Press Ganey (PGND) 10-Q 2 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 29, 2016
Document and Entity Information
Entity Registrant Name	Press Ganey Holdings, Inc.
Entity Central Index Key	1,633,142
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		53,040,092
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q2

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash	$ 46,383	$ 35,235
Accounts receivable, net of allowances of $821 and $774 at June 30, 2016 and December 31, 2015, respectively	53,627	53,568
Unbilled revenue	6,413	2,993
Prepaid expenses and other assets	5,495	4,603
Income taxes receivable	689	4,603
Total current assets	112,607	101,002
Property and equipment, net	58,133	60,262
Other non-current assets	2,799	897
Intangible assets, net	354,073	362,465
Goodwill	426,673	411,203
Total assets	954,285	935,829
Current liabilities:
Current portion of long-term debt	9,250	9,250
Current portion of capital lease obligations	4,852	4,626
Accounts payable	8,957	9,420
Accrued payroll and related liabilities	11,890	15,830
Accrued expenses and other liabilities	1,929	1,969
Deferred revenue	37,206	31,555
Total current liabilities	74,084	72,650
Long-term debt, less current portion	166,842	171,226
Capital lease obligations, less current portion	1,631	4,165
Deferred income taxes	122,749	125,179
Total liabilities	365,306	373,220
Commitments and contingencies
SHAREHOLDER’S EQUITY
Common stock, $0.01 par value; 350,000,000 shares authorized, 53,012,876 and 52,770,722 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively	530	528
Additional paid-in capital	608,897	598,575
Accumulated deficit	(20,448)	(36,494)
Total shareholder’s equity	588,979	562,609
Total liabilities and shareholder’s equity	$ 954,285	$ 935,829

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Condensed Consolidated Balance Sheets
Accounts receivable, allowances (in dollars)	$ 821	$ 774
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	53,012,876	52,770,722
Common stock, shares outstanding	53,012,876	52,770,722

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Condensed Consolidated Statements of Operations
Revenue	$ 91,240	$ 77,458	$ 177,971	$ 152,349
Operating expenses:
Cost of revenue	39,103	43,112	75,572	74,539
General and administrative	25,040	79,102	47,683	97,403
Depreciation and amortization	11,543	10,237	23,115	20,096
Loss (gain) on disposal of property and equipment	2	15	20	(31)
Total operating expenses	75,688	132,466	146,390	192,007
Income (loss) from operations	15,552	(55,008)	31,581	(39,658)
Other income (expense):
Interest expense, net	(1,136)	(3,775)	(2,366)	(8,354)
Extinguishment of debt		(638)		(638)
Management fee of related party		(267)		(553)
Total other income (expense), net	(1,136)	(4,680)	(2,366)	(9,545)
Income (loss) before income taxes	14,416	(59,688)	29,215	(49,203)
Provision for income taxes	6,489	(5,871)	13,169	(1,360)
Net income (loss)	$ 7,927	$ (53,817)	$ 16,046	$ (47,843)
Earnings (net loss) per share:
Basic (in dollars per share)	$ 0.15	$ (1.15)	$ 0.30	$ (1.06)
Diluted (in dollars per share)	$ 0.15	$ (1.15)	$ 0.30	$ (1.06)
Weighted average shares of common stock outstanding:
Basic (in shares)	52,917,288	46,802,915	52,861,826	45,058,057
Diluted (in shares)	53,463,577	46,802,915	53,374,858	45,058,057

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Operating activities
Net income (loss)	$ 16,046	$ (47,843)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	23,115	20,096
Amortization of deferred financing costs and debt discount	340	354
Equity-based compensation	13,349	74,997
Excess tax benefits from equity awards	(703)
Extinguishment of debt		638
Provision for doubtful accounts	51	321
Loss (gain) on disposal of property and equipment	20	(31)
Deferred income taxes	(2,430)	(4,913)
Changes in assets and liabilities:
Accounts receivable	2,522	(3,508)
Unbilled revenue	(2,468)	(542)
Prepaid expenses and other assets	(354)	(2,911)
Accounts payable	(1,640)	(2,834)
Accrued payroll and related liabilities	(4,335)	(3,781)
Accrued expenses and other liabilities	(40)	36
Deferred revenue	3,992	10,589
Income taxes, net	4,617	(3,137)
Net cash provided by operating activities	52,082	37,531
Investing activities
Acquisition of business, net of cash acquired	(16,744)
Investment in unconsolidated affiliate	(2,000)
Capital expenditures	(12,231)	(15,179)
Net cash used in investing activities	(30,975)	(15,179)
Financing activities
Payments on long-term debt	(4,626)	(225,140)
Deferred financing payments		(50)
Payments on capital lease obligations	(2,308)	(2,190)
Proceeds from sale of equity interests		100
Purchases of equity interests	(787)	(731)
Taxes paid for net settlements of restricted stock vesting	(2,941)	(10,858)
Excess tax benefits from equity awards	703
Distribution payments		(8,500)
Proceeds from the issuance of common stock in initial public offering, net of fees		237,977
Net cash used in financing activities	(9,959)	(9,392)
Net increase in cash	11,148	12,960
Cash at beginning of period	35,235	6,962
Cash at end of period	46,383	19,922
Supplemental disclosure of cash flow information
Cash paid during the period for interest	2,151	8,006
Cash paid during the period for income taxes	10,901	6,635
Disposal of property and equipment acquired through capital leases		283
Property and equipment acquired through capital leases		2,156
Capital expenditures in accounts payable	$ 2,670	2,069
Initial public offering related costs in accounts payable		$ 3,426

Basis of Presentation of Interi

Basis of Presentation of Interim Financial Information	6 Months Ended
	Jun. 30, 2016
Basis of Presentation of Interim Financial Information
Basis of Presentation of Interim Financial Information	1. Basis of Presentation of Interim Financial Information Press Ganey Holdings, Inc. (the “Company”) is a leading provider of patient experience and caregiver measurement, performance analytics and strategic advisory solutions for healthcare organizations across the continuum of care. The consolidated financial statements include the financial statements of Press Ganey Holdings, Inc. and its wholly owned subsidiary, Press Ganey Associates (“Associates”), and Associates’ wholly owned subsidiaries, PatientImpact LLC; Data Advantage LLC; Center for Performance Services, Inc.; Morehead Associates, Inc.; On The Spot Systems, Inc.; Dynamic Clinical Systems, Inc.; Healthcare Performance Improvement, LLC; Avatar International Holding Company and Avatar International, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Prior to the initial public offering (discussed below), the Company was a wholly owned subsidiary of PG Holdco, LLC (the “Parent”). Effective May 8, 2015, the name of the Company was changed from PGA Holdings, Inc. to Press Ganey Holdings, Inc. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring accruals necessary to present fairly the financial statements in accordance with GAAP. Operating results for the three and six months ended June 30, 2016 and 2015 are not necessarily indicative of results to be expected for any other interim period or for the full year. The preparation of the consolidated financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could materially differ from those estimates. Initial Public Offering In May 2015, the Company completed its initial public offering (the “IPO”) of 8,900,000 shares of common stock and, upon the underwriters’ exercise of their option to purchase additional shares, issued an additional 1,335,000 shares for a total of 10,235,000 shares issued at an offering price of $25.00 per share. Proceeds from the IPO were approximately $234.4 million, net of underwriting discounts and commissions and offering-related transaction costs incurred. In connection with the IPO: (i) the Parent was liquidated and its sole asset, the shares of the Company’s common stock, was distributed to the equity holders based on their relative rights under the limited liability company agreement, (ii) the Company recognized $70.4 million of equity-based compensation expense for the modification of certain units of the Parent, (iii) the Company paid a one-time transaction advisory fee of $8.5 million to Vestar Capital Partners, LLC (“Vestar”), and (iv) the Company recognized a loss on extinguishment of debt of $638,000 related to the write-off of deferred financing fees, loss on original issue discount and lender fees as a result of the $223.0 million partial repayment of its term loan facility with proceeds of the IPO. Stock Split On May 8, 2015, the Company’s common stock was split at a 2,800 -for-one ratio. The authorized shares were increased to 350.0 million. Accordingly, all references to numbers of common shares and per-share data in the accompanying unaudited condensed consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis. Preferred Stock On May 27, 2015, the Company amended and restated its certificate of incorporation to, among other things, authorize 50.0 million shares of preferred stock with a par value of $0.01 .

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2016
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies A complete listing of the Company’s significant accounting policies is discussed in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014 ‑09, “Revenue from Contracts with Customers (Topic 606).” This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. In August 2015, the FASB deferred the effective date by one year to annual and interim reporting periods beginning after December 15, 2017. The FASB is permitting early adoption of the standard, but not until annual and interim reporting periods beginning after December 15, 2016, the original effective date. An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the implementation guidance on principal versus agent considerations of ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which clarifies the identification of performance obligations and the licensing implementation guidance of ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” which provides clarification on certain revenue recognition criteria of ASU 2014-09. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption. In February 2016, the FASB issued ASU 2016-02, “Leases.” This ASU requires that a lessee record an operating lease in the balance sheet with a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Adoption of this standard will be on a modified retrospective approach, which includes a number of optional practical expedients that the Company may elect to apply. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, treatment of forfeitures and classification on the statement of cash flows. This standard is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements.

Property and Equipment

Property and Equipment	6 Months Ended
	Jun. 30, 2016
Property and Equipment
Property and Equipment	3. Property and Equipment Property and equipment, net consist of the following: June 30, December 31, 2016 2015 Furniture, fixtures, and leasehold improvements $ $ Office equipment Office equipment held under capital lease Computer equipment and software Development and construction in progress Accumulated amortization of office equipment held under capital leases Accumulated depreciation $ $ Depreciation and amortization of property and equipment was $7.3 million and $6.1 million for the three months ended June 30, 2016 and 2015 , respectively, and $14.7 million and $11.8 million for the six months ended June 30, 2016 and 2015 , respectively.

Investment in Unconsolidated Af

Investment in Unconsolidated Affiliate	6 Months Ended
	Jun. 30, 2016
Investments in and Advances to Affiliates, Schedule of Investments
Investment in Unconsolidated Affiliate	4. Investment in Unconsolidated Affiliate On April 28, 2016, the Company invested $2.0 million for a noncontrolling interest in Binary Fountain, Inc. (“Binary Fountain”). The Company does not exercise significant influence over Binary Fountain and is not the primary beneficiary of Binary Fountain’s activities, and, therefore, has accounted for this investment under the cost method. The fair value of cost method investments is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. The investment in Binary Fountain is included in other non-current assets in the Condensed Consolidated Balance Sheet as of June 30, 2016.

Fair Value Measurements

Fair Value Measurements	6 Months Ended
	Jun. 30, 2016
Fair Value Measurements
Fair Value Measurements	5. Fair Value Measurements Financial Instruments The recorded values of accounts receivable, accounts payable, and other liabilities approximate fair value because of the short maturity of these financial instruments. The recorded value of the variable rate Term Loan (as defined below) approximates fair value because the interest rate fluctuates with market rates.

Business Combination

Business Combination	6 Months Ended
	Jun. 30, 2016
Business Combination
Business Combination	6. Business Combination Avatar International Holding Company and Avatar International LLC On May 2, 2016, the Company acquired Avatar International Holding Company and its subsidiary Avatar International LLC (“Avatar”). Avatar was a competitor in the patient experience and caregiver engagement markets. The purchase price for Avatar was $16.7 million, net of cash acquired. The acquisition was accounted for under the purchase method of accounting and the total purchase price was allocated to the net tangible and identifiable intangible assets based on their estimated fair values (based on Level 3 measurements) as of May 2, 2016. The excess purchase price over the net tangible and intangible assets was preliminarily recorded to goodwill as the valuation of such assets has not yet been completed. Estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company is waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. The following table summarizes the preliminary allocation of the fair value of the acquisition: Accounts receivable $ Unbilled revenue Other current assets Property and equipment Goodwill and intangible assets Total assets acquired Liabilities assumed: Deferred revenue Other current liabilities Net assets acquired $ Transaction expenses of $934,000 and $969,000 relating to the purchase are included in general and administrative expenses for the three and six months ended June 30, 2016, respectively.

Intangible Assets

Intangible Assets	6 Months Ended
	Jun. 30, 2016
Intangible Assets
Intangible Assets	7. Intangible Assets Intangible assets consist of the following: June 30, 2016 December 31, 2015 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Trade name (indefinite life) $ $ — $ $ $ — $ Trade names (finite life) Customer relationships Proprietary technology Other $ $ $ $ $ $ Intangible asset amortization expense was $4.2 million and $4.1 million for the three months ended June 30, 2016 and 2015, respectively. Intangible asset amortization expense was $8.4 million and $8.3 million for the six months ended June 30, 2016 and 2015 , respectively.

Revolving Line of Credit and Lo

Revolving Line of Credit and Long Term Debt	6 Months Ended
	Jun. 30, 2016
Revolving Line of Credit and Long Term Debt
Revolving Line of Credit and Long Term Debt	8. Revolving Line of Credit and Long ‑Term Debt As of June 30, 2016 and December 31, 2015 , the Company’s long ‑term debt consisted of the following: June 30, December 31, 2016 2015 Term Loan $ $ Unamortized deferred financing fees Less current portion Long-term debt $ $ Unamortized deferred financing fees related to the Company’s Revolving Credit Facility (as defined below) were $799,000 and $897,000 at June 30, 2016 and December 31, 2015 , respectively, and are classified as other non-current assets in the condensed consolidated balance sheets. 2015 Credit Agreement On July 31, 2015, the Company entered into a new credit agreement (“2015 Credit Agreement”). The 2015 Credit Agreement consists of a five -year $185.0 million term loan (“Term Loan”) and a five -year $75.0 million revolving credit facility (“Revolving Credit Facility”). The Company used the proceeds from the Term Loan to repay the outstanding balance on its previous term loan of $183.2 million. At the discretion of the Company, interest accrues on outstanding borrowings under the 2015 Credit Agreement at either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin, currently 1.50% , or the adjusted base rate (“ABR”) plus an applicable margin, currently 0.50% . The applicable margins for both the LIBOR and ABR are variable based upon stipulated ranges of the secured net leverage ratio, as defined in the agreement. The Company is required to repay the outstanding principal amount of the Term Loan in equal quarterly amounts of $2.3 million. The remaining Term Loan balance and any outstanding balances on the Revolving Credit Facility will be due upon maturity on July 31, 2020. The Term Loan and Revolving Credit Facility are secured by substantially all of the assets of the Company. There were no borrowings outstanding on the Revolving Credit Facility at June 30, 2016 . The Company is charged a loan commitment fee, currently 0.375% , for unused amounts on the Revolving Credit Facility. The 2015 Credit Agreement contains certain restrictive and financial covenants which the Company must comply with on a quarterly basis, including a maximum secured net leverage ratio, as defined in the agreement. The Company is also limited in its ability to incur additional indebtedness or liens; pay dividends or make certain other restricted payments, enter into certain transactions with affiliates, merge or consolidate with another entity; or sell, assign, transfer, convey, or otherwise dispose of all or substantially all of its assets. The Company was in compliance with these restrictive and financial covenants as of June 30, 2016 .

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2016
Income Taxes
Income Taxes	9. Income Taxes For the three and six months ended June 30, 2016 , the Company recorded income tax expense of $ 6. 5 million and $13.2 million, respectively, compared to an income tax benefit of $ 5 .9 million and $1.4 million for the three and six months ended June 30, 2015, respectively . The Company’s effective tax rate was 45.0 % and 45.1% for the three and six months ended June 30, 2016, respectively, compared to 9.8 % and 2.8% for the three and six months ended June 30, 2015, respectively . The effective tax rate for the three and six months ended June 30, 2016 differs from the U.S. statutory rate primarily due to the impact of state tax rates and nondeductible equity-based compensation expense. The lower effective tax rate for the three and six months ended June 30, 2015 primarily reflects the inability to realize a tax benefit from nondeductible equity-based compensation expense incurred in connection with the modification of equity awards as a result of the Company’s IPO.

Segment Information

Segment Information	6 Months Ended
	Jun. 30, 2016
Segment Information
Segment Information	10. Segment Information An operating segment is a component of an enterprise that engages in business activities and has discrete financial information that is regularly reviewed by the enterprise’s chief operating decision maker to assess performance of the individual component and make decisions about allocating resources to the component. The Company produces one set of financial information at the enterprise level that is regularly reviewed by the Company’s chief operating decision maker. Discrete financial information is not produced or reviewed by the Company’s chief operating decision maker at a level lower than the enterprise level. As such, the Company has one operating segment as of June 30, 2016 and 2015 . The Company’s identifiable assets are located in the United States and over 99% of the Company’s revenues are from clients located in the United States.

Related Party Transactions

Related Party Transactions	6 Months Ended
	Jun. 30, 2016
Related Party Transactions
Related Party Transactions	11. Related Party Transactions The Company was charged an annual management fee that was payable quarterly to its majority shareholder, Vestar Capital Partners, LLC (“Vestar”). The management agreement was terminated and the annual management fee was no longer required after the effective date of the IPO. The Company incurred management fees of $0 and $267,000 for the three months ended June 30, 2016 and 2015 , respectively, and $0 and $553,000 for the six months ended June 30, 2016 and 2015, respectively . In connection with the IPO, the Company paid a one-time transaction advisory fee to Vestar of $8.5 million. This fee was reflected as a distribution payment on the condensed consolidated statement of cash flows for the six months ended June 30, 2015.

Equity-Based Compensation

Equity-Based Compensation	6 Months Ended
	Jun. 30, 2016
Equity-Based Compensation
Equity-Based Compensation	12. Equity-Based Compensation The Company measures its equity-based compensation expense based on the grant date fair value of the awards and recognizes this expense in the consolidated financial statements over the requisite service or performance vesting period. Total equity-based compensation expense recorded in the condensed consolidated statements of operations for the periods indicated is as follows: Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of revenue $ $ $ $ General and administrative Total equity-based compensation expense $ $ $ $ Parent Equity-Based Compensation Plan The Company’s former parent company, PG Holdco, LLC, had adopted an equity-based compensation plan (the “Parent Plan”), which authorized the granting of various equity awards of the Parent’s Preferred units, Class A common units, Class B common units, and Class C common units to employees and directors of the Company. The awards of the Parent were recorded as compensation expense in the accounts of the Company because the recipients are employees and directors of the Company. 2015 Incentive Award Plan The Company’s 2015 Incentive Award Plan (the “2015 Plan”) provides for the grant of stock options, restricted stock, dividend equivalents, stock payments, restricted stock units, stock appreciation rights, and other stock or cash based awards. The 2015 Plan authorized 7,120,000 shares of common stock for issuance pursuant to awards under the plan. Restricted Stock A summary of restricted stock activity during the six months ended June 30, 2016 , is as follows: Weighted Average Fair Value at Grant Shares Date Nonvested at January 1, 2016 $ Granted Vested Forfeited Nonvested at June 30, 2016 $ During six months ended June 30, 2016 , the Company granted 340,291 shares of restricted stock with four-year graded vesting (20% for years 1-2, 30% for years 3-4) based on service conditions and 267,530 shares of restricted stock with three-year cliff vesting based on performance conditions. As of June 30, 2016 , there was $48.5 million of unrecognized pre-tax compensation expense related to nonvested restricted stock, which is expected to be recognized over a weighted average period of 2.6 years. The Company realized $703,000 of excess tax benefits related to equity awards during the six months ended June 30, 2016, which was recorded as an increase to additional paid-in capital. During the six months ended June 30, 2016 , the Company purchased $787,000 of unvested equity interests related to awards that were modified at the IPO. Stock Options A summary of stock option activity during the six months ended June 30, 2016 , is as follows: Weighted Average Exercise Options Price Outstanding at January 1, 2016 $ Granted Exercised — — Forfeited — — Outstanding at June 30, 2016 $ Exercisable at June 30, 2016 — $ — During the six months ended June 30, 2016 , the Company granted options to purchase 812,119 shares of the Company’s common stock with four-year graded vesting (20% for years 1-2, 30% for years 3-4) based on service vesting. Options to purchase shares of common stock were granted with exercise prices equal to the fair value of the common stock on the date of grant. The fair value of the stock options granted was estimated using a Black-Scholes valuation model. The weighted average fair value of the options granted during the six months ended June 30, 2016 is estimated at $11.05 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.4%; an expected term of approximately six years; expected volatility of 41.5%; and dividend yield of 0.0% over the expected life of the option. The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was based on historical volatility of several peer companies to the Company for periods equal to the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. As of June 30, 2016 , there was $7.3 million of unrecognized pre-tax compensation expense related to stock options, which is expected to be recognized over a weighted average period of 3.7 years .

Earnings Per Share

Earnings Per Share	6 Months Ended
	Jun. 30, 2016
Earnings Per Share
Earnings Per Share	13. Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury stock method. Common equivalent shares consist of common stock issuable on the vesting of restricted stock units and exercise of outstanding options when dilutive. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net income (loss) $ $ $ $ Weighted average shares outstanding, basic Weighted average common equivalent shares — — Weighted average shares outstanding, diluted Net earnings (loss) per share Basic $ $ $ $ Diluted $ $ $ $ Equity instruments excluded from diluted net earnings (loss) per share calculation as the effect would have been anti-dilutive: Restricted stock — —

Basis of Presentation of Inte19

Basis of Presentation of Interim Financial Information (Policies)	6 Months Ended
	Jun. 30, 2016
Basis of Presentation of Interim Financial Information
Basis of Presentation of Interim Financial Information	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal and recurring accruals necessary to present fairly the financial statements in accordance with GAAP. Operating results for the three and six months ended June 30, 2016 and 2015 are not necessarily indicative of results to be expected for any other interim period or for the full year. The preparation of the consolidated financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could materially differ from those estimates.

Summary of Significant Accoun20

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2016
Summary of Significant Accounting Policies
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014 ‑09, “Revenue from Contracts with Customers (Topic 606).” This ASU requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. In August 2015, the FASB deferred the effective date by one year to annual and interim reporting periods beginning after December 15, 2017. The FASB is permitting early adoption of the standard, but not until annual and interim reporting periods beginning after December 15, 2016, the original effective date. An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the implementation guidance on principal versus agent considerations of ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which clarifies the identification of performance obligations and the licensing implementation guidance of ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” which provides clarification on certain revenue recognition criteria of ASU 2014-09. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements and its method of adoption. In February 2016, the FASB issued ASU 2016-02, “Leases.” This ASU requires that a lessee record an operating lease in the balance sheet with a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Adoption of this standard will be on a modified retrospective approach, which includes a number of optional practical expedients that the Company may elect to apply. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, treatment of forfeitures and classification on the statement of cash flows. This standard is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently in the process of evaluating the impact that this new guidance will have on its consolidated financial statements.

Property and Equipment (Tables)

Property and Equipment (Tables)	6 Months Ended
	Jun. 30, 2016
Property and Equipment
Schedule of Property and equipment, net	June 30, December 31, 2016 2015 Furniture, fixtures, and leasehold improvements $ $ Office equipment Office equipment held under capital lease Computer equipment and software Development and construction in progress Accumulated amortization of office equipment held under capital leases Accumulated depreciation $ $

Business Combination (Tables)

Business Combination (Tables)	6 Months Ended
	Jun. 30, 2016
Business Combination
Schedule of allocation of the fair value of the acquisition	Accounts receivable $ Unbilled revenue Other current assets Property and equipment Goodwill and intangible assets Total assets acquired Liabilities assumed: Deferred revenue Other current liabilities Net assets acquired $

Intangible Assets (Tables)

Intangible Assets (Tables)	6 Months Ended
	Jun. 30, 2016
Intangible Assets
Schedule of intangible assets	June 30, 2016 December 31, 2015 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Trade name (indefinite life) $ $ — $ $ $ — $ Trade names (finite life) Customer relationships Proprietary technology Other $ $ $ $ $ $

Revolving Line of Credit and 24

Revolving Line of Credit and Long Term Debt (Tables)	6 Months Ended
	Jun. 30, 2016
Revolving Line of Credit and Long Term Debt
Schedule of long-term debt	June 30, December 31, 2016 2015 Term Loan $ $ Unamortized deferred financing fees Less current portion Long-term debt $ $

Equity-Based Compensation (Tabl

Equity-Based Compensation (Tables)	6 Months Ended
	Jun. 30, 2016
Equity-Based Compensation
Schedule of equity-based compensation expense in condensed consolidated statements of operations	Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of revenue $ $ $ $ General and administrative Total equity-based compensation expense $ $ $ $
Schedule of changes in nonvested restricted stock	Weighted Average Fair Value at Grant Shares Date Nonvested at January 1, 2016 $ Granted Vested Forfeited Nonvested at June 30, 2016 $
Schedule of stock option activity	Weighted Average Exercise Options Price Outstanding at January 1, 2016 $ Granted Exercised — — Forfeited — — Outstanding at June 30, 2016 $ Exercisable at June 30, 2016 — $ —

Earnings Per Share (Tables)

Earnings Per Share (Tables)	6 Months Ended
	Jun. 30, 2016
Earnings Per Share
Schedule of basic and diluted earnings (net loss) per share	Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net income (loss) $ $ $ $ Weighted average shares outstanding, basic Weighted average common equivalent shares — — Weighted average shares outstanding, diluted Net earnings (loss) per share Basic $ $ $ $ Diluted $ $ $ $ Equity instruments excluded from diluted net earnings (loss) per share calculation as the effect would have been anti-dilutive: Restricted stock — —

Basis of Presentation of Inte27

Basis of Presentation of Interim Financial Information - Initial Public Offering (Details) - USD ($) $ / shares in Units, shares in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	May 31, 2015	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Initial Public Offering
IPO related costs incurred but not yet paid				$ 3,426,000
Equity-based compensation			$ 13,349,000	74,997,000
Loss on extinguishment of debt		$ 638,000		638,000
Transaction Advisory Fee | Vestar
Initial Public Offering
Transaction advisory fee				$ 8,500,000
IPO
Initial Public Offering
Equity-based compensation	$ 70,400,000
IPO | Term Loan
Initial Public Offering
Loss on extinguishment of debt	638,000
Partial debt repayment	223,000,000
IPO | Transaction Advisory Fee | Vestar
Initial Public Offering
Transaction advisory fee	$ 8,500,000
IPO | Common
Initial Public Offering
Shares issued in offering	10,235
Share price (in dollars per share)	$ 25
Proceeds from the issuance of common stock in initial public offering, net of fees	$ 234,400,000
IPO, excluding Underwriters' Option | Common
Initial Public Offering
Shares issued in offering	8,900
Underwriters' Option | Common
Initial Public Offering
Shares issued in offering	1,335

Basis of Presentation of Inte28

Basis of Presentation of Interim Financial Information - Stock Split and Preferred Stock (Details)	May 08, 2015shares	Jun. 30, 2016shares	Dec. 31, 2015shares	May 27, 2015$ / sharesshares
Stock split
Common stock, shares authorized		350,000,000	350,000,000
Preferred Stock
Preferred, shares authorized				50,000,000
Preferred, par value (in dollars per share) | $ / shares				$ 0.01
Common
Stock split
Stock split, conversion ratio	2,800
Common stock, shares authorized	350,000,000

Property and Equipment - Compon

Property and Equipment - Components (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property and equipment, net
Property and equipment, gross	$ 146,957	$ 139,395
Accumulated amortization on office equipment held under capital leases	(12,499)	(10,143)
Accumulated depreciation	(76,325)	(68,990)
Property and equipment, net	58,133	60,262
Furniture, fixtures, and leasehold improvements
Property and equipment, net
Property and equipment, gross	9,030	9,431
Office equipment
Property and equipment, net
Property and equipment, gross	18,444	19,619
Office equipment held under capital lease
Property and equipment, net
Property and equipment, gross	20,952	20,916
Computer equipment and software
Property and equipment, net
Property and equipment, gross	85,627	74,844
Construction in progress
Property and equipment, net
Property and equipment, gross	$ 12,904	$ 14,585

Property and Equipment - Deprec

Property and Equipment - Depreciation (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Depreciation and amortization
Depreciation and amortization	$ 7.3	$ 6.1	$ 14.7	$ 11.8

Investment in Unconsolidated 31

Investment in Unconsolidated Affiliate (Details) $ in Millions	Apr. 28, 2016USD ($)
Binary Fountain, Inc.
Investment in unconsolidated affiliate
Cost method investment	$ 2

Business Combination - Avatar (

Business Combination - Avatar (Details) - USD ($)	May 02, 2016	Jun. 30, 2016	Jun. 30, 2016
Business Acquisitions
Purchase price, net of cash acquired			$ 16,744,000
Avatar
Business Acquisitions
Purchase price, net of cash acquired	$ 16,700,000
Avatar | Level 3
Preliminary allocation of fair value of the acquisition:
Accounts receivable	2,632,000
Unbilled revenue	952,000
Other current assets	538,000
Property and equipment	495,000
Goodwill and intangible assets	15,470,000
Total assets acquired	20,087,000
Liabilities assumed:
Deferred revenue	(1,659,000)
Other current liabilities	(1,684,000)
Net assets acquired	$ 16,744,000
General and administrative | Avatar
Other information
Transaction expenses		$ 934,000	$ 969,000

Intangible Assets - Intangibles

Intangible Assets - Intangibles, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets, Net
Accumulated Amortization	$ (121,377)	$ (112,985)
Intangible Assets, Net (Excluding Goodwill)
Gross Carrying Value	475,450	475,450
Accumulated Amortization	(121,377)	(112,985)
Intangible assets, net	354,073	362,465
Trade names
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	2,410	2,410
Accumulated Amortization	(1,656)	(1,509)
Intangible Assets, Net (finite life)	754	901
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(1,656)	(1,509)
Customer relationships
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	237,620	237,620
Accumulated Amortization	(101,343)	(94,851)
Intangible Assets, Net (finite life)	136,277	142,769
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(101,343)	(94,851)
Proprietary technology
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	32,240	32,240
Accumulated Amortization	(16,450)	(14,849)
Intangible Assets, Net (finite life)	15,790	17,391
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(16,450)	(14,849)
Other
Finite-Lived Intangible Assets, Net
Gross Carrying Value (finite life)	3,180	3,180
Accumulated Amortization	(1,928)	(1,776)
Intangible Assets, Net (finite life)	1,252	1,404
Intangible Assets, Net (Excluding Goodwill)
Accumulated Amortization	(1,928)	(1,776)
Trade names
Indefinite-Lived Intangible Assets (Excluding Goodwill)
Indefinite-lived intangible assets	$ 200,000	$ 200,000

Intangible Assets - Amortizatio

Intangible Assets - Amortization (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Amortization expense
Amortization expense	$ 4.2	$ 4.1	$ 8.4	$ 8.3

Revolving Line of Credit and 35

Revolving Line of Credit and Long Term Debt - Components (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Long-term debt
Less current portion	$ (9,250)	$ (9,250)
Long-term debt	166,842	171,226
2015 Credit Agreement
Long-term debt
Unamortized deferred financing fees	(1,970)	(2,212)
Total debt	176,092	180,476
Less current portion	(9,250)	(9,250)
Long-term debt	166,842	171,226
2015 Credit Agreement | Term Loan
Long-term debt
Long-term debt, gross	$ 178,062	$ 182,688

Revolving Line of Credit and 36

Revolving Line of Credit and Long Term Debt - Unamortized Deferred Financing Fees (Details) - 2015 Credit Agreement - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Long-term debt
Deferred financing fees, net	$ 1,970	$ 2,212
Revolving Credit Facility
Long-term debt
Deferred financing fees, net	$ 799	$ 897

Revolving Line of Credit and 37

Revolving Line of Credit and Long Term Debt - Terms (Details) - USD ($)	Jul. 31, 2015	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Long-term debt
Loss on extinguishment of debt		$ 638,000		$ 638,000
2015 Credit Agreement | LIBOR
Long-term debt
Variable rate, basis spread (as a percent)			1.50%
2015 Credit Agreement | Adjusted Base Rate (ABR)
Long-term debt
Variable rate, basis spread (as a percent)			0.50%
Term Loan | 2015 Credit Agreement
Long-term debt
Term of debt instrument	5 years
Face amount of debt	$ 185,000,000
Frequency of periodic payment			quarterly
Periodic payment required			$ 2,300,000
Long-term debt, amount outstanding			178,062,000		$ 182,688,000
Term Loan | First Lien Credit Agreement
Long-term debt
Payments on debt	$ 183,200,000
Revolving Credit Facility | 2015 Credit Agreement
Long-term debt
Term of debt instrument	5 years
Maximum borrowing capacity	$ 75,000,000
Long-term debt, amount outstanding			$ 0
Commitment fee, unused amounts (as a percent)			0.375%

Income Taxes - Effective Tax Ra

Income Taxes - Effective Tax Rate (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income tax expense
Income tax expense	$ 6,489	$ (5,871)	$ 13,169	$ (1,360)
Effective income tax reconciliation
Effective income tax rate, expense (benefit)	45.00%	9.80%	45.10%	2.80%

Segment Information (Details)

Segment Information (Details) - Operating - segment	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Segment Information
Number of operating segments	1	1
Revenues | Geographic Concentration Risk | US
Segment Information
Revenues by location, as a percent	99.00%	99.00%

Related Party Transactions - Ma

Related Party Transactions - Management Fees (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Related Party Transactions
Related party expenses		$ 267		$ 553
Vestar | Management Fees
Related Party Transactions
Related party expenses	$ 0	$ 267	$ 0	553
Vestar | Transaction Advisory Fee
Related Party Transactions
Transaction advisory fee				$ 8,500

Equity-Based Compensation - All

Equity-Based Compensation - Allocated Equity-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Equity-based compensation expense
Total equity-based compensation expense	$ 7,349	$ 73,033	$ 13,349	$ 74,997
Cost of revenue, excluding depreciation and amortization
Equity-based compensation expense
Total equity-based compensation expense	1,429	10,643	2,540	11,355
General and administrative
Equity-based compensation expense
Total equity-based compensation expense	$ 5,920	$ 62,390	$ 10,809	$ 63,642

Equity-Based Compensation - Res

Equity-Based Compensation - Restricted Stock (Details) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Nonvested awards
Equity interests purchased	$ 787,000	$ 731,000
2015 Plan
Equity-based compensation
Shares authorized for issuance	7,120,000
Restricted stock
Nonvested awards
Equity interests purchased	$ 787,000
Unrecognized compensation
Unrecognized compensation costs	$ 48,500,000
Unrecognized compensation costs, weighted average period for recognition	2 years 7 months 6 days
Excess tax benefit related to equity awards recorded as increase to additional paid-in capital	$ 703,000
Restricted stock | 4-year service vesting
Nonvested awards
Granted (in shares)	340,291
Restricted stock | Service vesting, year 1
Vesting terms
Vesting percentage	20.00%
Restricted stock | Service vesting, year 2
Vesting terms
Vesting percentage	20.00%
Restricted stock | Service vesting, year 3
Vesting terms
Vesting percentage	30.00%
Restricted stock | Service vesting, year 4
Vesting terms
Vesting percentage	30.00%
Restricted stock | 3-year performance vesting (cliff)
Nonvested awards
Granted (in shares)	267,530
Restricted stock | 2015 Plan
Nonvested awards
Nonvested at beginning of period (in shares)	2,255,681
Granted (in shares)	607,821
Vested (in shares)	(335,395)
Forfeited (in shares)	(22,119)
Nonvested at end of period (in shares)	2,505,988
Weighted Average Fair Value at Grant Date
Nonvested at beginning of period (in dollars per share)	$ 25.15
Granted (in dollars per share)	26.38
Vested (in dollars per share)	25
Forfeited (in dollars per share)	25.48
Nonvested at end of period (in dollars per share)	$ 25.47

Equity-Based Compensation - Sto

Equity-Based Compensation - Stock Options (Details) - Stock Options $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2016USD ($)$ / sharesshares
Stock Options
Outstanding at beginning of period (in shares) | shares	36,304
Grants (in shares) | shares	812,119
Outstanding at end of period (in shares) | shares	848,423
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share) | $ / shares	$ 31.74
Granted (in dollars per share) | $ / shares	26.36
Outstanding at end of period (in dollars per share) | $ / shares	26.59
Fair value assumptions, Black-Scholes valuation model
Weighted-average grant date fair value (in dollars per share) | $ / shares	$ 11.05
Risk-free interest rate (as a percent)	1.40%
Expected term (in years)	6 years
Expected volatility (as a percent)	41.50%
Dividend yield (as a percent)	0.00%
Unrecognized compensation
Unrecognized compensation costs | $	$ 7.3
Unrecognized compensation costs, weighted average period for recognition	3 years 8 months 12 days
4-year service vesting
Stock Options
Grants (in shares) | shares	812,119
Service vesting, year 1
Vesting terms
Vesting percentage	20.00%
Service vesting, year 2
Vesting terms
Vesting percentage	20.00%
Service vesting, year 3
Vesting terms
Vesting percentage	30.00%
Service vesting, year 4
Vesting terms
Vesting percentage	30.00%

Earnings Per Share (Details)

Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Computation of basic and diluted earnings per share
Net income (loss)	$ 7,927	$ (53,817)	$ 16,046	$ (47,843)
Weighted average shares outstanding, basic	52,917,288	46,802,915	52,861,826	45,058,057
Weighted average common equivalent shares	546,289		513,032
Weighted average shares outstanding, diluted	53,463,577	46,802,915	53,374,858	45,058,057
Net earnings (loss) per share
Basic (in dollars per share)	$ 0.15	$ (1.15)	$ 0.30	$ (1.06)
Diluted (in dollars per share)	$ 0.15	$ (1.15)	$ 0.30	$ (1.06)
Restricted stock
Equity instruments excluded from diluted net earnings (loss) per share calculation as the effect would have been anti-dilutive:
Antidilutive shares excluded from computation of diluted earnings per share		159,673		159,673