term, which ranges from one to ten years. We record payments received in advance of the domain name registration term in deferred revenue in our balance sheets. The registration term and related revenue recognition commences once we confirm that the requested domain name has been recorded in the appropriate registry under accepted contractual performance standards. We defer the associated direct and incremental costs, which principally consist of registry and ICANN fees, and expense them as cost of revenue on a straight‑line basis over the registration term. | ||||
Our businesses, including eNom and Name.com, are ICANN accredited registrars. Thus, we are the primary obligor with our reseller and retail registrant customers and are responsible for the fulfillment of our registrar services to those parties. As a result, we report revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, we do not recognize any revenue related to transactions between its reseller customers and its ultimate retail customers. A portion of our resellers have contracted with us to provide billing and credit card processing services to the resellers’ retail customer base in addition to registration services. Under these circumstances, the cash collected from these resellers’ retail customer base exceeds the fixed amount per transaction that we charge for domain name registration services. Accordingly, we do not recognize the amounts that we collect for the benefit of the reseller as revenue and are recorded as a liability until we remit to the reseller on a periodic basis. We report revenue from these resellers on a net basis because the reseller determines the price to charge retail customers and maintains the primary customer relationship. | ||||
Value‑added Services | ||||
We recognize revenue from online registrar value‑added services, which include, but are not limited to, security certificates, domain name identification protection, charges associated with alternative payment methodologies, web hosting services and email services on a straight‑line basis over the period in which services are provided. We include payments received in advance of services being provided in deferred revenue. | ||||
Domain Name Monetization Services | ||||
Domain name monetization service revenue represents advertising revenue and primarily includes revenue derived from cost‑per‑click advertising links we place on websites owned by us, which we acquire and sell on a regular basis, and on websites owned by certain of our customers, with whom we have revenue sharing arrangements. Where we enter into revenue sharing arrangements with our customers, such as those relating to advertising on our customers’ domains, and when we are considered the primary obligor, we report the underlying revenue on a gross basis in our statements of operations, and record these revenue‑sharing payments to our customers as revenue‑sharing expenses, which are included in cost of revenue. | ||||
Also included under this heading is revenue which represents proceeds received from selling domain names from our portfolio, as well as proceeds received from selling domain names that are not renewed by customers of our registrar platform. Domain name sales are primarily conducted through our direct sales efforts as well as through our NameJet joint venture. While certain domain names sold are registered on our registrar platform upon sale, we have determined that sales revenue and related registration revenue represent separate units of accounting, because the domain name has value to the customers on a stand‑alone basis, where a customer could resell it separately, without the registration service, there is objective and reliable evidence of the fair value of the registration service and no general rights of return. We evaluated each deliverable, domain name sale and domain name registration, to determine whether vendor‑specific objective evidence (“VSOE”) or third‑party evidence of selling price (“TPE”) existed in order to determine the selling price for each unit of accounting. | ||||
We determined that there is VSOE for domain name registrations through analysis of historical stand‑alone transactions sold by us, which have been consistently priced with limited discounts. For domain name sales, we have determined that TPE is not a practical alternative due to uniqueness of domain names compared to those sold by competitors and the availability of relevant third‑party pricing information. We have not established VSOE for domain names due to the lack of pricing consistency and other factors. Accordingly, we allocate revenue to the domain name sale deliverable in the arrangement based on best estimate of the selling price (“BESP”). We determine BESP by reference to the total transaction price and an estimate of what a market participant would pay without the registration service. Based on the nature of the transaction and its elements, we believe that there are no meaningful discounts embedded in the overall arrangement. We recognize domain name sales revenue when title to the name is transferred to the buyer and the related registration fees are recognized on a straight‑ line basis over the registration term. If we sell a domain name, we recognize any unamortized cost basis as a cost of revenue. | ||||
For domain name sales generated through NameJet, we recognize revenue net of auction service fee payments to NameJet. We generated revenue of approximately $4.4 million and $5.1 million from domain name sales generated through NameJet for 2014 and 2013. | ||||
Intangible Assets | Intangible Assets | |||
Registration and Acquisition Costs of Undeveloped Websites | ||||
We capitalize initial registration and acquisition costs of our undeveloped websites, and amortize these costs over the expected useful life of the underlying undeveloped websites on a straight‑line basis, which approximates the estimated pattern in which the underlying economic benefits are consumed. The expected useful lives of the undeveloped websites range from 12 months to 84 months. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience with domain names of similar quality and value. | ||||
In order to maintain the rights to each undeveloped website acquired, we pay periodic renewal registration fees, which generally cover a minimum period of twelve months. We record renewal registration fees of website name intangible assets in deferred registration costs and recognize the costs over the renewal registration period, which is included in cost of revenue. | ||||
Acquired in Business Combinations | ||||
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocate the purchase price of each acquired business to our respective net tangible and intangible assets. Acquired intangible assets include: trade names, non‑compete agreements, owned website names, customer relationships, and technology. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives of three to 20 years, using the straight‑line method, which approximates the pattern in which the economic benefits are consumed. | ||||
gTLDs | ||||
We capitalize payments for gTLD applications and other costs directly attributable to the acquisition of gTLD registry operator rights and include them in other long-term assets. We have received and may continue to receive partial cash refunds for certain gTLD applications, and to the extent we elect to sell or dispose of certain gTLD applications throughout the process, we may also incur gains or losses on amounts invested. These gains have been recorded as gains on other assets, net, on the Statements of Operations. As gTLDs become available for their intended use, gTLD application fees and acquisition related costs are reclassified as finite lived intangible assets and amortized on a straight-line basis over an estimated useful life of 10 years, which approximates the pattern in which the economic benefits are consumed. Other costs incurred as part of the gTLD initiative and not directly attributable to the acquisition of gTLD registry operator rights are expensed as incurred. | ||||
Goodwill | Goodwill | |||
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and the identifiable intangible assets. Goodwill is not amortized; rather, goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter, or more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. First, we determine if the carrying value of our related reporting unit exceeds fair value, which would indicate that goodwill may be impaired. If we then determine that goodwill may be impaired, we compare the implied fair value of the goodwill to its carrying amount to determine if there is an impairment loss. | ||||
Our most recent annual impairment analysis was performed in the fourth quarter of 2014 and indicated that the fair value of our reporting unit exceeded the carrying value at that time. We recently experienced significant volatility in our stock price, however, and as of December 31, 2014, our market capitalization was less than our book value. Should this condition continue to exist for an extended period of time, we will consider this and other factors, including our anticipated future cash flows, to determine whether goodwill is impaired. If we are required to record a significant impairment charge against certain intangible assets reflected on our balance sheet during the period in which an impairment is determined to exist, we could report a greater loss in one or more future periods. Based on a review of events and changes in circumstances at the reporting unit level through December 31, 2014, we have not identified any indications that the carrying value of our goodwill is impaired. We will continue to perform our annual goodwill impairment test in the fourth quarter of the year ending December 31, 2015, consistent with our existing accounting policy. There were no charges recorded related to goodwill impairment during 2014, 2013 and 2012. | ||||
Long-lived Assets | Goodwill | |||
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and the identifiable intangible assets. Goodwill is not amortized; rather, goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter, or more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. First, we determine if the carrying value of our related reporting unit exceeds fair value, which would indicate that goodwill may be impaired. If we then determine that goodwill may be impaired, we compare the implied fair value of the goodwill to its carrying amount to determine if there is an impairment loss. | ||||
Our most recent annual impairment analysis was performed in the fourth quarter of 2014 and indicated that the fair value of our reporting unit exceeded the carrying value at that time. We recently experienced significant volatility in our stock price, however, and as of December 31, 2014, our market capitalization was less than our book value. Should this condition continue to exist for an extended period of time, we will consider this and other factors, including our anticipated future cash flows, to determine whether goodwill is impaired. If we are required to record a significant impairment charge against certain intangible assets reflected on our balance sheet during the period in which an impairment is determined to exist, we could report a greater loss in one or more future periods. Based on a review of events and changes in circumstances at the reporting unit level through December 31, 2014, we have not identified any indications that the carrying value of our goodwill is impaired. We will continue to perform our annual goodwill impairment test in the fourth quarter of the year ending December 31, 2015, consistent with our existing accounting policy. There were no charges recorded related to goodwill impairment during 2014, 2013 and 2012. | ||||
Long‑lived Assets | ||||
We evaluate the recoverability of our intangible assets, and other long‑ lived assets with finite useful lives for impairment when events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. These trigger events or changes in circumstances include, but are not limited to, a significant decrease in the market price of a long‑lived asset, a significant adverse change in the extent or manner in which a long‑ lived asset is being used, significant adverse changes in legal factors, including changes that could result from our inability to renew or replace material agreements with certain of our partners on favorable terms, significant adverse changes in the business climate including changes which may result from adverse shifts in technology in our industry and the impact of competition, a significant adverse deterioration in the amount of revenue or cash flows we expect to generate from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long‑lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of our long‑lived asset, or a current expectation that, more likely than not, a long‑lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. We perform impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In making this determination, we consider the specific operating characteristics of the relevant long‑lived assets, including (i) the nature of the direct and any indirect revenue generated by the assets; (ii) the interdependency of the revenue generated by the assets; and (iii) the nature and extent of any shared costs necessary to operate the assets in their intended use. An impairment test would be performed when the estimated undiscounted future cash flows expected to result from the use of the asset group is less than its carrying amount. Impairment is measured by assessing the usefulness of an asset by comparing its carrying value to its fair value. If an asset is considered impaired, the impairment loss is measured as the amount by which the carrying value of the asset group exceeds its estimated fair value. Fair value is determined based upon estimated discounted future cash flows. The key estimates applied when preparing cash flow projections relate to revenue, operating margins, economic life of assets, taxation and discount rates. To date, we have not recognized any impairment loss associated with our long‑lived assets. | ||||
Income Taxes | Income Taxes | |||
Our operations have historically been included in the federal income tax return of Demand Media, as well as certain state tax returns where Demand Media files on a combined basis. For periods during which our operations were included with Demand Media, income taxes are presented in these financial statements as if we filed our own tax returns on a separate return basis. We account for our income taxes using the liability and asset method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or in our tax returns. In estimating future tax consequences, generally all expected future events other than enactments or changes in the tax law or rates are considered. Deferred income taxes are recognized for differences between financial reporting and tax bases of assets and liabilities at the enacted statutory tax rates in effect for the years in which the temporary differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. We evaluate the realizability of our deferred tax assets and valuation allowances are provided when necessary to reduce deferred tax assets to the amounts expected to be realized. | ||||
We operate in various tax jurisdictions and are subject to audit by various tax authorities. We provide tax contingencies whenever it is deemed probable that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits, and relevant tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies. | ||||
We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that we believe has a greater than 50% likelihood of being realized upon settlement. We recognize interest and penalties accrued related to unrecognized tax benefits in our income tax (benefit) provision in the accompanying statements of operations. | ||||
We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified. The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. | ||||
Cash and Cash Equivalents | Cash and Cash Equivalents | |||
We consider all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. We consider funds transferred from our credit card service providers but not yet deposited into our bank accounts at the balance sheet dates, as funds in transit and these amounts are recorded as unrestricted cash, since the amounts are generally settled the day after the outstanding date. Cash and cash equivalents consist primarily of checking accounts and money market accounts. | ||||
Accounts Receivable | Accounts Receivable | |||
Since our domain name registration services are primarily conducted on a prepaid basis through credit card or internet payments processed at the time a transaction is consummatied, we do not carry significant receivables related to these business activities. As a result and for each of the periods presented, we did not maintain an allowance for potentially uncollectible receivables from our customers. | ||||
Accounts receivable primarily consists of amounts due from registries and from certain domain reseller customers of our registrar service offering, as well as gTLD amounts due from our strategic collaboration agreement with Donuts. Receivables from registries represent refundable amounts for registrations that were placed on auto-renew status by the registries, but were not explicitly renewed by a registrant as of the balance sheet dates. We record registry services accounts receivable at the amount of the registration fees paid by us to a registry for all registrations placed on auto-renew status. Subsequent to the lapse of a prior registration period, a registrant either renews the applicable domain name with us, which results in the application of the refundable amount to a consummated transaction, or the registrant lets the domain name registration expire, which results in a refund of the applicable amount from a registry to us. | ||||
Deferred Revenue and Deferred Registration Costs | Deferred Revenue and Deferred Registration Costs | |||
Deferred revenue consists primarily of amounts received from customers in advance of our performance for domain name registration services and online value‑added services. We recognize deferred revenue as revenue on a systematic basis that is proportionate to the unexpired term of the related domain name registration over online value‑added service period. | ||||
Deferred registration costs represent incremental direct costs paid in advance to registries, ICANN, and other third parties for domain name registrations and are recorded as a deferred cost. We record the amortization of deferred registration costs to cost of revenue on a straight‑line basis over the registration period. | ||||
Property and Equipment | Property and Equipment | |||
We record property and equipment at cost and provide for depreciation and amortization using the straight-line method for financial reporting purposes over the estimated useful lives. | ||||
We capitalize certain costs of internally developed software or software purchased for internal use. We capitalize software development costs when application development begins, it is probable that the project will be completed, and the software will be used as intended. We expense costs associated with preliminary project stage activities, training, maintenance, and all other post-implementation stage activities as we incur these costs. Our policy provides for the capitalization of certain payroll, benefits, and other payroll-related costs for employees who are directly associated with internal-use software development projects, as well as external direct costs of materials and services associated with developing or obtaining internal-use software. We only capitalize personnel costs that relate directly to time spent on such projects. | ||||
The estimated useful lives by asset classification are as follows: | ||||
· | Computer hardware - 2 to 5 years | |||
· | Computer software - 2 to 3 years | |||
· | Internally developed software - 3 years | |||
· | Furniture and equipment - 7 to 10 years | |||
· | Leasehold improvements - Shorter of the estimated useful life or life of related lease | |||
During 2014, depreciation expense included the write-off of internally developed software of $0.8 million. There were no impairments related to property and equipment during 2013 and 2012. | ||||
Other Long-Term Assets | Other Long‑Term Assets | |||
ICANN approved a framework for the significant expansion of the number of gTLDs available for businesses and consumers to register as part of a domain name (“New gTLD Program”). The first new gTLDs launched in the fourth quarter of 2013. We capitalize the costs incurred to pursue the acquisition of gTLD operator rights. While there can be no assurance that gTLDs will be awarded to us, we reclassify the these payments as finite‑lived intangible assets following the delegation of operator rights for each gTLD by ICANN. Payments for gTLD applications primarily represent amounts paid directly to ICANN and/or third parties in the pursuit of gTLD operator rights. When two or more applicants apply for the same gTLD, an auction process is used to determine the eventual owner. If a private auction is used, the highest bidder is required to pay the other applicants the proceeds from the auction in return for the withdrawal of their application for the gTLD. We may also receive partial cash refunds from ICANN for certain gTLD applications, and to the extent we elect to sell or dispose of our interest in certain gTLD applications throughout the process, we may also incur gains or losses on amounts invested. | ||||
Gains on the withdrawal of our interest in gTLD applications are recognized when realized, while losses are recognized when deemed probable. Potential losses are limited to the non‑refundable portion of our deposits, while gains realized during the initial ICANN rights delegation phase are based on proceeds received from third parties and may be significant as compared to our initial investment (deposit) in a particular gTLD. We expense other costs incurred by us as part of our gTLD initiative not directly attributable to the acquisition of gTLD operator rights. We amortize capitalized costs on a straight‑line basis over the estimated useful life of the gTLD operator rights acquired commencing the date that each asset is available for its intended use. | ||||
Investments | Investments | |||
We account for investments in entities over which we have the ability to exert significant influence, but do not control and are not the primary beneficiary of, including NameJet, LLC (“NameJet”), using the equity method of accounting. We include our proportionate share of earnings (losses) of our equity method investees in other income (expense), net in our statements of operations. Our proportional shares of affiliate earnings or losses accounted for under the equity method of accounting, were not material for all periods presented. Transactions with our equity method investees generated revenue of approximately $4.4 million, $5.1 million and $5.6 million for 2014, 2013 and 2012. | ||||
We account for investments in companies that we do not control or account for under the equity method either at fair value or under the cost method, as applicable. Investments in equity securities are carried at fair value if the fair value of the security is readily determinable. Equity investments carried at fair value are classified as available‑for‑sale securities. Realized gains and losses for available‑for‑sale securities are included in other income (expense), net in our statements of operations. Unrealized gains and losses, net of taxes, on available‑for‑sale securities are included in our financial statements as a component of other comprehensive income and accumulated other comprehensive income (“AOCI”), until realized. | ||||
We account for investments in equity securities that we do not control or account for under the equity method and do not have readily determinable fair values for under the cost method. We record cost method investments originally at cost. In determining whether other‑than‑temporary impairment exists for equity securities, management considers: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near‑term prospects of the issuer and (3) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. We have determined that there has been no impairment of our equity marketable securities to date. | ||||
The cost of marketable securities sold is based upon the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of other income (expense), net. | ||||
Leases | Leases | |||
We lease office space and equipment under non-cancelable operating leases. The terms of our lease agreements generally provide for rental payments on a graduated basis. We record rent expense on a straight-line basis over the lease period and have accrued for rent expense incurred but not paid. | ||||
Advertising Costs | Advertising Costs | |||
Advertising costs are expensed as incurred and generally consist of online advertising, sponsorships, and trade shows. Such costs are included in sales and marketing expense in our statements of operations. Advertising expense was $1.5 million, $0.7 million and $0.6 million for 2014, 2013 and 2012. | ||||
Stock-based Compensation | Stock-based compensation expense | |||
We measure stock-based compensation expense at the grant date based on the fair value of the award. We recognize compensation expense on a straight-line basis over the requisite service period. The requisite service period is generally four years. The compensation cost is recognized net of estimated forfeiture activity. | ||||
Foreign Currency Transactions | Foreign Currency Transactions | |||
We record realized and unrealized foreign currency transaction gains and losses as incurred. For 2014, 2013 and 2012, foreign currency transaction gains and losses are included in other income (expense) in our statements of operations. | ||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments | |||
Fair value represents 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. We measure our financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. | ||||
· | Level 1—valuations for assets and liabilities traded in active exchange markets, or interest in open‑end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds. | |||
· | Level 2—valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third‑party pricing services for identical or comparable assets or liabilities. | |||
· | Level 3—valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. | |||
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. | ||||
Assets and Liabilities Measure at Fair Value on a Nonrecurring Basis | ||||
Assets and liabilities recognized or disclosed at fair value in our consolidated financial statements on a nonrecurring basis include items such as property and equipment, cost and equity method investments, and other assets. These assets are measured at fair value if determined to be impaired. The fair values of these investments are determined based on valuation techniques using the best information available and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. | ||||
Assets and Liabilities Measure at Fair Value on a Recurring Basis | ||||
We have highly liquid investments classified as cash equivalents and short-term investments included in our consolidated balance sheets. Cash equivalents consist of financial instruments that have original maturities of 90 days or less. Short-term investments consist of financial instruments with maturities greater than 90 days , but that generally mature in less than 1 year. | ||||
Reclassifications | Reclassifications | |||
Certain prior year amounts have been reclassified to conform to the 2014 financial statement presentation. These reclassifications did not affect consolidated net income, cash flows, assets, liabilities or equity for the years presented. We made the following presentation changes to depreciation, cost of revenue and technology and development: | ||||
Depreciation | ||||
Depreciation is presented with amortization on the statement of operations. Depreciation was previously included with cost of revenue, sales and marketing, technology and development, and general and administrative costs. | ||||
Cost of Revenue | ||||
Cost of revenue consist primarily of direct costs we incur with selling an incremental product to our customers. Substantially all cost of revenue relates to domain name registration costs, payment processing fees, third-party commissions and customer care. Similar to our billing practices, we pay domain costs at the time of purchase, but recognize the costs of service ratably over the term of our customer contracts. Customer care expense represents the costs to consult, advise and service our customers’ needs. Customer care expenses primarily consist of personnel costs (including stock-based compensation expense). Domain costs include fees paid to the various domain registries and ICANN. We prepay these costs in advance for the life of the subscription. The terms of registry pricing are established by an agreement between registries and registrars. | ||||
Technology and Development | ||||
Technology and development consist primarily of costs associated with creation, development and distribution of our products and websites. Technology and development expenses primarily consist of headcount-related costs (including stock-based compensation expense) associated with the design, development, deployment, testing, operation and enhancement of our products, as well as costs associated with the data centers and systems infrastructure supporting those products. | ||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |||
In July 2013, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. This guidance is effective for fiscal years beginning after December 31, 2013 on either a prospective or retrospective basis. The adoption of this guidance on January 1, 2014, did not have a significant impact on our financial statements. | ||||
In April 2014, the FASB issued Accounting Standards Update 2014‑08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014‑08”). ASU 2014‑08 changes the requirements and disclosures for reporting discontinued operations. We are required to adopt the provisions of ASU 2014‑08 effective January 1, 2015, although early adoption is permitted. We do not expect the adoption of ASU 2014‑08 to have a significant impact on our financial position or results of operations. | ||||
In May 2014, the FASB issued ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is recorded. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. We are assessing the provisions of the guidance and have not determined the impact of the adoption of this guidance on our financial statements | ||||
Property_and_Equipment_Tables
Property and Equipment (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||
Schedule of property and equipment | Property and equipment consisted of the following (in thousands): | ||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Computers and other related equipment | $ | 17,199 | $ | 19,180 | |||||||
Purchased and internally developed software | 19,526 | 19,546 | |||||||||
Furniture and fixtures | 907 | 775 | |||||||||
Leasehold improvements | 1,342 | 1,278 | |||||||||
Property and equipment, gross | 38,974 | 40,779 | |||||||||
Less accumulated depreciation | -27,447 | -26,323 | |||||||||
Property and equipment, net | $ | 11,527 | $ | 14,456 | |||||||
Depreciation expense and amortization expense by classification | Depreciation expense, including the write-off of internally developed software of $0.8 million in 2014, is shown by classification below (in thousands): | ||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Sales and marketing | $ | 47 | $ | 101 | $ | 97 | |||||
Technology and development | 5,747 | 5,324 | 4,370 | ||||||||
General and administrative | 1,914 | 1,067 | 754 | ||||||||
Total depreciation expense | $ | 7,708 | $ | 6,492 | $ | 5,221 | |||||
Intangible_Assets_Tables
Intangible Assets (Tables) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||
Schedule of intangible assets | Intangible assets consisted of the following (in thousands): | ||||||||||||||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||||||||||||||
Gross | Weighted | Gross | Weighted | ||||||||||||||||||||
carrying | Accumulated | average useful | carrying | Accumulated | average useful | ||||||||||||||||||
amount | amortization | Net | life (years) | amount | amortization | Net | life (years) | ||||||||||||||||
Owned website names | $ | 16,581 | $ | -11,402 | $ | 5,179 | 4.0 | $ | 18,580 | $ | -11,534 | $ | 7,046 | 4.2 | |||||||||
Customer relationships | 20,842 | -18,258 | 2,584 | 5.8 | 20,976 | -17,119 | 3,857 | 5.8 | |||||||||||||||
Technology | 7,954 | -7,915 | 39 | 4.8 | 7,990 | -7,896 | 94 | 4.8 | |||||||||||||||
Non-compete agreements | 207 | -81 | 126 | 5.0 | 207 | -42 | 165 | 5.0 | |||||||||||||||
Trade names | 5,477 | -2,151 | 3,326 | 18.3 | 5,468 | -1,743 | 3,725 | 18.3 | |||||||||||||||
gTLDs | 26,909 | -1,047 | 25,862 | 10.0 | 381 | - | 381 | 10.0 | |||||||||||||||
$ | 77,970 | $ | -40,854 | $ | 37,116 | $ | 53,602 | $ | -38,334 | $ | 15,268 | ||||||||||||
Amortization expense by classification | Amortization expense by classification (in thousands): | ||||||||||||||||||||||
Year ended December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||
Cost of revenue | $ | 6,021 | $ | 5,336 | $ | 6,292 | |||||||||||||||||
Sales and marketing | 1,247 | 2,264 | 1,754 | ||||||||||||||||||||
Technology and development | 19 | 19 | - | ||||||||||||||||||||
General and administrative | 446 | 271 | 228 | ||||||||||||||||||||
Total amortization expense | $ | 7,733 | $ | 7,890 | $ | 8,274 | |||||||||||||||||
Estimated future amortization expense | Estimated future amortization expense related to intangible assets held at December 31, 2014 (in thousands): | ||||||||||||||||||||||
Years Ending December 31, | Amount | ||||||||||||||||||||||
2015 | $ | 7,218 | |||||||||||||||||||||
2016 | 5,098 | ||||||||||||||||||||||
2017 | 3,780 | ||||||||||||||||||||||
2018 | 3,716 | ||||||||||||||||||||||
2019 | 3,410 | ||||||||||||||||||||||
Thereafter | 13,894 | ||||||||||||||||||||||
Total | $ | 37,116 | |||||||||||||||||||||
Goodwill_Tables
Goodwill (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Goodwill. | |||||
Schedule of changes in the goodwill balance | The following table presents the changes in our goodwill balance (in thousands): | ||||
Amount | |||||
Balance as of December 31, 2012 | $ | 103,144 | |||
Working capital adjustment | -102 | ||||
Balance as of December 31, 2013 and 2014 | $ | 103,042 | |||
Other_Assets_Tables
Other Assets (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||
Schedule of other assets | gTLD deposits and other assets consisted of the following (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
gTLD deposits | $ | 21,180 | $ | 21,252 | ||||
Other assets | 3,298 | 1,998 | ||||||
Other_Balance_Sheet_Items_Tabl
Other Balance Sheet Items (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Balance Sheet Related Disclosures [Abstract] | ||||||||
Schedule of accounts receivable | Accounts receivable consisted of the following (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Accounts receivable—trade | $ | 7,101 | $ | 5,515 | ||||
Receivables from registries | 3,598 | 3,661 | ||||||
gTLD deposit receivable | 3,557 | - | ||||||
Accounts receivable | $ | 14,256 | $ | 9,176 | ||||
Schedule of prepaids and other current assets | Prepaid expenses and other currents assets consisted of the following (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Prepaid expenses | $ | 2,799 | $ | 2,371 | ||||
Prepaid registry fees | 1,599 | 2,024 | ||||||
Note receivable | 2,500 | - | ||||||
Prepaid expenses and other current assets | $ | 6,898 | $ | 4,395 | ||||
Schedule of accrued and other liabilities | Accrued expenses and other current liabilities consisted of the following (in thousands): | |||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Customer deposits | $ | 8,404 | $ | 7,065 | ||||
Accrued payroll and related items | 2,927 | 3,052 | ||||||
Commissions payable | 2,244 | 2,209 | ||||||
Domain owners’ royalties payable | 1,901 | 1,193 | ||||||
Other | 5,837 | 5,268 | ||||||
Accrued expenses and other current liabilities | $ | 21,313 | $ | 18,787 | ||||
Debt_Tables
Debt (Tables) (Tennebaum) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Tennebaum | |||||
Schedule of debt outstanding | The following table presents our debt outstanding on the Tennenbaum Credit Facility as of December 31, 2014 (in thousands): | ||||
December 31, 2014 | |||||
Principal | $ | 30,000 | |||
Unamortized note discount | -4,895 | ||||
Carrying value | $ | 25,105 | |||
Schedule of Maturities of Long-term Debt [Table Text Block] | The following table presents the scheduled principal payments on the Tennenbaum Credit Facility (in thousands): | ||||
Years Ending December 31, | Amount | ||||
2015 | $ | 1,500 | |||
2016 | 1,500 | ||||
2017 | 1,500 | ||||
2018 | 1,500 | ||||
2019 | 24,000 | ||||
Total | $ | 30,000 | |||
Schedule Of Interest Expense | There was no interest expense in 2013 and 2012. Interest expense for 2014 on the Tennenbaum Credit Facility consisted of the following (in thousands): | ||||
Year ended | |||||
December 31, 2014 | |||||
Cash interest expense | $ | 1,133 | |||
Amortization of issuance costs | 203 | ||||
Amortization of note discount | 481 | ||||
Total | $ | 1,817 | |||
Effective interest rate | 14.8 | % | |||
Commitments_and_Contigencies_T
Commitments and Contigencies (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Commitments and Contingencies | ||||||||||||||
Schedule of other commitments fiscal year maturities | Our future minimum commitments under non-cancelable contractual obligations consisted of the following (in thousands): | |||||||||||||
Lease | Purchase | |||||||||||||
Commitments | Obligations | |||||||||||||
Years Ending December 31, | Debt (1) | -2 | -3 | Total | ||||||||||
2015 | $ | 4,511 | $ | 1,363 | $ | 466 | $ | 6,340 | ||||||
2016 | 4,378 | 1,238 | - | 5,616 | ||||||||||
2017 | 4,125 | 1,200 | - | 5,325 | ||||||||||
2018 | 3,838 | 1,100 | - | 4,938 | ||||||||||
2019 | 25,328 | 356 | - | 25,684 | ||||||||||
Thereafter | - | - | - | - | ||||||||||
Total | $ | 42,180 | $ | 5,257 | $ | 466 | $ | 47,903 | ||||||
-1 | Includes principal and interest on our credit facilities. | |||||||||||||
-2 | Lease commitments are related to office facilities in various locations and lease certain equipment under non‑cancelable operating leases. | |||||||||||||
-3 | Purchase obligations consist of enforceable and legally binding arrangements with third parties related to services to support operations. | |||||||||||||
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Income Tax Disclosure [Abstract] | |||||||||||
Schedule of income (loss) before income taxes | Income/(loss) before income taxes consisted of the following (in thousands): | ||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Domestic | $ | -11,413 | $ | -8,386 | $ | -1,138 | |||||
Foreign | 8,227 | -3,261 | -13 | ||||||||
Loss before income taxes | $ | -3,186 | $ | -11,647 | $ | -1,151 | |||||
Schedule of income tax benefit (expense) | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Domestic | $ | -11,413 | $ | -8,386 | $ | -1,138 | |||||
Foreign | 8,227 | -3,261 | -13 | ||||||||
Loss before income taxes | $ | -3,186 | $ | -11,647 | $ | -1,151 | |||||
The income tax benefit (expense) consists of the following (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Current (expense) benefit: | |||||||||||
Federal | $ | - | $ | - | $ | 2,472 | |||||
State | -22 | -6 | -5 | ||||||||
Foreign | -9 | -10 | - | ||||||||
Deferred (expense) benefit: | |||||||||||
Federal | 1,454 | 1,136 | -2,324 | ||||||||
State | -95 | -176 | 19 | ||||||||
Total income tax benefit | $ | 1,328 | $ | 944 | $ | 162 | |||||
Schedule of the reconciliation of the effective tax rate | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Current (expense) benefit: | |||||||||||
Federal | $ | - | $ | - | $ | 2,472 | |||||
State | -22 | -6 | -5 | ||||||||
Foreign | -9 | -10 | - | ||||||||
Deferred (expense) benefit: | |||||||||||
Federal | 1,454 | 1,136 | -2,324 | ||||||||
State | -95 | -176 | 19 | ||||||||
Total income tax benefit | $ | 1,328 | $ | 944 | $ | 162 | |||||
The reconciliation of the federal statutory income tax rate of 34% to our effective income tax rate is as follows (in thousands): | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Expected income tax benefit at U.S. statutory rate | $ | 1,083 | $ | 3,960 | $ | 387 | |||||
Foreign rate differential | 3,988 | -469 | - | ||||||||
State tax (expense) benefit, net of federal taxes | 163 | 160 | 72 | ||||||||
Non-deductible stock-based compensation expense | -2,343 | -1,749 | -196 | ||||||||
Meals and entertainment | -38 | -77 | -54 | ||||||||
State rate changes | -240 | -280 | -77 | ||||||||
Valuation allowance | -1,197 | -646 | - | ||||||||
Non-deductible warrant amortization | -135 | - | - | ||||||||
Other | 47 | 45 | 30 | ||||||||
Total income tax benefit | $ | 1,328 | $ | 944 | $ | 162 | |||||
Schedule of deferred tax assets and liabilities | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Expected income tax benefit at U.S. statutory rate | $ | 1,083 | $ | 3,960 | $ | 387 | |||||
Foreign rate differential | 3,988 | -469 | - | ||||||||
State tax (expense) benefit, net of federal taxes | 163 | 160 | 72 | ||||||||
Non-deductible stock-based compensation expense | -2,343 | -1,749 | -196 | ||||||||
Meals and entertainment | -38 | -77 | -54 | ||||||||
State rate changes | -240 | -280 | -77 | ||||||||
Valuation allowance | -1,197 | -646 | - | ||||||||
Non-deductible warrant amortization | -135 | - | - | ||||||||
Other | 47 | 45 | 30 | ||||||||
Total income tax benefit | $ | 1,328 | $ | 944 | $ | 162 | |||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands): | |||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Deferred tax assets: | |||||||||||
Accrued liabilities not currently deductible | $ | 661 | $ | 1,155 | |||||||
Intangible assets - excess of financial statement amortization over tax basis | 4,956 | 4,800 | |||||||||
Indirect federal impact of deferred state taxes | 847 | 703 | |||||||||
Deferred revenue | 6,262 | 5,560 | |||||||||
Net operating losses | 13,764 | 7,261 | |||||||||
Stock-based compensation expense | 931 | 3,364 | |||||||||
Other | - | - | |||||||||
Total deferred tax assets | $ | 27,421 | $ | 22,843 | |||||||
Deferred tax liabilities: | |||||||||||
Deferred registration costs | $ | -26,956 | $ | -23,529 | |||||||
Prepaid expenses | -1,580 | -1,673 | |||||||||
Goodwill not amortized for financial reporting | -12,078 | -10,368 | |||||||||
Intangible assets - excess of financial basis over tax basis | -897 | -967 | |||||||||
Property and equipment | -2,020 | -3,080 | |||||||||
Other | -450 | -423 | |||||||||
Total deferred tax liabilities | $ | -43,981 | $ | -40,040 | |||||||
Valuation allowance | -1,843 | -646 | |||||||||
Net deferred tax liabilities | $ | -18,403 | $ | -17,843 | |||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Current deferred tax liabilities | $ | -27,886 | $ | -24,157 | |||||||
Non-current deferred tax assets | 9,483 | 6,314 | |||||||||
Net deferred tax liabilities | $ | -18,403 | $ | -17,843 | |||||||
Schedule of deferred tax asset valuation allowance activity | As of December 31, 2014, the valuation allowance reduced our non-current deferred tax assets by $1.8 million. The table below presents our deferred tax asset valuation allowance activity (in thousands): | ||||||||||
2014 | 2013 | 2012 | |||||||||
Balance as of January 1, | $ | 646 | $ | - | $ | - | |||||
Charged to income tax expense | 1,197 | 646 | - | ||||||||
Balance as of December 31, | $ | 1,843 | $ | 646 | $ | - | |||||
Stock_based_Compensation_Expen1
Stock based Compensation Expense (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||
Schedule of stock-based compensation expense related to all employee and non-employee stock-based awards | Our stock‑based compensation expense related to stock‑based awards that has been included in the following line items within the statements of operations are as follows (in thousands): | |||||||||||||
Year ended December 31, | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
Cost of revenue | $ | 372 | $ | 458 | $ | 407 | ||||||||
Sales and marketing | 1,178 | 1,598 | 1,816 | |||||||||||
Technology and development | 1,049 | 1,377 | 1,512 | |||||||||||
General and administrative | 3,237 | 6,030 | 6,377 | |||||||||||
Total stock-based compensation expense | $ | 5,836 | $ | 9,463 | $ | 10,112 | ||||||||
Schedule of stock options activity | The following table presents our stock option activity recast to reflect the conversion of five Demand Media stock options to one Rightside stock option on August 1, 2014 (in thousands, except for per share amounts and contractual term): | |||||||||||||
Weighted | ||||||||||||||
Average | ||||||||||||||
Weighted | Remaining | |||||||||||||
Average | Contractual | Aggregate | ||||||||||||
Exercise Price | Term | Intrinsic | ||||||||||||
Shares | Per Share | (in years) | Value | |||||||||||
Outstanding as of December 31, 2013 | 335 | $ | 15.42 | |||||||||||
Exercised | -7 | 7.88 | ||||||||||||
Expired | -9 | 18.98 | ||||||||||||
Outstanding as of December 31, 2014 | 319 | 15.47 | 3.84 | $ | 40 | |||||||||
Exercisable as of December 31, 2014 | 319 | $ | 15.47 | 3.84 | $ | 40 | ||||||||
Schedule of additional information related to stock-based compensation activity | Information related to stock‑based compensation activity is as follows (in thousands): | |||||||||||||
Year ended December 31, | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
Intrinsic value of options exercised | $ | 124 | $ | 590 | $ | 2,376 | ||||||||
Total fair value of restricted stock units vested (intrinsic value) | 4,962 | 3,884 | 3,189 | |||||||||||
Schedule of restricted stock unit awards activity | ||||||||||||||
Year ended December 31, | ||||||||||||||
2014 | 2013 | 2012 | ||||||||||||
Intrinsic value of options exercised | $ | 124 | $ | 590 | $ | 2,376 | ||||||||
Total fair value of restricted stock units vested (intrinsic value) | 4,962 | 3,884 | 3,189 | |||||||||||
The following table presents a summary of restricted stock unit award activity recast to reflect the conversion of five Demand Media RSUs to 1.71 Rightside RSUs (in thousands, except for per share amounts): | ||||||||||||||
Weighted | ||||||||||||||
Average Grant | ||||||||||||||
Shares | Date Share Value | |||||||||||||
Outstanding as of December 31, 2013 | 679 | $ | 24.54 | |||||||||||
Granted | 907 | 11.33 | ||||||||||||
Vested | -302 | 23.16 | ||||||||||||
Cancelled | -111 | 22.61 | ||||||||||||
Outstanding as of December 31, 2014 | 1,173 | $ | 14.86 | |||||||||||
Business_Segments_Tables
Business Segments (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Segment Reporting [Abstract] | |||||||||||
Schedule of revenue derived from segments | Revenue from our Domain name services and Aftermarket and other service offering are as follows (in thousands): | ||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Domain name services | $ | 161,585 | $ | 141,558 | $ | 126,854 | |||||
Aftermarket and other | 30,163 | 43,634 | 46,114 | ||||||||
Total revenue | $ | 191,748 | $ | 185,192 | $ | 172,968 | |||||
Transactions_with_Related_Part1
Transactions with Related Parties and Parent Company Investment (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Related Party Transactions [Abstract] | |||||||||||
Schedule of costs incurred and allocated by Demand Media | Prior to the separation on August 1, 2014, we recorded the following costs incurred and allocated by Demand Media in our statements of operations as follows (in thousands): | ||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Sales and marketing | $ | 1,499 | $ | 2,083 | $ | 2,560 | |||||
Technology and development | 8,511 | 13,312 | 11,257 | ||||||||
General and administration | 11,500 | 20,906 | 18,223 | ||||||||
Total allocated expenses | $ | 21,510 | $ | 36,301 | $ | 32,040 | |||||
Schedule of parent company investment activity | The net decrease in the parent company investment of $28.0 million for 2014 includes cash transfers to Demand Media, net of allocated expenses, assets and liabilities. | ||||||||||
Fair_Value_of_Financial_Instru1
Fair Value of Financial Instruments (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||
Schedule of assets and liabilities meansured at fair value | ||||||||||||||
Fair Value Measurement Using | Assets at Fair | |||||||||||||
As of December 31, 2014 | Level 1 | Level 2 | Level 3 | Value | ||||||||||
Assets: | ||||||||||||||
Cash and cash equivalents | $ | 49,743 | $ | - | $ | - | $ | 49,743 | ||||||
Liabilities: | ||||||||||||||
Debt | $ | - | $ | - | $ | 25,105 | $ | 25,105 | ||||||
Fair Value Measurement Using | Assets at Fair | |||||||||||||
As of December 31, 2013 | Level 1 | Level 2 | Level 3 | Value | ||||||||||
Assets: | ||||||||||||||
Cash and cash equivalents | $ | 66,833 | $ | - | $ | - | $ | 66,833 | ||||||
Marketable securities | 906 | 906 | ||||||||||||
Restricted cash | 1,563 | - | - | 1,563 | ||||||||||
Total | $ | 69,302 | $ | - | $ | - | $ | 69,302 | ||||||
Earnings_loss_Per_Share_Tables
Earnings (loss) Per Share (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Earnings Per Share [Abstract] | |||||||||||
Schedule of earnings (loss) per share | Basic and diluted earnings (loss) per share were calculated using the following (in thousands, except per share amounts): | ||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Net loss | $ | -1,858 | $ | -10,703 | $ | -989 | |||||
Weighted average number of shares outstanding: | |||||||||||
Basic | 18,452 | 18,413 | 18,413 | ||||||||
Dilutive effect of stock-based equity awards | - | - | - | ||||||||
Dilutive effect of warrants | - | - | - | ||||||||
Diluted | 18,452 | 18,413 | 18,413 | ||||||||
Net loss per share attributable to common stockholders: | |||||||||||
Basic | $ | -0.1 | $ | -0.58 | $ | -0.05 | |||||
Diluted | $ | -0.1 | $ | -0.58 | $ | -0.05 | |||||
Business_Acquisitions_Tables
Business Acquisitions (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Business Acquisitions | |||||
Summary of the allocation of the purchase consideration | The acquisition of Name.com is included in our financial statements as of the date of the acquisition. The following table summarizes the allocation of the purchase consideration during 2012 (in thousands): | ||||
Amount | |||||
Goodwill | $ | 10,313 | |||
Customer relationships | 5,094 | ||||
Owned website names | 1,885 | ||||
Trade names | 897 | ||||
Non-compete agreements | 205 | ||||
Technology | 76 | ||||
Other assets acquired and liabilities assumed, net | -470 | ||||
Total | $ | 18,000 | |||
Schedule of business acquisition pro forma information | Supplemental information on an unaudited pro forma basis, as if the 2012 acquisition had been consummated as of January 1, 2012, is as follows (in thousands): | ||||
Year ended | |||||
December 31, 2012 | |||||
Revenue | $ | 190,594 | |||
Net income | 828 | ||||
Concentrations_Tables
Concentrations (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Revenues | Customer risk | |||||||||||
Concentration Risk [Line Items] | |||||||||||
Schedule of concentrations by risk | |||||||||||
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Advertising network partner | 11 | % | 12 | % | 14 | % | |||||
Registrar partner | 17 | % | 14 | % | 12 | % | |||||
Accounts receivable | Credit concentration risk | |||||||||||
Concentration Risk [Line Items] | |||||||||||
Schedule of concentrations by risk | |||||||||||
December 31, | |||||||||||
2014 | 2013 | ||||||||||
Advertising network partner | 14 | % | 14 | % | |||||||
Registry partner | 18 | % | 26 | % | |||||||
Quarterly_Financial_Informatio1
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Quarterly Financial Information (Unaudited) | |||||||||||||||||
Schedule of quarterly and full year financial information | The following unaudited quarterly financial information presents our quarterly and full year financial information (in thousands, except per share information). | ||||||||||||||||
Three months ended | Year ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | December 31 | |||||||||||||
2014 | |||||||||||||||||
Revenue | $ | 44,552 | $ | 46,689 | $ | 48,774 | $ | 51,733 | $ | 191,748 | |||||||
Income (loss) before income taxes | -2,557 | -4,896 | 2,489 | 1,778 | -3,186 | ||||||||||||
Net income (loss) | -3,921 | -3,490 | 4,097 | 1,456 | -1,858 | ||||||||||||
Net income (loss) per share attributable to common stockholders: | |||||||||||||||||
Basic | $ | -0.21 | $ | -0.19 | $ | 0.22 | $ | 0.08 | $ | -0.1 | |||||||
Diluted | -0.21 | -0.19 | 0.22 | 0.08 | -0.1 | ||||||||||||
2013 | |||||||||||||||||
Revenue | $ | 45,897 | $ | 48,217 | $ | 45,506 | $ | 45,572 | $ | 185,192 | |||||||
Loss before income taxes | -2,338 | -642 | -3,928 | -4,739 | -11,647 | ||||||||||||
Net loss | -1,734 | -682 | -2,562 | -5,725 | -10,703 | ||||||||||||
Net loss per share attributable to common stockholders: | |||||||||||||||||
Basic | $ | -0.09 | $ | -0.04 | $ | -0.14 | $ | -0.31 | $ | -0.58 | |||||||
Diluted | -0.09 | -0.04 | -0.14 | -0.31 | -0.58 | ||||||||||||
Company_Background_and_Basis_o1
Company Background and Basis of Presentation (Details) (USD $) | 0 Months Ended | 12 Months Ended | |||||
Aug. 01, 2014 | Dec. 31, 2014 | Aug. 01, 2014 | Jul. 31, 2014 | Dec. 31, 2013 | Feb. 28, 2013 | Dec. 31, 2012 | |
item | item | ||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||
Number of publicly traded entities after spin-off | 2 | ||||||
Number of classes of common stock | 1 | ||||||
Preferred stock, shares outstanding | 0 | 0 | |||||
Authorized capital stock (in shares) | 120,000,000 | ||||||
Common stock shares authorized (in shares) | 100,000,000 | 100,000,000 | 0 | ||||
Common stock par value (in dollars per share) | $0.00 | $0.00 | $0.00 | $0.00 | |||
Preferred stock authorized (in shares) | 20,000,000 | 20,000,000 | 0 | ||||
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 | $0.00 | ||||
Shares issued | 18,661,000 | 18,400,000 | 1,000 | 0 | |||
Shares outstanding | 18,661,000 | 18,400,000 | 1,000 | 0 | |||
Separation conversion ratio - one share of Rightside common stock for every five shares of Demand Media | 20 | ||||||
Duration of the transition services agreement | 18 months |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details) (USD $) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Joint venture revenue | $4.40 | $5.10 | $5.60 |
Minimum | |||
Registration Term | 1 year | ||
Maximum | |||
Registration Term | 10 years | ||
NameJet joint venture member | |||
Joint venture revenue | $4.40 | $5.10 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | |
Property, Plant and Equipment [Line Items] | |||
Impairment of property plant and equipment | $0 | $0 | |
Computer hardware | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 2 years | ||
Computer hardware | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 5 years | ||
Computer software | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 2 years | ||
Computer software | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 3 years | ||
Internally developed software | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 3 years | ||
Impairment of property plant and equipment | 800,000 | ||
Furniture and equipment | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 7 years | ||
Furniture and equipment | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Useful life | 10 years |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details 3) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Finite-Lived Intangible Assets [Line Items] | |||
Goodwill impairment | $0 | $0 | |
Joint venture revenue | 4,400,000 | 5,100,000 | 5,600,000 |
Advertising expense | 1,500,000 | 700,000 | 600,000 |
Share based compensation service period | 4 years | ||
Minimum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Aquired finite-lived intangible assets useful life | 3 years | ||
Maximum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Aquired finite-lived intangible assets useful life | 20 years | ||
Owned website names | |||
Finite-Lived Intangible Assets [Line Items] | |||
Website renewal period | 12 months | ||
Aquired finite-lived intangible assets useful life | 4 years | 4 years 2 months 12 days | |
Owned website names | Minimum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Aquired finite-lived intangible assets useful life | 12 months | ||
Owned website names | Maximum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Aquired finite-lived intangible assets useful life | 84 months | ||
gTLD deposit receivable | |||
Finite-Lived Intangible Assets [Line Items] | |||
Aquired finite-lived intangible assets useful life | 10 years | 10 years | |
Finite lived useful life | 10 years | ||
NameJet joint venture member | |||
Finite-Lived Intangible Assets [Line Items] | |||
Joint venture revenue | $4,400,000 | $5,100,000 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $38,974,000 | $40,779,000 | |
Less accumulated depreciation | -27,447,000 | -26,323,000 | |
Property and equipment, net | 11,527,000 | 14,456,000 | |
Finite-Lived Intangible Assets, Net | 37,116,000 | 15,268,000 | |
Accumulated amortization | 40,854,000 | 38,334,000 | |
Impairment of Long-Lived Assets Held-for-use | 0 | 0 | |
Depreciation | 7,708,000 | 6,492,000 | 5,221,000 |
Sales and marketing | |||
Property, Plant and Equipment [Line Items] | |||
Depreciation | 47,000 | 101,000 | 97,000 |
Technology and development | |||
Property, Plant and Equipment [Line Items] | |||
Depreciation | 5,747,000 | 5,324,000 | 4,370,000 |
General and administrative | |||
Property, Plant and Equipment [Line Items] | |||
Depreciation | 1,914,000 | 1,067,000 | 754,000 |
Computers and other related equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 17,199,000 | 19,180,000 | |
Computer software | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 19,526,000 | 19,546,000 | |
Less accumulated depreciation | -9,600,000 | -8,100,000 | |
Property and equipment, net | 5,800,000 | 5,300,000 | |
Furniture and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 907,000 | 775,000 | |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 1,342,000 | 1,278,000 | |
Internally developed software | |||
Property, Plant and Equipment [Line Items] | |||
Impairment of Long-Lived Assets Held-for-use | $800,000 |
Intangible_Assets_Details
Intangible Assets (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | $77,970 | $53,602 | |
Accumulated amortization | -40,854 | -38,334 | |
Total | 37,116 | 15,268 | |
Amortization of intangible assets | 7,733 | 7,890 | 8,274 |
Owned website names | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 16,581 | 18,580 | |
Accumulated amortization | -11,402 | -11,534 | |
Total | 5,179 | 7,046 | |
Useful life | 4 years | 4 years 2 months 12 days | |
Customer relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 20,842 | 20,976 | |
Accumulated amortization | -18,258 | -17,119 | |
Total | 2,584 | 3,857 | |
Useful life | 5 years 9 months 18 days | 5 years 9 months 18 days | |
Technology. | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 7,954 | 7,990 | |
Accumulated amortization | -7,915 | -7,896 | |
Total | 39 | 94 | |
Useful life | 4 years 9 months 18 days | 4 years 9 months 18 days | |
Noncompete agreements | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 207 | 207 | |
Accumulated amortization | -81 | -42 | |
Total | 126 | 165 | |
Useful life | 5 years | 5 years | |
Trade names | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 5,477 | 5,468 | |
Accumulated amortization | -2,151 | -1,743 | |
Total | 3,326 | 3,725 | |
Useful life | 18 years 3 months 18 days | 18 years 3 months 18 days | |
gTLD deposit receivable | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 26,909 | 381 | |
Accumulated amortization | -1,047 | ||
Total | 25,862 | 381 | |
Useful life | 10 years | 10 years | |
Cost of revenue | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | 6,021 | 5,336 | 6,292 |
Sales and marketing | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | 1,247 | 2,264 | 1,754 |
Technology and development | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | 19 | 19 | |
General and administrative | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | $446 | $271 | $228 |
Intangible_Assets_Details_2
Intangible Assets (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract] | ||
2015 | $7,218 | |
2016 | 5,098 | |
2017 | 3,780 | |
2018 | 3,716 | |
2019 | 3,410 | |
Thereafter | 13,894 | |
Total | $37,116 | $15,268 |
Goodwill_Details
Goodwill (Details) (USD $) | 12 Months Ended | 24 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | |
Goodwill. | |||
Goodwill impairment | $0 | $0 | |
Goodwill [Roll Forward] | |||
Beginning balance | 103,042,000 | 103,144,000 | 103,144,000 |
Working capital adjustment | -102,000 | ||
Goodwill, Ending Balance | $103,042,000 | $103,042,000 | $103,042,000 |
Other_Assets_Details
Other Assets (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
gTLD deposits | $21,180 | $21,252 |
Other assets | $3,298 | $1,998 |
Other_Assets_Details_2
Other Assets (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Payments made for gTLD applications | $32,000,000 | $3,900,000 |
Gain on gTLD application withdrawals, net | 22,103,000 | 4,232,000 |
Deferred finance cost included in other assets | 2,600,000 | |
gTLD Deposits | ||
Restricted cash and cash equivalents | 700,000 | |
Other Assets | ||
Restricted cash and cash equivalents | $900,000 |
Other_Balance_Sheet_Items_Deta
Other Balance Sheet Items (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Accounts receivable | ||
Accounts receivable | $14,256 | $9,176 |
Prepaid Expense and other current assets | ||
Prepaid expenses | 2,799 | 2,371 |
Prepaid registry fees | 1,599 | 2,024 |
Note receivable | 2,500 | |
Prepaid expenses and other current assets | 6,898 | 4,395 |
Accounts receivable - trade | ||
Accounts receivable | ||
Accounts receivable | 7,101 | 5,515 |
Receivables from registries | ||
Accounts receivable | ||
Accounts receivable | 3,598 | 3,661 |
gTLD deposit receivable | ||
Accounts receivable | ||
Accounts receivable | $3,557 |
Other_Balance_Sheet_Items_Deta1
Other Balance Sheet Items (Details 2) (USD $) | 0 Months Ended | 12 Months Ended | ||
Feb. 27, 2015 | Feb. 04, 2015 | Dec. 31, 2014 | Oct. 31, 2014 | |
item | ||||
Subsequent events | ||||
Note receivable | $2,500,000 | |||
Namecheap | Six-month LIBOR | ||||
Subsequent events | ||||
Note receivable | 2,500,000 | 2,500,000 | ||
Subsequent Event | Namecheap | Six-month LIBOR | ||||
Subsequent events | ||||
Note receivable | 1,000,000 | 1,000,000 | ||
Number of payment received | 2 | |||
Proceeds from collection of loan receivable | $1,000,000 | $500,000 | $1,500,000 |
Other_Balance_Sheet_Items_Deta2
Other Balance Sheet Items (Details 3) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Balance Sheet Related Disclosures [Abstract] | ||
Customer deposits | $8,404 | $7,065 |
Accrued payroll and related items | 2,927 | 3,052 |
Commissions payable | 2,244 | 2,209 |
Domain owners' royalties payable | 1,901 | 1,193 |
Other | 5,837 | 5,268 |
Accrued expenses and other current liabilities | $21,313 | $18,787 |
Debt_Details
Debt (Details) (USD $) | 1 Months Ended | 12 Months Ended |
Aug. 31, 2014 | Dec. 31, 2014 | |
Silicon Valley Bank | Revolving credit facility | ||
Credit facilities disclosures | ||
Facility capacity | $30,000,000 | |
Term loan borrowing | 30,000,000 | |
Debt instrument fee | 600,000 | |
Unused borrowing capacity fee percentage | 0.25% | |
Silicon Valley Bank | Letter of credit subfacility | ||
Credit facilities disclosures | ||
Facility capacity | 15,000,000 | |
Letters of credit issued | 11,000,000 | |
Unused borrowing capacity fee | 2 | |
Silicon Valley Bank | Federal Funds Effective Swap Rate | Revolving credit facility | ||
Credit facilities disclosures | ||
Margin | 0.50% | |
Silicon Valley Bank | Eurodollar | Revolving credit facility | ||
Credit facilities disclosures | ||
Percentage added to interest rate | 1.00% | |
Silicon Valley Bank | Eurodollar | Revolving credit facility | Minimum | ||
Credit facilities disclosures | ||
Margin | 1.00% | |
Silicon Valley Bank | Eurodollar | Revolving credit facility | Maximum | ||
Credit facilities disclosures | ||
Margin | 1.50% | |
Silicon Valley Bank | London Interbank Offered Rate (LIBOR) | Revolving credit facility | Minimum | ||
Credit facilities disclosures | ||
Margin | 2.00% | |
Silicon Valley Bank | London Interbank Offered Rate (LIBOR) | Revolving credit facility | Maximum | ||
Credit facilities disclosures | ||
Margin | 2.50% | |
Tennebaum | Term loan credit facility | ||
Credit facilities disclosures | ||
Term loan borrowing | 30,000,000 | |
Quarterly principal payment | $375,000 | |
Beginning date for required repayments | 31-Mar-15 | |
Percentage of excess cash flow used for mandatory prepayments | 50.00% | |
Tennebaum | Term loan credit facility | Prepaid in year one | ||
Credit facilities disclosures | ||
Premium on prepayment | 4.00% | |
Tennebaum | Term loan credit facility | Prepaid in year two | ||
Credit facilities disclosures | ||
Premium on prepayment | 2.50% | |
Tennebaum | Term loan credit facility | Prepaid in year three | ||
Credit facilities disclosures | ||
Premium on prepayment | 1.00% | |
Tennebaum | Term loan credit facility | Prepaid after year three | ||
Credit facilities disclosures | ||
Premium on prepayment | 0.00% | |
Tennebaum | London Interbank Offered Rate (LIBOR) | Term loan credit facility | ||
Credit facilities disclosures | ||
Margin | 8.75% |
Debt_Details_2
Debt (Details 2) (USD $) | 5 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2014 | Aug. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Class of Warrant or Right [Line Items] | |||||
Stock warrants issued | $4,441,000 | $4,441,000 | |||
Principal | 23,605,000 | 23,605,000 | |||
Scheduled Principal Payments | |||||
Total | 23,605,000 | 23,605,000 | |||
Interest Expense [Abstract] | |||||
Total | 1,988,000 | ||||
Tennebaum Credit Facility warrants | |||||
Class of Warrant or Right [Line Items] | |||||
Exercise price | $15.05 | ||||
Stock price | $14.49 | ||||
Strike price | $15.05 | ||||
Volatility | 42.44% | ||||
Risk free rate | 1.67% | ||||
Dividend yield | 0.00% | ||||
Expected term | 5 years | ||||
Warrant equity component | 4,400,000 | ||||
Tennebaum Credit Facility warrants | Maximum | |||||
Class of Warrant or Right [Line Items] | |||||
Warrants to purchase common stock (in shares) | 997,710 | ||||
Term loan credit facility | Tennebaum Credit Facility warrants | |||||
Class of Warrant or Right [Line Items] | |||||
Debt instrument fee | 3,200,000 | 3,200,000 | |||
Tennebaum | |||||
Class of Warrant or Right [Line Items] | |||||
Deferred finance cost | 2,300,000 | 2,300,000 | |||
Deferred financing discount | 900,000 | 900,000 | |||
Principal | 30,000,000 | 30,000,000 | |||
Unamortized note discount | -4,895,000 | -4,895,000 | |||
Carrying value | 25,105,000 | 25,105,000 | |||
Scheduled Principal Payments | |||||
2015 | 1,500,000 | 1,500,000 | |||
2016 | 1,500,000 | 1,500,000 | |||
2017 | 1,500,000 | 1,500,000 | |||
2018 | 1,500,000 | 1,500,000 | |||
2019 | 24,000,000 | 24,000,000 | |||
Total | 30,000,000 | 30,000,000 | |||
Interest Expense [Abstract] | |||||
Cash interest expense | 1,133,000 | 0 | 0 | ||
Amortization of issuance costs | 203,000 | ||||
Amortization of note discount | 481,000 | ||||
Total | 1,817,000 | ||||
Effective interest rate | 14.80% | 14.80% | |||
Tennebaum | Level 3 | |||||
Class of Warrant or Right [Line Items] | |||||
Long-term debt fair value | $25,100,000 | $25,100,000 |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (USD $) | 12 Months Ended | 0 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 06, 2014 | Aug. 31, 2014 | |
Leases and Letters of Credit | |||||
Rent Expense | $1,100,000 | $1,200,000 | $600,000 | ||
Tennenbaum Capital Partners LLC | Term loan | |||||
Leases and Letters of Credit | |||||
Debt instrument amount | 30,000,000 | ||||
Debt Instrument, Periodic Payment | 375,000 | ||||
Silicon Valley Bank | Letter of credit subfacility | |||||
Leases and Letters of Credit | |||||
Letters of credit outstanding | 11,000,000 | ||||
Facility capacity | 15,000,000 | ||||
Silicon Valley Bank | Revolving credit facility | |||||
Leases and Letters of Credit | |||||
Facility capacity | $30,000,000 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Detais 2) (USD $) | 1 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2014 |
Domain Name Agreement | |
Other Commitments [Line Items] | |
Contract term | 1 year |
Quarterly purchase obligation | $0.20 |
Donuts Agreement | |
Other Commitments [Line Items] | |
Contract term | 5 years |
Commitments_and_Contingencies_2
Commitments and Contingencies (Details 3) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Other Commitments | |
2015 | $6,340 |
2016 | 5,616 |
2017 | 5,325 |
2018 | 4,938 |
2019 | 25,684 |
Total | 47,903 |
Debt | |
Other Commitments | |
2015 | 4,511 |
2016 | 4,378 |
2017 | 4,125 |
2018 | 3,838 |
2019 | 25,328 |
Total | 42,180 |
Lease Commitments | |
Other Commitments | |
2015 | 1,363 |
2016 | 1,238 |
2017 | 1,200 |
2018 | 1,100 |
2019 | 356 |
Total | 5,257 |
Purchase Obligations | |
Other Commitments | |
2015 | 466 |
Total | $466 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax Disclosure [Abstract] | |||||||||||
Domestic | ($11,413) | ($8,386) | ($1,138) | ||||||||
Foreign | 8,227 | -3,261 | -13 | ||||||||
Loss before income taxes | 1,778 | 2,489 | -4,896 | -2,557 | -4,739 | -3,928 | -642 | -2,338 | -3,186 | -11,647 | -1,151 |
Current (expense) benefit: | |||||||||||
Federal | 2,472 | ||||||||||
State | -22 | -6 | -5 | ||||||||
Foreign | -9 | -10 | |||||||||
Deferred (expense) benefit: | |||||||||||
Federal | 1,454 | 1,136 | -2,324 | ||||||||
State | -95 | -176 | 19 | ||||||||
Income tax benefit | $1,328 | $944 | $162 |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Reconciliation of effective income tax rate | |||
Expected income tax benefit at U.S. statutory rate | $1,083 | $3,960 | $387 |
Foreign rate differential | 3,988 | -469 | |
State tax (expense) benefit, net of federal taxes | 163 | 160 | 72 |
Non-deductible stock-based compensation | -2,343 | -1,749 | -196 |
Meals and entertainment | -38 | -77 | -54 |
State rate changes | -240 | -280 | -77 |
Valuation allowance | -1,197 | -646 | |
Non-deductible warrant amortization | -135 | ||
Other | 47 | 45 | 30 |
Income tax benefit | $1,328 | $944 | $162 |
Income_Taxes_Details_3
Income Taxes (Details 3) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Deferred tax assets | ||
Accrued liabilities not currently deductible | $661 | $1,155 |
Intangible assets - excess of financial statement amortization over tax basis | 4,956 | 4,800 |
Indirect federal impact of deferred state taxes | 847 | 703 |
Deferred revenue | 6,262 | 5,560 |
Net operating losses | 13,764 | 7,261 |
Stock-based compensation | 931 | 3,364 |
Total deferred tax assets | 27,421 | 22,843 |
Deferred tax liabilities: | ||
Deferred registration costs | -26,956 | -23,529 |
Prepaid expenses | -1,580 | -1,673 |
Goodwill not amortized for financial reporting | -12,078 | -10,368 |
Intangible assets - excess of financial basis over tax basis | -897 | -967 |
Property and equipment | -2,020 | -3,080 |
Other | -450 | -423 |
Total deferred tax liabilities | -43,981 | -40,040 |
Valuation allowance | -1,843 | -646 |
Net deferred tax liabilities | ($18,403) | ($17,843) |
Income_Taxes_Details_4
Income Taxes (Details 4) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Operating Loss Carryforwards [Line Items] | ||
Current deferred tax liabilities | ($27,886,000) | ($24,157,000) |
Non-current deferred tax assets | 9,483,000 | 6,314,000 |
Net deferred tax liabilities | -18,403,000 | -17,843,000 |
Balance as of January 1, | 646,000 | |
Charged to income tax expense | 1,197,000 | 646,000 |
Balance as of December 31, | 1,843,000 | 646,000 |
Cumulative unrealized stock option tax attributes excluded from deferred tax assets | 800,000 | |
Uncertain income tax positions | 0 | 0 |
Federal | ||
Operating Loss Carryforwards [Line Items] | ||
NOL carryforwards | 31,900,000 | 17,300,000 |
State | ||
Operating Loss Carryforwards [Line Items] | ||
NOL carryforwards | 12,500,000 | 8,100,000 |
Irish | ||
Operating Loss Carryforwards [Line Items] | ||
NOL carryforwards | $14,800,000 |
Employee_Benefit_Plan_Details
Employee Benefit Plan (Details) (Demand Media 401k Plan, USD $) | 12 Months Ended | |
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Demand Media 401k Plan | ||
Defined contribution plan | ||
Contributions | $0.70 | $0.60 |
Recovered_Sheet1
Stock Based Compensation Expense (Details) (USD $) | 12 Months Ended | 0 Months Ended | ||
In Thousands, except Share data in Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 01, 2014 |
Stock-based Compensation Expense | ||||
Allocated Share-based Compensation Expense | $5,836 | $9,463 | $10,112 | |
Demand Media | ||||
Stock-based Compensation Expense | ||||
Allocated Share-based Compensation Expense | 800 | 5,500 | 6,900 | |
Cost of revenue | ||||
Stock-based Compensation Expense | ||||
Allocated Share-based Compensation Expense | 372 | 458 | 407 | |
Sales and marketing | ||||
Stock-based Compensation Expense | ||||
Allocated Share-based Compensation Expense | 1,178 | 1,598 | 1,816 | |
Technology and development | ||||
Stock-based Compensation Expense | ||||
Allocated Share-based Compensation Expense | 1,049 | 1,377 | 1,512 | |
General and administrative | ||||
Stock-based Compensation Expense | ||||
Allocated Share-based Compensation Expense | $3,237 | $6,030 | $6,377 | |
Equity Plan [Member] | ||||
Stock-based Compensation Expense | ||||
Restricted stock units and options outstanding | 1.1 | |||
Common stock reserved for future grants | 0.8 | |||
Shared based compensation vesting period | 4 years | |||
Equity Plan [Member] | Restricted stock units | ||||
Stock-based Compensation Expense | ||||
RSU's issued ratio | 0.342 |
Recovered_Sheet2
Stock Based Compensation Expense (Details 2) (USD $) | 12 Months Ended |
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 |
Equity Plan [Member] | |
Additional Disclosures | |
Aggregate intrinsic value outstanding end of period | $40 |
Stock Option | |
Additional Disclosures | |
Aggregate intrinsic value exercisable | $40 |
Stock Option | Equity Plan [Member] | |
Shares | |
Outstanding beginning balance | 335 |
Exercised | -7 |
Expired | -9 |
Outstanding ending balance | 319 |
Exercisable | 319 |
Weighted Average Exercise Price | |
Weighted average exercise price outstanding beginning balance | $15.42 |
Weighted average exercise price exercised | $7.88 |
Weighted average exercise price expired | $18.98 |
Weighted average exercise price outstanding ending balance | $15.47 |
Weighted average exercise price exercisable | $15.47 |
Additional Disclosures | |
Weighted average remaining contractual term outstanding | 3 years 10 months 2 days |
Weighted average remaining contractual term exercisable | 3 years 10 months 2 days |
Stock_Based_Compensation_Expen2
Stock Based Compensation Expense (Details 3) (Stock Option, Equity Plan [Member], USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Stock Option | Equity Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Intrinsic value of options exercised | $124 | $590 | $2,376 |
Total fair value of restricted stock units vested (intrinsic value) | $4,962 | $3,884 | $3,189 |
Stock_Based_Compensation_Expen3
Stock Based Compensation Expense (Details 4) (USD $) | 0 Months Ended | 12 Months Ended |
In Millions, except Share data, unless otherwise specified | Aug. 01, 2014 | Dec. 31, 2014 |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||
RSUs received in Spin-Off conversion | 1.71 | |
Restricted Stock Units (RSUs) | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||
Unrecognized stock based compensation, net of forfeitures | $10.30 | |
Nonvested awards period of recognition | 3 years 1 month 6 days | |
Restricted Stock Units (RSUs) | Equity Plan [Member] | ||
Non-option rollforward | ||
Outstanding beginning balance | 679,000 | |
Granted | 907,000 | |
Vested | -302,000 | |
Cancelled | -111,000 | |
Outstanding ending balance | 1,173,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Weighted average share value outstanding beginning balance | $24.54 | |
Weighted average share value granted | $11.33 | |
Weighted average share value vested and released | $23.16 | |
Weighted average share value cancelled | $22.61 | |
Weighted average share value outstanding ending balance | $14.86 | |
Demand Media | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||
RSUs Given Up in Spin-Off conversion | 5 |
Business_Segments_Details
Business Segments (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
segment | |||||||||||
Business Segments | |||||||||||
Number of Operating Segments | 1 | ||||||||||
Total Revenue | $51,733 | $48,774 | $46,689 | $44,552 | $45,572 | $45,506 | $48,217 | $45,897 | $191,748 | $185,192 | $172,968 |
Domain name services | |||||||||||
Business Segments | |||||||||||
Total Revenue | 161,585 | 141,558 | 126,854 | ||||||||
Aftermarket and other | |||||||||||
Business Segments | |||||||||||
Total Revenue | $30,163 | $43,634 | $46,114 |
Transactions_with_Related_Part2
Transactions with Related Parties and Parent Company Investment (Details) (USD $) | 7 Months Ended | 12 Months Ended | ||
In Thousands, unless otherwise specified | Jul. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 |
Related Party Transaction [Line Items] | ||||
Net decrease in parent company investment | ($28,043) | $38,255 | $64,975 | |
Demand Media | ||||
Related Party Transaction [Line Items] | ||||
Allocated expenses | 36,301 | 32,040 | 21,510 | |
Demand Media | Sales and marketing | ||||
Related Party Transaction [Line Items] | ||||
Allocated expenses | 2,083 | 2,560 | 1,499 | |
Demand Media | Service Costs | ||||
Related Party Transaction [Line Items] | ||||
Allocated expenses | 5,500 | 6,900 | 800 | |
Demand Media | Technology and development | ||||
Related Party Transaction [Line Items] | ||||
Allocated expenses | 13,312 | 11,257 | 8,511 | |
Demand Media | General and administrative | ||||
Related Party Transaction [Line Items] | ||||
Allocated expenses | $20,906 | $18,223 | $11,500 |
Fair_Value_of_Financial_Instru2
Fair Value of Financial Instruments (Detail) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
In Thousands, unless otherwise specified | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Cash and cash equivalents | $49,743 | $66,833 | $40,593 | $10,985 |
Fair Value, Measurements, Recurring [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Marketable securities | 906 | |||
Assets, Fair Value Disclosure, Total | 69,302 | |||
Debt Instrument, Fair Value Disclosure | 25,105 | |||
Fair Value, Measurements, Recurring [Member] | Level 1 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Marketable securities | 906 | |||
Assets, Fair Value Disclosure, Total | 69,302 | |||
Fair Value, Measurements, Recurring [Member] | Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Debt Instrument, Fair Value Disclosure | 25,105 | |||
Money Market Funds | Fair Value, Measurements, Recurring [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Cash and cash equivalents | 49,743 | 66,833 | ||
Money Market Funds | Fair Value, Measurements, Recurring [Member] | Level 1 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Cash and cash equivalents | 49,743 | 66,833 | ||
Demand Deposit Account | Fair Value, Measurements, Recurring [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Restricted Cash and Cash Equivalents | 1,563 | |||
Demand Deposit Account | Fair Value, Measurements, Recurring [Member] | Level 1 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Restricted Cash and Cash Equivalents | $1,563 |
Earnings_loss_Per_Share_Detail
Earnings (loss) Per Share (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 01, 2014 | Jul. 31, 2014 |
Net income (loss) | $1,456 | $4,097 | ($3,490) | ($3,921) | ($5,725) | ($2,562) | ($682) | ($1,734) | ($1,858) | ($10,703) | ($989) | ||
Weighted average number of shares outstanding | |||||||||||||
Weighted average shares outstanding, basic | 18,452,000 | 18,413,000 | 18,413,000 | ||||||||||
Weighted average shares outstanding, diluted | 18,452,000 | 18,413,000 | 18,413,000 | ||||||||||
Net income (loss) per share attributable to common | |||||||||||||
Net loss per share attributable to common stockholders - Basic (in earnings per share) | $0.08 | $0.22 | ($0.19) | ($0.21) | ($0.31) | ($0.14) | ($0.04) | ($0.09) | ($0.10) | ($0.58) | ($0.05) | ||
Net loss per share attributable to common stockholders - Diluted (in earnings per share) | $0.08 | $0.22 | ($0.19) | ($0.21) | ($0.31) | ($0.14) | ($0.04) | ($0.09) | ($0.10) | ($0.58) | ($0.05) | ||
Shares issued | 18,661,000 | 0 | 18,661,000 | 0 | 18,400,000 | 1,000 | |||||||
Common stock par value (in dollars per share) | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||||
Shares outstanding | 18,661,000 | 0 | 18,661,000 | 0 | 18,400,000 | 1,000 | |||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | |||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 32,600 | 0 | 0 | ||||||||||
Tennebaum Credit Facility warrants | |||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | |||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $15.05 | $15.05 |
Business_Acquisitions_Details
Business Acquisitions (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Business Acquisition [Line Items] | |||
Tax deductible amount of goodwill | $9,700,000 | ||
Owned website names | |||
Business Acquisition [Line Items] | |||
Useful life | 4 years | 4 years 2 months 12 days | |
Noncompete agreements | |||
Business Acquisition [Line Items] | |||
Useful life | 5 years | 5 years | |
Trade names | |||
Business Acquisition [Line Items] | |||
Useful life | 18 years 3 months 18 days | 18 years 3 months 18 days | |
Name.com | |||
Business Acquisition [Line Items] | |||
Purchase price | 18,000,000 | ||
Cash payments | 18,000,000 | ||
Purchase consideration, cash | 16,200,000 | ||
Contingent consideration liability | $1,800,000 | ||
Maximum period to payoff the hold back | 18 months | ||
Name.com | Owned website names | |||
Business Acquisition [Line Items] | |||
Useful life | 3 years | ||
Name.com | Developed technology and customer relationships | |||
Business Acquisition [Line Items] | |||
Useful life | 4 years | ||
Name.com | Noncompete agreements | |||
Business Acquisition [Line Items] | |||
Useful life | 5 years | ||
Name.com | Trade names | |||
Business Acquisition [Line Items] | |||
Useful life | 10 years |
Business_Acquisitions_Details_
Business Acquisitions (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Business Acquisition [Line Items] | |||
Goodwill | $103,042,000 | $103,042,000 | $103,144,000 |
Working capital adjustment | 100,000 | 700,000 | 1,800,000 |
Cash paid for acquisition holdback | -1,042,000 | -650,000 | |
Supplemental Pro forma Information | |||
Revenue | 190,594,000 | ||
Net income | 828,000 | ||
Name.com | |||
Business Acquisition [Line Items] | |||
Goodwill | 10,313,000 | ||
Other assets acquired and liabilities assumed, net | -470,000 | ||
Total | 18,000,000 | ||
Contingent consideration liability | 1,800,000 | ||
Name.com | Customer relationships | |||
Business Acquisition [Line Items] | |||
Intangible assets | 5,094,000 | ||
Name.com | Owned website names | |||
Business Acquisition [Line Items] | |||
Intangible assets | 1,885,000 | ||
Name.com | Trade names | |||
Business Acquisition [Line Items] | |||
Intangible assets | 897,000 | ||
Name.com | Noncompete agreements | |||
Business Acquisition [Line Items] | |||
Intangible assets | 205,000 | ||
Name.com | Technology | |||
Business Acquisition [Line Items] | |||
Intangible assets | $76,000 |
Concentrations_Details
Concentrations (Details) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cost Of Registered Names | Critically needed services risk | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 76.00% | 83.00% | 82.00% |
Cash And Cash Equivalents And Marketable Securities | Credit concentration risk | U.S. financial institutions | |||
Concentration Risk [Line Items] | |||
Number of financial institutions where deposits are held | 1 | ||
Cash And Cash Equivalents And Marketable Securities | Credit concentration risk | Foreign Banks | |||
Concentration Risk [Line Items] | |||
Number of financial institutions where deposits are held | 1 | ||
Revenue from advertising network partners | Customer risk | |||
Concentration Risk [Line Items] | |||
Number of advertising network partners | 2 | ||
Revenues | Customer risk | Advertising network partner A | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 11.00% | 12.00% | 14.00% |
Revenues | Customer risk | Registrar partner | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 17.00% | 14.00% | 12.00% |
Accounts receivable | Credit concentration risk | Advertising network partner A | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 14.00% | 14.00% | |
Accounts receivable | Credit concentration risk | Registrar partner | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 18.00% | 26.00% |
Quarterly_Financial_Informatio2
Quarterly Financial Information (Unaudited) (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Quarterly Financial Information (Unaudited) | |||||||||||
Revenue | $51,733 | $48,774 | $46,689 | $44,552 | $45,572 | $45,506 | $48,217 | $45,897 | $191,748 | $185,192 | $172,968 |
Income (loss) before income taxes | 1,778 | 2,489 | -4,896 | -2,557 | -4,739 | -3,928 | -642 | -2,338 | -3,186 | -11,647 | -1,151 |
Net income (loss) | $1,456 | $4,097 | ($3,490) | ($3,921) | ($5,725) | ($2,562) | ($682) | ($1,734) | ($1,858) | ($10,703) | ($989) |
Net income (loss) per share attributable to common stockholders: | |||||||||||
Net loss per share attributable to common stockholders - Basic (in earnings per share) | $0.08 | $0.22 | ($0.19) | ($0.21) | ($0.31) | ($0.14) | ($0.04) | ($0.09) | ($0.10) | ($0.58) | ($0.05) |
Net loss per share attributable to common stockholders - Diluted (in earnings per share) | $0.08 | $0.22 | ($0.19) | ($0.21) | ($0.31) | ($0.14) | ($0.04) | ($0.09) | ($0.10) | ($0.58) | ($0.05) |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||
Feb. 04, 2015 | Feb. 27, 2015 | Dec. 31, 2014 | Oct. 31, 2014 | |
Subsequent events | ||||
Note receivable | $2,500,000 | |||
Namecheap | Six-month LIBOR | ||||
Subsequent events | ||||
Note receivable | 2,500,000 | 2,500,000 | ||
Subsequent Event | Namecheap | ||||
Subsequent events | ||||
Automatic maturity extension period unless at least 30 day notice of non-renewal | 1 year | |||
Subsequent Event | Namecheap | Six-month LIBOR | ||||
Subsequent events | ||||
Note receivable | 1,000,000 | 1,000,000 | ||
Proceeds from collection of loan receivable | 500,000 | $1,000,000 | $1,500,000 |