| Basis of Presentation and Summary of Significant Accounting Policies | Note 2—Basis of Presentation and Summary of
Significant Accounting Policies
Basis of Presentation and Principles of
Consolidation
The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and include the
operations of the Company and its wholly owned subsidiaries. All
intercompany transactions have been eliminated in
consolidation.
Reverse Stock Split
On September 2, 2016, the Company effected a 1-for-3
Use of Estimates
The preparation of consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ materially from these estimates.
On an on-going Black-Scholes
Revenue Recognition
The Company generates revenue from clients who enter into
agreements to use the Company’s platform to purchase
advertising inventory, data and other add-on add-on
The Company recognizes revenue when four basic criteria are met:
(1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered;
(3) the fees are fixed or determinable, and
(4) collectability is reasonably assured. In applying the
foregoing criteria, the Company recognizes revenue upon the
completion of a transaction, that is, when a bid is won, subject to
satisfying these criteria. Subsequent to a bid being won through
the Company’s platform, the associated fees are generally not
subject to adjustment or refund. Historically, any refunds and
adjustments have not been material. The Company assesses
collectability based on a number of factors, including the
creditworthiness of a client or advertiser and related payment
history. The Company generally bills clients for the gross amount
of advertising inventory, data or other add-on
The Company reports revenue net of amounts it pays suppliers for
the cost of advertising inventory, data and add-on (“ASC”) 605-45, Revenue Recognition -Principal third-party add-on third-party add-on add-on third-party add-on third-party add-on
Based on these and other factors, the Company has determined it is
not the principal in the purchase and sale of advertising
inventory, data and other add-on
The Company’s accounts receivable are recorded at the amount
of gross billings to clients, net of allowances (“Gross
Billings”), for the amounts it is responsible to collect, and
accounts payable are recorded at the net amount payable to
suppliers. Accordingly, both accounts receivable and accounts
payable appear large in relation to revenue reported on a net
basis.
Operating Expenses
The Company classifies its operating expenses into four
categories:
Platform Operations. stock-based
Sales and Marketing. stock-based
Technology and Development. stock-based non-current
General and Administrative. stock-based
Stock-Based
Compensation expense related to stock options, restricted stock
awards and units, which are referred to collectively as restricted
stock, and awards granted under the Company’s employee stock
purchase plan, or ESPP, is measured and recognized in the
consolidated financial statements based on the fair value of the
awards granted. The fair value of each option award is estimated on
the grant date using the Black-Scholes option-pricing Stock-based straight-line
Stock options granted to non-employees Black-Scholes option-pricing non-employee re-measured
Determining the fair value of stock options and ESPP awards
requires judgment. The Company’s use of the Black-Scholes risk-free option-pricing
These assumptions and estimates are as follows:
Fair Value of Common Stock. Valuation of
Privately Held Company Equity Securities Issued as
Compensation
Risk -Free risk-free
Expected Term. mid-point
Volatility.
Dividend Yield.
During the year ended December 31, 2016, the Company early
adopted Accounting Standards Update, or ASU, No. 2016-09, Compensation—Stock
Compensation (Topic 718): Improvements to Employee
Share -Based
The Company will continue to use judgment in evaluating the
assumptions related to the Company’s stock-based
Income Taxes
Deferred income tax assets and liabilities are determined based
upon the net tax effects of the differences between the
Company’s consolidated financial statements carrying amounts
and the tax basis of assets and liabilities and are measured using
the enacted tax rate expected to apply to taxable income in the
years in which the differences are expected to be reversed.
A valuation allowance is used to reduce some or all of the deferred
tax assets if, based upon the weight of available evidence, it is
more likely than not that those deferred tax assets will not be
realized. During 2014, the Company released the valuation allowance
of $2.2 million previously established against its U.S. net
deferred tax assets. Management’s conclusion to release such
valuation allowance was due to, among other reasons, three years of
cumulative pre-tax pre-tax
The Company recognizes the 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 consolidated financial statements from such
positions are then measured based on the largest benefit that has a
greater than 50% likelihood of being realized. The Company
recognizes interest and penalties accrued related to its uncertain
tax positions in its income tax provision in the accompanying
consolidated statements of operations.
Net Income (Loss) Per Share Attributable to Common
Stockholders
Basic net income (loss) per share attributable to common
stockholders is calculated by dividing the net income (loss)
attributable to common stockholders by the weighted-average two-class
Diluted net income (loss) per share attributable to common
stockholders adjusts the basic net income (loss) per share
attributable to common stockholders and the weighted-average treasury-stock as-if-converted
Cash
As of December 31, 2015 and 2016, cash consisted of cash held
in checking accounts.
Accounts Receivable and Allowance for Doubtful
Accounts
Accounts receivable are recorded at the invoiced amount, are
unsecured and do not bear interest. The Company performs ongoing
credit evaluations of its clients and certain advertisers when the
Company’s agreements with its clients contain sequential
liability terms that provide that the client payments are not due
to the Company until the client has received payment from its
customers who are advertisers. The allowance for doubtful accounts
is based on the best estimate of the amount of probable credit
losses in existing accounts receivable. The allowance for doubtful
accounts is determined based on historical collection experience
and the review in each period of the status of the then-outstanding
The following table presents changes in the allowance for doubtful
accounts (in thousands):
Year Ended December 31,
2014 2015 2016
Beginning balance $ 524 $ 172 $ 686
Add: bad debt expense 144 542 1,890
Less: write-offs, net of recoveries (496 ) (28 ) (2 )
Ending balance $ 172 $ 686 $ 2,574
Property and Equipment, Net
Property and equipment are recorded at historical cost, less
accumulated depreciation and amortization. Depreciation is computed
using the straight-line
Years
Computer equipment 2
Purchased software 5
Furniture, fixtures and office equipment 5
Leasehold improvements *
* Leasehold improvements are amortized
on a straight-line
Repair and maintenance costs are charged to expense as incurred,
while renewals and improvements are capitalized. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain
or loss is reflected in the Company’s operating results.
Capitalized Software Development Costs
The Company capitalizes certain costs associated with creating and
enhancing internally developed software related to the
Company’s technology infrastructure. These costs include
personnel and related employee benefits expenses for employees who
are directly associated with and who devote time to software
development projects, and external direct costs of materials and
services consumed in developing or obtaining the software. Software
development costs that do not qualify for capitalization, as
further discussed below, are expensed as incurred and recorded in
technology and development expenses in the consolidated statements
of operations.
Software development activities typically consist of three stages:
(1) the planning phase; (2) the application and
infrastructure development stage; and (3) the post
implementation stage. Costs incurred in the planning and post
implementation phases, including costs associated with the
post-configuration straight-line straight-line
The Company does not transfer ownership of its internally developed
software, or lease its software, to third parties.
Operating Leases
The Company records rent expense for operating leases, some of
which have escalating rent payments, on a straight-line rent-free straight-line
Debt Issuance Costs
Debt issuance costs related to the term loans have been recorded as
a reduction of the carrying amount of the debt and are amortized to
interest expense using the effective interest method. Debt
financing costs associated with credit facilities have been
deferred and recorded in other assets and are amortized to interest
expense on a straight-line
Preferred Stock Warrant Liabilities
Prior to the completion of the Company’s IPO, warrants to
purchase preferred stock of the Company were accounted for as
liabilities at fair value because the underlying shares of
convertible preferred stock were contingently redeemable, including
in the case of a deemed liquidation, which could have obligated the
Company to transfer assets to the preferred stockholders. The
preferred stock warrants were recorded at fair value at each
balance sheet date and changes in the fair value of the preferred
stock warrants during each reporting period were recorded in the
Company’s consolidated statements of operations until the
earlier of the exercise or expiration of the warrants or the
warrants’ conversion to warrants to purchase common stock, at
which time any remaining liability was reclassified to additional
paid-in
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in
an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value
must maximize the use of observable inputs and minimize the use of
unobservable inputs. Fair value measurements are based on a fair
value hierarchy, based on three levels of inputs, of which the
first two are considered observable and the last unobservable,
which are the following:
Level 1—Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Company has the ability to
access at the measurement date.
Level 2—Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly, such as quoted market prices for similar
assets and liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the
asset or liability.
Level 3—Unobservable inputs.
Observable inputs are based on market data obtained from
independent sources.
The carrying amounts of accounts receivable, accounts payable,
accrued expenses and other current liabilities approximate fair
value due to the short-term
The Company’s convertible preferred stock warrants were
measured using unobservable inputs that required a high level of
judgment to determine fair value, and were thus classified as
Level 3.
Certain long lived assets including capitalized software
development costs are also subject to measurement at fair value on
a non-recurring
Concentration of Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and
accounts receivable. The Company maintains its cash with financial
institutions and its cash levels exceed the Federal Deposit
Insurance Corporation (FDIC) federally insured limits.
For 2014, one client accounted for 11% of Gross Billings. For 2015,
two clients each accounted for 12% of Gross Billings. For 2016,
three clients accounted for 15%, 13% and 11%, respectively, of
Gross Billings.
As of December 31, 2015, three clients accounted for 18%, 13%
and 10%, respectively, of consolidated accounts receivable. As of
December 31, 2016, three clients accounted for 27%, 13% and
12%, respectively, of consolidated accounts receivable.
As of December 31, 2015, one supplier accounted for 11% of
consolidated accounts payable. As of December 31, 2016, one
supplier accounted for 10% of consolidated accounts payable.
Foreign Currency Transactions and Translation
The Company has entities operating in various countries. Each of
these entities’ functional currency is the U.S. Dollar.
Transactions in foreign currencies are translated into U.S. Dollars
at the rates of exchange in effect at the date of the transaction.
Net transaction losses were approximately $0.3 million,
$1.0 million, and $1.2 million for the years ended
December 31, 2014, 2015 and 2016, respectively, and are
included in foreign currency exchange loss, net in the accompanying
consolidated statements of operations.
Commencing in 2015 the Company entered into forward contracts to
hedge foreign currency exposures related primarily to the
Company’s foreign currency denominated accounts receivable.
The Company does not designate the foreign exchange forward
contracts as hedges for accounting purposes and changes in the fair
value of the foreign exchange forward contracts are recorded in
foreign exchange loss, net in the accompanying consolidated
statements of operations. As of December 31, 2015 and 2016,
the Company had open forward contracts with aggregate notional
amounts of $5.9 million and $27.1 million, respectively.
The fair value of the open forward contracts was not material. The
Company’s forward contracts generally have terms of
30-210 days.
Recent Accounting Pronouncements
Under the Jumpstart Our Business Startups Act (“JOBS
Act”), the Company meets the definition of an emerging growth
company. The Company has irrevocably elected to opt out of the
extended transition period for complying with new or revised
accounting standards pursuant to Section 107(b) of the JOBS
Act.
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update, or ASU,
No. 2014-09, Revenue from Contracts with Customers (Topic 606) 2014-09, No. 2015-14, ASU 2014-09
In February 2016, the FASB issued ASU No. 2016-02, Leases right-of-use right-of-use
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation
(Topic 718) Improvements to Employee
Share -Based share-based 2016-09 cumulative-effect stock-based cumulative-effect
In June 2016, the FASB issued ASU No. 2016-13, Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments 2016-13
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash
Flows (Topic 230), Classification of Certain Cash Receipts and Cash
Payments 2016-15 2016-15 2016-15 |
