10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          .

Commission file number: 000-50463

Callidus Software Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0438629
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification Number)

Callidus Software Inc.

4140 Dublin Boulevard, Suite 400

Dublin, California  94568

(Address of principal executive offices, including zip code) 

(925) 251-2200

(Registrant’s telephone number, including area code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer  x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

There were 56.8 million shares of the registrant’s common stock, par value $0.001, outstanding on April 28, 2016, the latest practicable date prior to the filing of this report.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	20
Item 4. Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	21
Item 1A. Risk Factors	21
Item 6. Exhibits	35
Signatures	36
Exhibit Index	37

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CALLIDUS SOFTWARE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share data)

	March 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	81,830		$	77,232
Short-term investments	20,074			19,977
Accounts receivable, net of allowances of $1,342 and $1,310 at March 31, 2016 and December 31, 2015, respectively	42,737			43,461
Prepaid and other current assets	10,888			11,385
Total current assets	155,529			152,055
Property and equipment, net	23,921			20,540
Goodwill	49,825			50,146
Intangible assets, net	13,852			14,885
Deposits and other noncurrent assets	3,993			4,016
Total assets	$	247,120		$	241,642
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,442		$	3,636
Accrued payroll and related expenses	9,322			12,510
Accrued expenses	13,392			11,017
Deferred revenue	78,301			74,644
Total current liabilities	104,457			101,807
Deferred revenue, noncurrent	4,373			5,186
Deferred income taxes, noncurrent	1,441			1,477
Other noncurrent liabilities	6,074			4,371
Total liabilities	116,345			112,841
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.001 par value; 100,000 shares authorized; 59,099 and 58,612 shares issued and 56,760 and 56,273 shares outstanding at March 31, 2016 and December 31, 2015, respectively	57			56
Additional paid-in capital	435,631			428,776
Treasury stock; 2,339 shares at March 31, 2016 and December 31, 2015	(14,430		)	(14,430		)
Accumulated other comprehensive loss	(2,082		)	(1,735		)
Accumulated deficit	(288,401		)	(283,866		)
Total stockholders’ equity	130,775			128,801
Total liabilities and stockholders’ equity	$	247,120		$	241,642

See accompanying notes to unaudited condensed consolidated financial statements.

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CALLIDUS SOFTWARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands, except per share data)

	Three Months Ended March 31,
	2016			2015
Revenue:
Recurring	$	37,606		$	28,893
Services and license	10,772			10,852
Total revenue	48,378			39,745
Cost of revenue:
Recurring	9,962			8,358
Services and license	8,261			7,661
Total cost of revenue	18,223			16,019
Gross profit	30,155			23,726
Operating expenses:
Sales and marketing	18,903			13,726
Research and development	7,242			6,038
General and administrative	8,255			7,418
Restructuring and other	316			116
Total operating expenses	34,716			27,298
Operating loss	(4,561		)	(3,572		)
Interest income and other income (expense), net	225			(190		)
Interest expense	(43		)	(67		)
Loss before provision for income taxes	(4,379		)	(3,829		)
Provision for income taxes	156			214
Net loss	$	(4,535	)	$	(4,043	)
Net loss per share
Basic and diluted	$	(0.08	)	$	(0.08	)
Weighted average shares used in computing net loss per share:
Basic and diluted	56,690			50,709
Comprehensive income (loss):
Net loss	$	(4,535	)	$	(4,043	)
Unrealized gain on available-for-sale securities	48			6
Foreign currency translation adjustments	(395		)	(699		)
Comprehensive loss	$	(4,882	)	$	(4,736	)

See accompanying notes to unaudited condensed consolidated financial statements.

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CALLIDUS SOFTWARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(4,535	)	$	(4,043	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	1,688			1,387
Amortization of intangible assets	1,360			1,288
Provision for doubtful accounts	529			94
Stock-based compensation	6,453			4,817
Loss on foreign currency from market-to-market derivative	78			—
Excess tax benefit from stock-based compensation	(21		)	—
Deferred income taxes	71			(59		)
Loss on disposal of property and equipment	—			6
Net amortization on investments	(45		)	5
Changes in operating assets and liabilities:
Accounts receivable	195			3,350
Prepaid and other current assets	437			(230		)
Other noncurrent assets	(3		)	247
Accounts payable	(558		)	2,089
Accrued expenses	1,073			(781		)
Accrued payroll and related expenses	(3,188		)	(939		)
Accrued restructuring and other expenses	(266		)	—
Deferred revenue	2,844			772
Net cash provided by operating activities	6,112			8,003
Cash flows from investing activities:
Purchases of investments	(3,700		)	—
Proceeds from maturities and sale of investments	3,600			—
Purchases of property and equipment	(1,521		)	(7,063		)
Purchases of intangible assets	(267		)	(234		)
Net cash used in investing activities	(1,888		)	(7,297		)
Cash flows from financing activities:
Proceeds from follow-on offering, net of issuance costs	—			64,370
Proceeds from issuance of common stock	1,467			1,581
Restricted stock units acquired to settle employee withholding liability	(1,085		)	(1,959		)
Excess tax benefit from stock-based compensation	21			—
Payment of consideration related to acquisitions	(104		)	(226		)
Payment of principal under capital leases	—			(112		)
Net cash provided by financing activities	299			63,654
Effect of exchange rates on cash and cash equivalents	75			(35		)
Net increase in cash and cash equivalents	4,598			64,325
Cash and cash equivalents at beginning of period	77,232			34,200
Cash and cash equivalents at end of period	$	81,830		$	98,525
Supplemental disclosures of cash flow information:
Cash paid for interest on capital leases	$	—		$	8
Cash paid for income taxes	$	261		$	167
Non-cash investing and financing activities:
Purchases of property and equipment through accounts payable and other accrued liabilities	$	3,548		$	3,775

See accompanying notes to unaudited condensed consolidated financial statements.

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CALLIDUS SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Summary of Significant Accounting Policies

Basis of Presentation and Summary of Accounting Policies

All amounts included herein related to these condensed consolidated financial statements as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are unaudited and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Callidus Software Inc.'s ("Company") Annual Report on Form 10-K for the year ended December 31, 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the Securities and Exchange Commission ("SEC") rules and regulations regarding interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments for the fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the full fiscal year ending December 31, 2016.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include wholly-owned subsidiaries in Australia, Canada, Germany, Hong Kong, India, Japan, Malaysia, Mexico, Netherlands, New Zealand, Serbia, Singapore, and the United Kingdom. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

Preparation of the unaudited condensed consolidated financial statements in conformity with GAAP and the rules and regulations of the SEC requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, the reported amounts of revenue and expenses during the reporting period and the accompanying notes. Estimates are used for, but not limited to, uncertain tax liabilities, allowances for doubtful accounts, the useful lives of fixed assets and intangible assets, goodwill and intangible asset impairments, stock-based compensation forfeiture rates, accrued liabilities, the allocation of the value of purchase consideration for business acquisitions and other contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates such estimates and assumptions on an ongoing basis for continued reasonableness, using historical experience and other factors, including the current economic environment. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such evaluation. Illiquid credit markets, volatile equity and foreign currency markets and fluctuations in information technology spending by prospective customers can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates. Changes in those estimates, if any, resulting from continuing changes in the economic environment, will be reflected in the consolidated financial statements in future periods.

Revenue Recognition

     The Company generates revenue by providing software as a service ("SaaS") solutions through on-demand subscription, on-premise perpetual and term licenses and related software maintenance, and professional services. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Recurring Revenue. Recurring revenue, which includes SaaS revenue and maintenance revenue, is recognized ratably over the stated contractual period. SaaS revenue consists of subscription fees from customers accessing our cloud-based service offerings. Maintenance revenue consists of fees from customers purchasing licenses and receiving support for such on-premise solutions. The Company also recognizes SaaS and maintenance revenue associated with customers using its products in excess of contracted usage ("Overages"). Overages are primarily attributed to SaaS products and such Overages are recorded in SaaS revenue in the period incurred. Revenue related to Overages was immaterial during the three months ended March 31, 2016 and 2015.

Service and License Revenue. Service and license revenue primarily consists of training, integration and configuration services. Generally, the Company's professional services arrangements are billed on a time-and-materials basis. Time and material services are recognized as the services are rendered based on inputs to the project, such as billable hours incurred. For fixed-fee professional services arrangements, the Company recognizes revenue under the proportional performance method of

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accounting and estimates the proportional performance on a monthly basis, utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If the Company does not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion. Service and license revenue also includes revenue from perpetual licenses, which is recognized upon delivery of the product, using the residual method, assuming all the other conditions for revenue recognition have been met.

In a limited number of arrangements with non-standard acceptance criteria, the Company defers the revenue until the acceptance criteria is satisfied. Reimbursements, including those related to travel and out-of-pocket expenses, are included in services and license revenue, and an equivalent amount of reimbursable expenses is included in cost of services and license revenue.

In general, recurring revenue agreements are entered into for 12 to 36 months, and the professional services are performed within nine months of entering into a contract with the customer, depending on the size of integration.

SaaS agreements provide specified service level commitments, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers a portion of their subscription and support fees. Based on the Company's historical experience meeting its service level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments.

The Company recognizes revenue when all of the following conditions are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The fees are fixed or determinable; and    

• Collection of the fees is reasonably assured.

If the Company determines that any one of the four criteria is not met, it will defer recognition of revenue until all the criteria are met.

Multiple-deliverable arrangements with on-demand subscription. For on-demand subscription agreements with multiple-deliverables, the Company evaluates each element to determine whether it represents a separate unit of accounting. The Company determines the best estimated selling price of each deliverable in an arrangement based on a selling price hierarchy of methods contained in Finance Accounting Standards Board ("FASB") Accounting Standards Update (“ASU”) No. 2009-13, "Revenue Recognition (Accounting Standards Codification (“ASC”) Topic 605)-Multiple-Deliverable Revenue Arrangements." The best estimated selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”), if available, third-party evidence (“TPE”), if VSOE is not available, or estimated selling price (“ESP”), if neither VSOE nor TPE is available. Total arrangement fees are allocated to each element using the relative selling price method. The Company has currently established VSOE for most deliverables, except for fixed fee service arrangements and on-premise software licenses.

The Company considered all of the following factors to establish the ESP for fixed fee service arrangements when sold with its on-demand services: the weighted average actual sales prices of professional services sold on a stand-alone basis for on-demand services; average billing rates for fixed fee service agreements when sold with on-demand services, cost plus a reasonable mark-up and other factors such as gross margin objectives, pricing practices and growth strategy. The Company is currently using cost plus a reasonable mark-up to establish ESP for fixed fee service arrangements.

Multiple-deliverable arrangements with on-premise license. For arrangements with multiple deliverables, including license, professional services and maintenance, the Company recognizes license revenue using the residual method of accounting pursuant to the requirements of the guidance contained in ASC 985-605, "Software Revenue Recognition." Under the residual method, revenue is recognized when VSOE for fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more of the delivered elements in the arrangement. If evidence of fair value cannot be established for the undelivered elements, all of the revenue is deferred until evidence of fair value can be established, or until the items for which evidence of fair value cannot be established are delivered. For maintenance and certain professional services, the Company is able to establish VSOE because it has a sufficient history of selling these deliverables at an established price. The Company's revenue arrangements do not include a general right of return relative to the delivered products.

Generally, for the Company's term-based licenses, if the only undelivered element is maintenance, the entire amount of revenue is recognized ratably, over the maintenance period.

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Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenue.

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting" which simplifies the accounting for share-based transactions, including the income tax consequences, classification of awards as either equity or liabilities on the balance sheet, and classification of employee taxes paid on statement of cash flows when an employer withholds shares for tax-withholding purposes. The new standard is effective for interim and annual periods beginning after December 15, 2016 and early adoption is permitted. The Company has elected not to early adopt. The Company is currently evaluating the impact of the adoption of ASU 2016-09 on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases and amounts previously recognized in accordance with the business combinations guidance for leases. The Company is currently evaluating its expected adoption method and timeline, and the impact of this new standard on its consolidated financial statements.    

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes, (ASU 2015-17)", which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of the Company's net current deferred tax liabilities to net non-current deferred tax liabilities in its consolidated balance sheets as of December 31, 2015. No prior periods were adjusted retrospectively.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 may also impact how the Company accounts for certain direct costs associated with its revenues. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted one year earlier. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company has not elected a transition method and is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements and does not plan to early adopt this standard.

Note 2—Financial Instruments

As of March 31, 2016 and December 31, 2015, all investment debt securities were classified as available-for-sale and carried at estimated fair value, which is determined based on the inputs discussed in Note 3.

The Company classifies all highly liquid instruments with an original maturity on the date of purchase of three months or less as cash and cash equivalents.  The Company classifies available-for-sale securities that have a maturity date longer than three months as short-term investments, including those investments with a maturity date of longer than one year that are highly liquid and which the Company does not intend to hold to maturity.

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Realized gains and losses are calculated using the specific identification method. As of March 31, 2016 and December 31, 2015, the Company had no short-term investments in a material unrealized loss position.

The components of the Company’s cash, cash equivalents, and investments classified as available-for-sale were as follows at March 31, 2016 and December 31, 2015 (in thousands):

March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	81,800	$	—	$	—	$	81,800
Cash equivalents:
Money market funds	30		—		—		30
Total cash equivalents	30		—		—		30
Total cash and cash equivalents	$	81,830	$	—	$	—	$	81,830
Short-term investments:
Certificates of deposits	$	1,500	$	—	$	—	$	1,500
U.S. government and agency obligations	9,105		26		—		9,131
Corporate notes and U.S. government agency obligations	9,421		22		—		9,443
Total short-term investments	$	20,026	$	48	$	—	$	20,074

December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash	$	77,191	$	—	$	—		$	77,191
Cash equivalents:
Money market funds	41		—		—			41
Total cash equivalents	41		—		—			41
Total cash and cash equivalents	$	77,232	$	—	$	—		$	77,232
Short-term investments:
Certificate of deposits	$	1,500	$	—	$	—		$	1,500
U.S. government and agency obligations	7,423		—		(16		)	7,407
Corporate notes and U.S. government agency obligations	11,087		—		(17		)	11,070
Total short-term investments	$	20,010	$	—	$	(33	)	$	19,977

The market value and the amortized cost of available-for-sale debt securities by contractual maturities as of March 31, 2016 were as follows (in thousands):

Contractual maturity	Amortized Cost		Estimated Fair value
Less than 1 year	$	6,508	$	6,535
Between 1 and 2 years	13,518		13,539
Total	$	20,026	$	20,074

The Company had no realized gains or losses on sales of its investments for the three months ended March 31, 2016 and 2015. The Company had net purchases of investments of $0.1 million during the three months ended March 31, 2016 and none during the three months ended March 31, 2015.

The short-term investments in highly rated credit securities generally have minor to moderate fluctuations in the fair values from period to period. The Company monitors credit ratings, downgrades and significant events surrounding these

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securities in order to assess whether any of the impairments will be considered other-than-temporary. The Company did not identify any securities held as of March 31, 2016 or as of December 31, 2015 for which the fair value declined significantly below amortized cost and were considered other-than-temporary impairments.

Note 3—Fair Value Measurements

The Company measures financial assets at fair value on an ongoing basis. The estimated fair value of the Company’s financial assets was determined using the following inputs at March 31, 2016 and December 31, 2015 (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets  for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
March 31, 2016	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	30	$	30	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	9,131		—		9,131		—
Corporate notes and obligations (2)	9,443		—		9,443		—
Total	$	20,104	$	30	$	20,074	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	191	$	—	$	—	$	191
Foreign currency derivative contract (3)	78		—		78		—
Total	$	269	$	—	$	78	$	191

_____________________________________________________________________________

(1) Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

(2) Included in short-term investments on the unaudited condensed consolidated balance sheet.

(3) Included in accrued expenses on the unaudited condensed consolidated balance sheet.

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2015	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	41	$	41	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	7,407		—		7,407		—
Corporate notes and obligations (2)	11,070		—		11,070		—
Total	$	20,018	$	41	$	19,977	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	324	$	—	$	—	$	324
Total	$	324	$	—	$	—	$	324

_____________________________________________________________________________

(1) Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

(2) Included in short-term investments on the unaudited condensed consolidated balance sheet.

(3) Included in accrued expenses on the unaudited condensed consolidated balance sheet.

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Valuation of Investments

Level 1 and Level 2

The Company’s available-for-sale securities include money market funds, certificates of deposit, corporate notes and U.S. government agency obligations. The Company values these securities using a pricing matrix from a pricing service provider, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs). The Company classifies all of its available-for-sale securities, except for money market funds, as having Level 2 inputs. The Company validates the estimated fair value of certain securities from a pricing service provider on a quarterly basis. The valuation techniques used to measure the fair value of the financial instruments having Level 2 inputs, all of which have counterparties with high credit ratings, were derived from the following: non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data. 

During the three months ended March 31, 2016, the Company hedged an Australian Dollar receivable to reduce the risk that earnings would be adversely affected by changes in the Australian currency exchange rate. The notional amount of the derivative instrument acquired during the three months ended March 31, 2016 was $1.2 million. The Company accounts for the derivative instrument at fair value with changes in the fair value recorded as a component of interest income and other income (expense), net of $0.1 million for the period ending March 31, 2016.

Level 3

Contingent consideration and related liabilities are defined as earn-out payments which the Company may pay in connection with the acquisition of BridgeFront LLC ("BridgeFront"). Contingent consideration and related liabilities are classified as level 3 liabilities, as the Company uses unobservable inputs to value them, which is a probability-based income approach. Subsequent changes in the fair value of contingent consideration and related liabilities will be recorded in the Company's unaudited condensed consolidated statements of operations.

The Company did not have any transfers of its fair value measurement between Level 1, Level 2 and Level 3 during the periods presented. 

Note 4—Commitments and Contingencies

Except as discussed below, there were no material changes in the Company's commitments under contractual obligations as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2015.

Oracle Agreement

In February 2016 the Company entered into a five-year agreement with Oracle to purchase software and support services for the Company's data centers. Pursuant to the agreement, the Company is required to make payments of $0.75 million on April 26, 2016, June 1, 2016, September 1, 2016 and November 1, 2016, and annual payments of $3.0 million beginning February 2017 and ending February 2020, for a total of $15.0 million. As of March 31, 2016, $1.5 million was included in accrued expenses and $2.2 million was included in other noncurrent liabilities in the unaudited condensed consolidated balance sheets.

Letter of Credit

The Company extended a $1.1 million letter of credit for one year to October 1, 2016 for leased space in Dublin, California. There is no balance outstanding under this line of credit.

Revolver Line of Credit

In May 2014, the Company entered into a credit agreement with Wells Fargo Bank, National Association ("Wells Fargo"), under which Wells Fargo agreed to make a revolving loan ("Revolver") to the Company in an amount not to exceed $10.0 million, with an accordion feature that allows the Company to increase the maximum borrowing amount by not less than $5.0 million and not more than $10.0 million. In September 2014, the Company increased the maximum borrowing amount to $15.0 million. The Revolver matures in May 2019. During the quarter ended June 30, 2015, the Company paid off the outstanding amount of $10.5 million. There is no balance outstanding as of March 31, 2016.

Pursuant to the agreement, the Company is required to maintain a leverage ratio of 3.00:1.00 and minimum liquidity of $7.5 million. The Company has met these leverage and liquidity covenants.

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Outstanding borrowings under the Revolver bear interest, at the Company's option, at a base rate plus an applicable margin. The applicable margin ranges between 0.75% and 2.25% depending on the Company's leverage ratio. A fee of 0.25% per annum is payable with respect to the unused portion of the commitment. Interest is payable every three months.

Warranties and Indemnification

The Company generally warrants that its software will perform in accordance with its standard documentation. Under the Company’s standard warranty, should a software product not perform as specified in the documentation within the warranty period, the Company will repair or replace the software or refund the license fee paid. To date, the Company has not incurred any incremental costs related to warranty obligations for its software.

The Company’s product license and on-demand agreements typically include a limited indemnification provision for claims by third parties relating to the Company’s intellectual property. To date, the Company has not incurred material costs, and has not accrued any costs, related to such indemnification provisions.

Note 5—Restructuring and Other

Restructuring and other expenses primarily consist of costs associated with exit from excess facilities, employee terminations and incremental depreciation expense as a result of the change in the estimated useful life of assets to be abandoned.

The Company incurred $0.3 million of restructuring and other expenses during the three months ended March 31, 2016 and $0.1 million during the same period ended March 31, 2015.

The following tables set forth a summary of accrued restructuring and other expenses for the three months endedMarch 31, 2016 and 2015 (in thousands):

	December 31, 2015		Additions		Adjustments		Cash Payments			March 31, 2016
Facilities-related costs	$	17	$	316	$	18	$	(68	)	$	283
Total accrued restructuring and other expenses	$	17	$	316	$	18	$	(68	)	$	283

	December 31, 2014		Additions		Adjustments			Cash Payments			March 31, 2015
Severance and termination-related costs	$	—	$	109	$	—		$	(109	)	$	—
Facilities related costs	194		7		(6		)	(37		)	158
Total accrued restructuring and other expenses	$	194	$	116	$	(6	)	$	(146	)	$	158

Note 6—Net Loss Per Share

Basic net loss per share is calculated by dividing net loss for the period by the weighted average common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss for the period by the weighted average common shares outstanding, the exercise of outstanding common stock options, the release of restricted stock units and purchases of shares pursuant to the Company's employee stock purchase plan ("ESPP"), to the extent these shares are dilutive. For the three months ended March 31, 2016 and 2015, the diluted net loss per share calculation was the same as the basic net loss per share calculation as all potential common shares were anti-dilutive.

     Diluted net loss per share does not include the effect of the following potential weighted average common shares because to do so would be anti-dilutive for the periods presented (in thousands):

	Three Months Ended March 31,
	2016	2015
Restricted Stock Units	3,417	2,800
Stock Options	637	1,109
ESPP Shares	19	3
Total	4,073	3,912

The weighted average exercise price of stock options excluded for the three months ended March 31, 2016 and March 31, 2015 was $6.68 and $5.95, respectively.

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Note 7—Stock-based Compensation

Expense Summary

Stock-based compensation expense is measured based on the grant-date fair value of the stock-based awards. The Company recognizes stock-based compensation expense, for the portion of the awards that are ultimately expected to vest, on a straight-line basis, over the requisite service period for those awards with graded vesting and service conditions.

The table below sets forth a summary of stock-based compensation expense for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Stock options	$	145	$	170
Restricted stock units
Performance-based awards	1,179		748
Service-based awards	4,758		3,644
ESPP shares	371		255
Total stock-based compensation	$	6,453	$	4,817

As of March 31, 2016, there was total unrecognized compensation expense of $0.7 million, $6.2 million, $30.4 million and $1.2 million related to stock options, performance-based awards, service-based awards and ESPP shares, respectively, which were expected to be recognized over weighted average periods of 1.3 years, 1.7 years, 2.2 years and 0.7 years, respectively.

The table below sets forth the functional classification of stock-based compensation expense for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Cost of recurring revenue	$	509	$	288
Cost of services and other revenue	512		342
Sales and marketing	2,154		1,458
Research and development	1,170		797
General and administrative	2,108		1,932
Total stock-based compensation	$	6,453	$	4,817

Performance-based Awards

In 2015, the Company granted performance-based restricted stock units with vesting contingent on successful attainment of pre-set SaaS revenue growth and recurring revenue gross profit targets over the three-year period from July 1, 2015 through June 30, 2018. During the three months ended March 31, 2016, $0.4 million of expense, net of forfeiture, was recognized.

In 2014, the Company granted performance-based restricted stock units with vesting contingent on absolute SaaS revenue growth over the three-year period from January 1 2014 through December 31, 2016, and on the Company’s relative total stockholder return over the three-year period from 2014 through 2016 versus an index of 17 SaaS companies. During the three months ended March 31, 2016, $0.8 million of expense, net of forfeiture, was recognized.

Determination of Fair Value

The fair value of service-based awards is estimated based on the market value of the Company’s stock on the date of grant. Vesting of a portion of the performance awards granted during 2014 is based on relative stockholder return and therefore, is subject to a market condition. As a result, the fair value of performance awards is calculated using a Monte Carlo simulation model that estimates the distribution of the potential outcomes of the grants of performance awards based on simulated future index of the peer companies.

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The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model. No stock options were granted during the three months ended March 31, 2016 and March 31, 2015.

The fair value of each ESPP share is estimated on the enrollment date of the offering period using the Black-Scholes valuation model and the assumptions noted in the following table:

	Three Months Ended March 31,
Employee Stock Purchase Plan	2016	2015
Expected life (in years)	0.50 to 1.00	0.49 to 1.00
Risk-free interest rate	0.42% to 0.51%	0.07% to 0.25%
Volatility	45% to 51%	42% to 46%
Dividend yield	None	None

Note 8—Income Taxes

Income tax expense for each of the three month periods ended March 31, 2016 and March 31, 2015 was $0.2 million. In both periods the tax expense was mainly attributable to sales to foreign customers subject to withholding taxes and income in the foreign jurisdictions subject to income taxes.

Note 9—Segment, Geographic and Customer Information

The accounting principles guiding disclosures about segments of an enterprise and related information establish standards for the reporting by business enterprises of information about operating segments, products and services, geographic areas and major customers. The method of determining which information is reported is based on the way that management organizes the operating segments within the Company for making operational decisions and assessments of financial performance. The Company’s chief operating decision maker is considered to be the Company’s chief executive officer ("CEO"). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. By this definition, the Company operates in one business segment, which are the development, marketing and sale of the Company's sales and marketing effectiveness cloud software and related services.

The following table summarizes revenue for the three months ended March 31, 2016 and 2015 by geographic areas (in thousands):

	Three Months Ended March 31,
	2016		2015
United States and Canada	$	39,885	$	30,925
EMEA	4,876		3,681
Asia Pacific	2,542		2,701
Other	1,075		2,438
	$	48,378	$	39,745

Substantially all of the Company’s long-lived assets are located in the United States and United Kingdom. Long-lived assets located outside the United States and United Kingdom are immaterial.

During the three months ended March 31, 2016 and 2015, no customer accounted for more than 10% of total revenue.

Note 10—Related-Party Transactions

In the normal course of business, the Company entered into agreements with Lithium Technologies, Inc. (“Lithium”), whose Chief Financial Officer is a member of the Company's Board of Directors.

In 2013, Lithium entered into a two-year web hosting agreement with the Company, which was extended for another three years in 2015 in the amount of $138,000 per year, from which the company recognized approximately $37,613 in hosting revenue during the three months ended March 31, 2016. In addition, during 2015, the Company entered into various agreements with Lithium for professional services, and recognized approximately $4,290 in professional services revenue during the three months ended March 31, 2016.

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In 2015, the Company purchased a one-year consulting and training service contract for Social Success Services from Lithium for $60,000, which was paid in full in October 2015. As of March 31, 2016, $19,500 was included in prepaid and other current assets.

11. Subsequent Event

On April 7, 2016, the Company acquired specific assets of ViewCentral LLC. ("ViewCentral"), a privately-held company and a leader in the extended enterprise learning market. The Company acquired specific assets of ViewCentral to expand its Litmos mobile learning solution with a full revenue management and e-commerce platform designed for selling and optimizing profitable training for customers and channel. The purchase consideration was $4.0 million in cash. The Company expects to complete its valuation of the assets by the end of the second quarter of 2016.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of financial condition and results of operations should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 and with the unaudited condensed consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. This section of this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to our future plans, objectives, expectations, prospects, intentions and financial performance and the assumptions that underlie these statements. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” "may," “will,” and similar expressions and the negatives thereof identify forward-looking statements, which generally are not historical in nature.  These forward-looking statements include, but are not limited to, statements concerning the following: levels of recurring revenue, levels of SaaS revenue, changes in and expectations with respect to revenue, revenue growth and gross profits, operating expense levels, the impact of quarterly fluctuations of revenue and operating results, staffing and expense levels, expected cash and investment balances, the impact of foreign exchange rates and interest rate fluctuations, projected future financial performance, our anticipated growth and trends in our businesses, our business strategy, and other characterizations of future events or circumstances.  As and when made, management believes that these forward-looking statements are reasonable.  However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made and may be based on assumptions that do not prove to be accurate.  In addition, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections.  Many of these risks and uncertainties are described in “Risk Factors” set forth in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances occurring after the date of this Quarterly Report on Form 10-Q, except as required by law.

Overview

CallidusCloud^® is a global leader in cloud-based sales, marketing, learning and customer experience solutions. CallidusCloud enables its customers to accelerate their Lead to Money^TM process with a suite of solutions that can, among other things, identify leads, implement territory and quota plans, enable sales forces, automate bid configuration pricing and quoting, manage contracts, streamline sales compensation and capture customer feedback for competitive advantage. Approximately 4,700 organizations, across a broad set of industries, rely on CallidusCloud to optimize the Lead to Money process and close more deals, faster.

Lead to Money is a process designed to help companies respond to the changing role of sales and marketing in the redefined buying cycle. In the last decade, the ubiquity of social networks, mobile devices and e-commerce has transformed the traditional sales cycle into a buyer-led digital economy. Buyers are researching and evaluating companies online and are completing a significant portion of their purchases digitally. In order to successfully turn leads into money, sales, marketing, learning and customer experience teams must work together.

We provide a suite of Software-as-a-Service ("SaaS") solutions which generate revenue from cloud subscriptions, sales operation services and term licenses. Our SaaS customers typically purchase annual subscriptions, but occasionally purchase multi-year subscriptions.

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Revenue Growth and Customer Expansion

For the three months ended March 31, 2016, we added approximately 100 net new customers and had a total of approximately 4,700 customers.

For the three months ended March 31, 2016, total revenue was $48.4 million, an increase of $8.6 million, or 22%, from the three months ended March 31, 2015. Total recurring revenue, which includes SaaS and maintenance revenue, increased by 30% in the three months ended March 31, 2016 from the same period in 2015. SaaS revenue increased to $34.5 million in the three months ended March 31, 2016, representing an increase of $9.5 million, or 38%, from the same period in 2015. Recurring revenue gross margin was 74% in the three months ended March 31, 2016, compared to 71% for the three months ended March 31, 2015. The improvement is primarily associated with higher SaaS revenue and cost savings associated with data center infrastructure consolidation. Overall gross margins were 62% for the three months ended March 31, 2016, compared to 60% for the three months ended March 31, 2015. Revenue related to overages (customers using our products in excess of contracted usage) was immaterial during the three months ended March 31, 2016 and March 31, 2015.

SaaS revenue continued to drive the increases in both recurring revenue and total revenue, reflecting continued market acceptance of our Lead to Money solutions.

Acquisition

On April 7, 2016, the Company acquired specific assets of ViewCentral LLC. ("ViewCentral"), a privately-held company and a leader in the extended enterprise learning market. The Company acquired specific assets of ViewCentral to expand its Litmos mobile learning solution with a full revenue management and e-commerce platform designed for selling and optimizing profitable training for customers and channel. The purchase consideration was $4.0 million in cash. The Company expects to complete its valuation of the assets by the end of the second quarter of 2016.

Application of Critical Accounting Policies and Use of Estimates

The discussion and analysis of our financial condition and results of operations which follows is based upon our unaudited condensed consolidated financial statements prepared in accordance with U.S Generally Accepted Accounting Principles ("GAAP"). The application of GAAP requires our management to make assumptions, judgments and estimates that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures regarding these items. We base our assumptions, judgments and estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates under different assumptions or conditions. To the extent that there are material differences between these estimates and actual results, our future financial condition or results of operations will be affected. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors.

We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, stock-based compensation, valuation of acquired intangible assets, goodwill impairment, long-lived assets impairment, contingent consideration and income taxes have the greatest potential impact on our unaudited condensed consolidated final statements. These areas are key components of our results of operations and are based on complex rules which require us to make judgments and estimates. Historically, our assumptions, judgments and estimates in accordance with our critical accounting policies have not materially differed from our actual results. There were no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2016 as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Recent Accounting Pronouncements

Please refer to Note 1 of our notes to unaudited condensed consolidated financial statements for information regarding the effect of recent accounting pronouncements on our financial statements.

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Results of Operations

Comparison of the Three Months Ended March 31, 2016 and 2015

Revenue, Cost of Revenue and Gross Profit

The following table sets forth the changes in revenue, cost of revenue and gross profit for the three months ended March 31, 2016, compared to the same periods in 2015 (in thousands, except for percentage data):

	Three Months Ended March 31, 2016		Percentage of Revenue	Three Months Ended March 31, 2015		Percentage of Revenue	Increase (Decrease)			Percentage Change
Revenue:
Recurring	$	37,606	78%	$	28,893	73%	$	8,713		30%
Services and license	10,772		22%	10,852		27%	(80		)	(1)%
Total revenue	$	48,378	100%	$	39,745	100%	$	8,633		22%
Cost of revenue:
Recurring	$	9,962	26%	$	8,358	29%	$	1,604		19%
Services and license	8,261		77%	7,661		71%	600			8%
Total cost of revenue	$	18,223	38%	$	16,019	40%	$	2,204		14%
Gross profit:
Recurring	$	27,644	74%	$	20,535	71%	$	7,109		35%
Services and license	2,511		23%	3,191		29%	(680		)	(21)%
Total gross profit	$	30,155	62%	$	23,726	60%	$	6,429		27%

Revenue

Total Revenue.  The increase in total revenue for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to continued SaaS revenue growth. Adoption of our Lead to Money suite, increased cross-sell and up-sell from our current customer base, and acquisitions in 2015 contributed to our growth in revenue.

Recurring Revenue.  Recurring revenue consists of SaaS and maintenance revenue. For the three months ended March 31, 2016 compared to the same period in 2015, SaaS revenue increased $9.5 million primarily as a result of 42% bookings growth in 2015, partially offset by a decrease in maintenance revenue of $0.8 million resulting from customers converting from license to SaaS arrangements.

Services and License Revenue.  Services and license revenue consists of integration and configuration services, training and on-premise perpetual licenses. Services and license revenue for the three months ended March 31, 2016decreased by $0.1 million compared to the same period in 2015. The decrease was due to a $0.4 million decrease in license revenue, partially offset by a $0.3 million increase in service revenue.

Cost of Revenue and Gross Profit

Cost of Recurring Revenue.  The increase in cost of recurring revenue for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to a $0.9 million increase in personnel related costs and a $0.7 million increase in depreciation, maintenance, equipment and other related expenses as we continue to invest in hosting facilities to support our revenue growth and expanded customer base.

Cost of Services and License Revenue.  The increase in the cost of services and license revenue during the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to a $0.9 million increase in personnel-related costs, partially offset by a decrease of $0.3 million in subcontractor-related services.

Recurring Revenue Gross Profit. The increase in recurring revenue gross profit for the three months ended March 31, 2016 compared to the same period in 2015 reflects increased revenue of $8.7 million partially offset by a $0.9 million increase in personnel costs and a $0.7 million increase in depreciation and maintenance, equipment and other related expenses.

Services and License Revenue Gross Profit. The decrease in services and license revenue gross profit for the three months ended March 31, 2016 compared to the same period in 2015 was attributable to increases of $0.9 million in personnel related costs, and a $0.4 million decrease in license revenue, partially offset by a $0.3 million increase in service revenues and $0.3 million decrease in subcontractor-related services.

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Operating Expenses

The following table outlines the changes in operating expenses for the three months ended March 31, 2016, compared to the same period in 2015 (in thousands, except percentage data): 

	Three Months Ended March 31, 2016		Percentage of Revenue	Three Months Ended March 31, 2015		Percentage of Revenue	Increase (Decrease)		Percentage Change
Operating expenses:
Sales and marketing	$	18,903	39%	$	13,726	35%	$	5,177	38%
Research and development	7,242		15%	6,038		15%	1,204		20%
General and administrative	8,255		17%	7,418		19%	837		11%
Restructuring and other	316		1%	116		—%	200		172%
Total operating expenses	$	34,716	72%	$	27,298	69%	$	7,418	27%

Sales and Marketing.  The increase for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to an increase in headcount, resulting in a $3.6 million increase in personnel related costs, which includes an increase of $0.7 million in stock-based compensation expense and a $0.9 million increase in commissions due to higher 2015 bookings, a $0.9 million increase in related travel and other expenses and a $0.5 million increase in marketing events.

Research and Development.  The increase for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to a $0.5 million increase in personnel related costs, which includes an increase in stock-based compensation expense of $0.4 million, an increase of $0.4 million in consulting costs and an increase of $0.2 million in maintenance agreements as we continue to invest in product development.

General and Administrative.  The increase for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to a $0.4 million increase in personnel related costs, which includes $0.2 million in stock-based compensation expense, and a $0.4 million increase in corporate expenses related to facility relocation costs for our corporate and certain of our subsidiary offices.

Restructuring and Other.  Restructuring and other expense for the three months ended March 31, 2016 relates to the relocation of our Birmingham, Alabama offices. For the same period in 2015, we incurred severance costs related to the elimination of a position.

Stock-based Compensation

The following table sets forth a summary of our stock-based compensation expenses for the three months ended March 31, 2016, compared to the same period in 2015 (in thousands, except percentage data):

	Three Months Ended March 31, 2016		Three Months Ended March 31, 2015		Increase (Decrease)		Percentage Change
Stock-based compensation:
Cost of recurring revenue	$	509	$	288	$	221	77%
Cost of services revenue	512		342		170		50%
Sales and marketing	2,154		1,458		696		48%
Research and development	1,170		797		373		47%
General and administrative	2,108		1,932		176		9%
Total stock-based compensation	$	6,453	$	4,817	$	1,636	34%

The increase for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to the timing of restricted stock unit grants, an increased stock price and increased employee stock purchase plan participation.

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Other Items

The following table sets forth changes in other items for the three months ended March 31, 2016, compared to the same period in 2015 (in thousands, except percentage data):

	Three Months Ended March 31, 2016			Three Months Ended March 31, 2015			Increase (Decrease)			Percentage Change
Other income (expense), net
Interest income and other income (expense), net	$	225		$	(190	)	$	415		(218)%
Interest expense	(43		)	(67		)	(24		)	36%
	$	182		$	(257	)	$	439		(171)%
Provision for income taxes	$	156		$	214		$	(58	)	(27)%

Interest Income and Other Income (Expense), Net

Interest income and other income (expense) increased during the three months ended March 31, 2016 compared to the same period in 2015 due to a $0.3 million gain in foreign currency from holding foreign currency receivables, offset by a $0.1 million market-to-market loss on our foreign currency hedge during the three months ended March 31, 2016 compared to a $0.2 million loss in foreign currency from holding foreign currency receivables for the same period in 2015.

Interest Expense

Interest expense for the three months ended March 31, 2016 was generally comparable to the same period in 2015.

Provision for Income Taxes

Income tax expense for each of the three month periods ended March 31, 2016 and March 31, 2015 was $0.2 million. In both periods the tax expense is mainly attributable to sales to foreign customers subject to withholding taxes and income in the foreign jurisdictions subject to income taxes.

Liquidity and Capital Resources

As of March 31, 2016, our principal sources of liquidity were cash and cash equivalents and short-term investments of $101.9 million and accounts receivable of $42.7 million, compared to $97.2 million and $43.5 million at December 31, 2015, respectively.

In March 2015, we completed a stock offering in which we issued 5.3 million shares of our common stock at a public offering price of $13.00 per share. We received net proceeds of $64.4 million after deducting underwriting discounts and commissions of $4.1 million and other offering expenses of $0.3 million.

In May 2014, we entered into a credit agreement with Wells Fargo Bank, National Association ("Wells Fargo"), under which Wells Fargo agreed to make a revolving loan to us in an amount not to exceed $10.0 million, with an accordion feature that allows us to increase the maximum borrowing amount by not less than $5.0 million and not more than $10.0 million. The Revolver matures in May 2019. Outstanding borrowings under the Revolver bear interest, at our option, at a base rate plus an applicable margin. The applicable margin ranges between 0.75% and 2.25% depending on our leverage ratio. In September 2014, we exercised the accordion feature and increased the maximum borrowing amount to $15.0 million. Interest is payable every three months. As of March 31, 2016 we had no outstanding borrowings under the Revolver.

Cash provided by operating activities during the three months endedMarch 31, 2016decreased from cash provided by operating activities during the same period in 2015. The decrease was primarily due to the change in accrued payroll and related expenses, accounts payable and accounts receivable, partially offset by a higher change in deferred revenue.

The following table summarizes, for the periods indicated, selected items in our unaudited condensed consolidated statements of cash flows (in thousands):

	Three Months Ended March 31,
	2016			2015
Net cash provided by operating activities	$	6,112		$	8,003
Net cash used in investing activities	$	(1,888	)	$	(7,297	)
Net cash provided by financing activities	$	299		$	63,654

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Cash Flows During the Three Months Ended March 31, 2016

Net cash provided by operating activities was $6.1 million for the three months ended March 31, 2016 compared to $8.0 million provided in the three months ended March 31, 2015. During the three months ended March 31, 2016, net loss was $4.5 million, which included $6.5 million in stock-based compensation and $3.0 million in depreciation and amortization expense. Changes in operating assets and liabilities used $0.5 million in cash during the first three months of 2016, primarily driven by a decrease in accrued payroll and related expenses of $3.2 million, and a decrease in accounts payable of $0.6 million, partially offset by an increase in deferred revenue of $2.8 million, an increase in accrued expenses of $1.1 million and a decrease in prepaid and other assets of $0.4 million.

Net cash used in investing activities was $1.9 million during the three months ended March 31, 2016, compared to cash used in investing activities of $7.3 million in the three months ended March 31, 2015. During the three months ended March 31, 2016, net cash used in investing activities included $0.1 million for net investment purchases and $1.5 million for purchases of property and equipment for our data center investments as well as leasehold improvements for our subsidiary offices and corporate headquarters.

Net cash provided by financing activities was $0.3 million during the three months ended March 31, 2016, compared to $63.7 million cash provided by financing activities in the three months ended March 31, 2015. During the three months ended March 31, 2016, the increase in cash provided by financing activities was primarily due to $1.5 million of proceeds from the issuance of common stock, partially offset by $1.1 million for the repurchase of restricted stock from employees for payment of taxes on vesting of restricted stock units and a $0.1 million holdback payment related to our BridgeFront acquisition.

Forward-Looking Cash Commitments

Our future capital requirements depend on many factors, including the amount of revenue we generate, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of new product introductions and enhancements to existing products, our ability to offer SaaS service on a consistently profitable basis and the continuing market acceptance of our products and future acquisitions or other capital expenditures we may make. However, based upon our current business plan and revenue projections, we believe that our current working capital and anticipated cash flows from operations will be adequate to meet our cash needs for daily operations and capital expenditures for at least the next twelve months, and we intend to continue to manage our cash in a manner designed to ensure that we have adequate cash and cash equivalents to fund our operations as well as future commitments.

Contractual Obligations and Commitments

Please refer to Note 4 of our notes to unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q for further information. For additional information on existing unconditional purchase commitments, please refer to our Annual Report on Form 10-K for the year ended December 31, 2015.

Off-Balance Sheet Arrangements

With the exception of the above contractual obligations, we have no material off-balance sheet arrangements that have not been recorded in our unaudited condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     During the three months ended March 31, 2016, there were no significant changes to our quantitative and qualitative disclosures about market risk. Please refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk included in our Annual Report on Form 10-K for the year ended December 31, 2015 for a more complete discussion on the market risks we encounter.

Item 4. Controls and Procedures

Evaluation of Disclosures Controls and Procedures

Our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended, Rules 13a-15(e) or 15d-15(e)) as of March 31, 2016, have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures.

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Changes in Internal Control Over Financial Reporting

In connection with their evaluation of our disclosure controls and procedures as of the end of the period covered by this report, our CEO and CFO did not identify any changes in our internal control over financial reporting during the three months ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A.    Risk Factors

Factors That Could Affect Future Results

You should carefully consider the risks below, as well as other information included or incorporated by reference in this report before making an investment decision. We operate in a dynamic and rapidly changing environment that involves many risks and uncertainties that could cause actual results to differ materially from results contemplated by forward-looking statements in this report.  Because of the factors discussed below, other information included or incorporated by reference in this report and other factors affecting our operating results, past performance should not be considered a reliable indicator of future performance. The risks discussed in this report are not the only risks we face. Risks and uncertainties of which we are not currently aware, or which we currently deem to be immaterial, may also adversely affect our business, financial condition or operating results.

Risks Related to Our Business

We have a history of losses, and we intend to continue to invest in our business, so we cannot assure you that we will achieve profitability.

We incurred net losses of $4.5 million during the three months ended March 31, 2016, $13.1 million in 2015, $11.6 million in 2014, and $21.4 million in 2013. We had an accumulated deficit of $288.4 million as of March 31, 2016. We intend to continue to invest in our business, including with respect to our employee base; sales and marketing efforts; development of new products, services, and features; and improvement of our existing products, services, and features. Therefore, to achieve profitability, we must increase our revenue, particularly our recurring revenue by entering into more and larger sales transactions while limiting customer churn, and manage our cost structure in line with our revenue. If we fail to do so, our future results and financial condition will be adversely affected and we may be unable to continue operating.

We continue to monitor and manage our costs in an effort to optimize our performance for the long term. However, there is no assurance that we will be successful and unforeseen expenses, difficulties or delays may prevent us from realizing

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our goals. From time to time, we incur restructuring expenses or expenses related to other cost reduction efforts, but we can offer no assurance that these or other actions will enable us to achieve or sustain profitability in the future. In addition, we cannot be certain that steps we have taken to control our costs will not adversely affect our prospects for long-term revenue growth. If we cannot increase our revenue, improve gross margins and control costs, our future results and financial condition will be negatively affected.

Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future, and because we recognize revenue from subscriptions over a period of time, downturns in revenue may not be immediately reflected in our operating results.

Because we recognize recurring revenue and maintenance revenue ratably over the terms of the related subscription agreements and maintenance support agreements, most of our revenue each quarter results from recognition of deferred revenue related to agreements entered into during previous quarters. Consequently, declines in new or renewed subscription agreements and maintenance agreements that occur in one quarter will largely be felt in future quarters, both because we may be unable to generate sufficient new revenue to offset the decline and because we may be unable to adjust our operating costs and capital expenditures to align with the changes in revenue. Our subscription model makes it more difficult for us to increase our revenue rapidly in any period, because revenue from new customers must be recognized over the applicable subscription term. Furthermore, although our business model is primarily focused on recurring revenue, we anticipate continuing to recognize license revenue primarily from upgrades reflecting additional usage over the contracted amount. License revenue is difficult to forecast and is likely to fluctuate due to many factors that are beyond our control including transition of license customers to recurring revenue models. Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as definitive indicators of future performance. Other factors that may cause our revenue and operating results to fluctuate include:

• timing of customer budget cycles;

• the priority our customers place on our products compared to other business investments;

• size, timing and contract terms of new customer contracts, and unpredictable and often lengthy sales cycles;

• reduced renewals;

• competitive factors, including new product introductions, upgrades and discounted pricing or special payment terms offered by our competitors, as well as strategic actions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

• technical difficulties, errors or service interruptions in our solutions that may cause customer dissatisfaction with solutions;

• consolidation among our customers, which may alter their buying patterns, or business failures that may reduce demand for our solutions;

• operating expenses associated with expansion of our sales force or business, and our product development efforts;

• cost, timing and management efforts related to the introduction of new features to our solutions;

• our ability to obtain, maintain and protect our intellectual property rights and adequately safeguard the information imported into our solutions or otherwise provided to us by our customers;

• changes in the regulatory environment, including with respect to security, or privacy laws and regulations, or their enforcement; and

• extraordinary expenses such as impairment charges, litigation or other payments related to settlement of disputes.

Any of these developments may adversely affect our revenue, operating results and financial condition. Furthermore, we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. In such cases, we may be required to defer revenue recognition on sales to affected customers. In the future, we may have to record additional reserves or write-offs, or defer revenue on sales transactions, which could negatively impact our financial results.

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If we are unable to maintain the profitability of our recurring revenue solutions, our operating results could be adversely affected.

We have invested, and expect to continue to invest, substantial resources to expand, market and refine our solutions. If we are unable to grow the volume of our recurring revenue, or to improve our gross margins, we may not be able to achieve profitability and our operating results and financial condition could be adversely affected. Factors that could harm our ability to improve our gross margins include:

• customer attrition as customers decide not to renew for any reason;

• our inability to maintain or increase the prices customers pay for our solutions, due to competitive pricing pressures or limited demand;

• our inability to reduce operating costs through technology-based efficiencies and streamlined processes;

• increased direct and indirect cost of third-party services, including hosting facilities and professional services contractors performing implementation and support services;

• higher personnel and personnel-related costs;

• increased costs to integrate products or personnel that we acquire, including time and expense associated with new sales personnel reaching full productivity; and

• increased costs to license and maintain and replace third-party software embedded in our solutions or to create alternatives to such third-party software.

Our business and operations have experienced rapid growth in recent periods, and if we do not effectively manage any future growth or are unable to improve our systems and processes, our operating results will be adversely affected.

We have experienced rapid growth and increased demand for our products over the last few years. Our employee headcount and number of customers have increased significantly, and we expect to continue to grow our headcount significantly in future periods. For example, from the end of fiscal 2015 to March 31, 2016, our employee headcount increased from 901 to 952 employees, and our number of customers increased from approximately 4,600 to 4,700. We anticipate that we will continue to significantly expand our operations and headcount in the near term, and that our customer base will continue to expand. The growth and expansion of our business and our product and service offerings place a significant strain on our management, operations, sales and marketing, and financial resources. To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems, our sales and marketing teams and our ability to manage headcount, capital, and business processes in an efficient manner.

We may not be able to implement improvements to our systems and processes in an efficient or timely manner, and we may discover deficiencies in our existing systems and processes. We may experience difficulties in managing improvements to our systems and processes, which could disrupt existing customer relationships, cause us to lose customers, limit sales of our products, or increase our technical support costs. Our failure to improve our systems and processes, or the failure of those systems and processes to operate in the intended manner, may result in our inability to manage the growth of our business and accurately forecast our revenue and expenses. Our productivity and the quality of our solutions may be adversely affected if we do not integrate and train new employees quickly and effectively. Any future growth would add complexity to our organization and require effective coordination throughout our organization. Failure to manage any future growth effectively could result in increased costs, negatively impact our customers' satisfaction with our solutions and harm our operating results.

Decreases in retention rates for customer SaaS subscriptions or on-premise maintenance arrangements could materially impact our future revenue or operating results.

Our customers have no obligation to renew our SaaS subscriptions or maintenance support arrangements after the expiration of the subscription or maintenance period, which is typically 12 to 24 months. Customers may elect not to renew, or may renew for fewer seat licenses or shorter contract terms. In addition, we offer a pay-as-you-go model, whereby customers can pay for our SaaS services on a monthly basis without a long-term commitment, which may unexpectedly increase the rate of customer non-renewals and thus negatively and unpredictably affect our recurring revenue. If our customer renewal rates

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decline, which may occur as a result of many factors, including reduced budgets, insourcing decisions or dissatisfaction with our service, our revenue will be adversely affected and our business will suffer.

Most of our revenue is derived from our Lead to Money solutions, and a decline in sales of those solutions could adversely affect our operating results and financial condition.

We derive a majority of our revenue from our Lead to Money solutions. If demand for those solutions declines significantly and we are unable to replace the revenue with revenue from our other offerings, our business and operating results will be adversely affected. We cannot assure you that our current levels of market penetration and revenue from these solutions will continue. If conditions in the market for these solutions change as a result of increased competition or new product offerings by our competitors or consolidation among our competitors, or if we are unable to timely introduce successful new solutions to keep pace with technological advancements, our revenue may decline and our financial results and financial condition would be harmed.

If we do not compete effectively, our revenue may not grow and could decline.

We experience intense competition from other software companies, as well as from customers' internal development teams. We believe one of our key challenges is to demonstrate the benefits of our solutions to prospective customers so that they will prioritize purchases of our solutions over other options. Our financial performance depends in large part on continued growth in the number of organizations adopting our sales effectiveness solutions to manage the performance of their sales organizations, yet the market for sales effectiveness solutions may not develop as we expect, or at all.

We compete principally with vendors of sales effectiveness software, incentive compensation management ("ICM") software, enterprise resource planning software and customer relationship management software. Our competitors may be more successful than we are in capturing the market by, for example, announcing new products, services or enhancements that better meet the needs of prospective customers or our current customers or changing industry standards. In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. Increased competition may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business, results of operations and financial condition.

Many of our competitors, particularly our enterprise resource planning competitors, have longer operating histories with significantly greater financial, technical, marketing, service and other resources. Many also have a larger installed base of users, larger marketing budgets, broader relationships, established distribution agreements, and greater name recognition. Some of our competitors' products may also be more effective at performing particular sales effectiveness or incentive compensation management system functions or may be more customized for particular customer needs in any given market. Even if our competitors provide products with less sales performance management or incentive compensation management system functionality than our solutions, their products may incorporate other capabilities, such as recording and accounting for transactions, customer orders or inventory management. A product that performs these functions, along with functions of our solutions, may appeal to some customers by reducing the number of software applications they use in their business. Our competitors, especially larger competitors, may also bundle incentive compensation management or other functionalities with their other offerings, rendering our software less competitive from a pricing perspective.

Our products generally must be integrated with software provided by existing or potential competitors. These competitors could alter their software products in ways that inhibit integration with ours, or they could deny or delay our access to advance software releases, which would restrict our ability to adapt our products for integration with their new releases and could result in the loss of both sales opportunities and renewals of on-demand services and maintenance.

Some potential customers have already made substantial investments in third-party or internally-developed solutions designed to model, administer, analyze and report on sales effectiveness programs. These companies may be reluctant to abandon such investments in favor of our solutions. In addition, information technology departments of some potential customers may resist purchasing our solutions for a variety of reasons, including concerns that hosted solutions are not sufficiently customizable for their needs or that they pose data security concerns for their enterprises.

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If we change prices, alter our payment terms or modify our products or services in order to compete, our margins and operating results may be adversely affected.

The intensely competitive market in which we do business may require us to change our prices or modify our pricing strategies for our solutions in ways that adversely affect our operating results. If our competitors offer discounts on competitive products or services, we may need to lower prices or offer other terms more favorable to existing and prospective customers in order to compete successfully. If we raise prices based upon our own evaluation of the value of our products, those increases might not be well received by customers, which may hurt our sales. Some of our competitors may bundle their products with other solutions for promotional purposes or as a pricing strategy, or provide guarantees of prices and product implementations. These practices could, over time, limit the prices that we can charge for our solutions or cause us to modify our existing market strategies accordingly. If we cannot offset price reductions and other terms that are more favorable to our customers with a corresponding increase in sales or decrease in spending, then the reduced revenue resulting from lower prices would adversely affect our gross margins and operating results.

If we experience service interruptions in our offerings to customers, our business and financial results could be harmed.

Our business is primarily conducted over the Internet, so we depend on our ability to protect our computer equipment and stored data against damage from natural disasters, human error, power loss, telecommunications failures, cyber-attacks or other unauthorized intrusion and other events. Moreover, our headquarters are located in the San Francisco Bay Area, a region known for seismic activity. Although we have redundant facilities to support our operations, our systems, procedures and controls might not be adequate for all eventualities, which could prolong the adverse impact.

There can be no assurance that our disaster preparedness will prevent significant interruption of our operations, which could be lengthy, or reduce the speed or functionality of our services. Service interruptions, no matter how prolonged or frequent, may result in material liability claims from customers for breach of service-level commitments, customer terminations and damage to our reputation and business prospects.

In addition, third-party service providers for hosting facilities or other critical infrastructure could be interrupted in the event of a natural disaster, facility closings or other unanticipated problems. Third-party telecommunications providers of Internet and other telecommunication services may fail to perform adequately, or their systems may fail to operate properly or be disabled, causing business interruption, system damage or significant expense for us to replace, and could harm our revenue, increase costs, cause regulatory intervention or damage to our reputation.

Software errors could be costly and time-consuming for us to correct, and could harm our reputation and impair our ability to sell our solutions.

Our solutions are based on complex software that may contain errors, or "bugs," that could be costly to correct, harm our reputation and impair our ability to sell our solutions to new customers. Moreover, customers relying on our solutions to implement their incentive compensation arrangements may be more sensitive to such errors, and the attendant potential security vulnerabilities and business interruptions for these applications. If we incur substantial costs to correct any errors of this nature, our operating margins could be adversely affected. Because our customers depend on our solutions for critical business functions, any service interruptions could result in lost or delayed market acceptance and lost sales, higher service-level credits and warranty costs, diversion of development resources and product liability suits.

Security breaches or loss of customer data could create the perception that our solutions are not secure, causing customers to discontinue or reject the use of our solutions and potentially subjecting us to significant liability. Implementing, monitoring and maintaining adequate security safeguards may be costly.

Our solutions allow our customers to access and transmit confidential data, including personally identifiable information of their employees, agents and customers over the Internet, and we store our customers' data on servers. We may also have access to confidential data in connection with the activities of our professional services organization, including implementation, maintenance and support activities for our customers.

Moreover, many of our customers are subject to heightened security obligations regarding the personally identifiable information of their downstream customers. In the United States, these heightened obligations particularly affect the financial services, healthcare and insurance sectors, which are subject to controls over personal information under various state and federal laws and regulations. Other directives, such as the European Union Directive on Data Protection and accompanying laws and regulations of the Member States of the European Union implementing the directive, create international obligations

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on the protection of personal data that typically exceed security requirements mandated in the United States. Implementation of security measures to satisfy customer and regulatory requirements may be substantial and costly.

Our security measures to protect customer information may be inadequate or breached by third-party action, including intentional misconduct or malfeasance, system error, employee error or otherwise, resulting in unauthorized access to or disclosure of our customers' data, including intellectual property and other confidential business information. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and are often not recognized until launched against a target, we may be unable to anticipate them or to implement adequate preventative measures. Because we do not control our customers or third-party technology providers that our customers may authorize to access their data, we cannot ensure the integrity or security of their activities. In addition, malicious third parties may conduct attacks designed to temporarily deny customers access to our services.

If we do not adequately safeguard the information that customers import into our solutions or otherwise provide to us, or if third parties penetrate our solutions and misappropriate customers' confidential information, our reputation may be damaged, resulting in a loss of confidence in our solutions, negatively impacting our brand and future sales, and we may be sued and incur substantial damages. Even if it is determined that our security measures were adequate, the damage to our reputation may cause customers and potential customers to reconsider the use of our solutions, which may have a material adverse effect on our results of operations.

Our business depends in part on a strong and trusted brand, and any failure to maintain, protect, and enhance our brand could harm our business.

We have developed a strong and trusted brand that is associated with our solutions and services and that brand has contributed to the success of our business. Our brand is based on customer trust in our solutions and the implementations of our solutions in their businesses, across a broad range of industries. To continue to expand our customer base, it is important that we maintain, protect and enhance our brand. Our ability to achieve that goal depends largely on our ability to maintain our customers’ trust and continue to provide high-quality and secure solutions. Negative publicity could harm our reputation and customer confidence in and use of our solutions, whether that negative publicity relates to our industry or our company, the quality and reliability of our solutions, our risk management processes, our privacy and security practices, or other issues experienced by our customers. Accordingly, harm to our brand can stem from many sources, such as if we fail to satisfy expectations of service and quality, inadequately protect sensitive information, or experience compliance failures. If we do not successfully maintain a strong and trusted brand, our business and financial results may be harmed.

Legal and regulatory changes related to data protection and privacy could create unexpected costs, require changes to our business, impact the use and adoption of our solutions or require us to agree to onerous terms and conditions, which could have an adverse effect on our future revenue, operating results or customer retention.

Legal and regulatory frameworks for data protection and privacy issues are evolving worldwide, and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices. We expect federal, state and foreign governments to expand data protection and privacy regulation and we expect more public scrutiny, enforcement and sanctions in this area. In addition, foreign court judgments and regulatory actions may affect our ability to transfer, process and receive data transnationally, including data that is critical to our operations or core to the functionality of our solutions. New laws, regulations, judgments or actions may relate to the solicitation, collection, processing, use and disclosure of personal information, including cross-border transfers of personal information, in a way that could affect demand for our solutions or cause us to change our platform or business model and increase our costs of doing business.

Our customers can use our solutions to store compensation and other personal identifying information about their sales personnel that are or may be considered personal data in some jurisdictions and, therefore, may be subject to this evolving legislation, regulation or heightened public scrutiny. In addition to the potential adoption of new laws and regulations in the United States and internationally, evolving definitions and norms regarding personal data may require us to adapt our business practices, or limit or inhibit our ability to operate or expand our business.

In order to comply with new United States or international laws, regulations or judgments, including adopting new and potentially onerous customer contractual clauses, we may incur substantial costs or change our business practices in a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy. Furthermore, to comply with any new non-U.S. laws, regulations or judgments, we may have to create expensive duplicative information technology infrastructure and business operations, which could hinder our expansion plans or render them commercially infeasible, increase our costs of doing business and harm our financial results.

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In addition, customers may experience higher compliance costs as a result of laws, regulations and judgments, which may limit the use and adoption of our solutions and reduce overall demand, or lead to significant fines, penalties or liabilities for any noncompliance. As a result, some industries may not adopt our solutions based on perceived privacy concerns, regardless of the validity of such concerns.

While we take measures to protect the security of information that we collect, use and disclose in the operation of our business, and we offer privacy protections for this information, these measures may not always be effective. Furthermore, although we strive to comply with applicable laws and regulations relating to privacy and data collection, use and disclosure, these laws and regulations are continually evolving, not always clear and not always consistent across the jurisdictions in which we do business. Any proceedings brought against us relating to compliance with these laws and regulations could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, adversely affect the demand for our solutions and ultimately result in the imposition of monetary liability or restrictions on our ability to conduct our business. There is no assurance that contractual indemnity or insurance would be available to offset any portion of these costs.

In addition, if we are perceived as not operating in accordance with industry best privacy practices, we may be subject to negative publicity, government investigation, litigation or investigation by accountability groups. Any action against us could be costly and time consuming, require us to change our business practices, expose us to substantial monetary liability and result in damage to our reputation and business.

Acquisitions of, and investments in, other businesses present many risks. We may not realize the anticipated financial and strategic benefits of these transactions, and we may not be able to manage our operations with the acquired businesses efficiently or profitably.

As part of our business strategy, we evaluate opportunities to expand and enhance our product and service offerings to meet customer needs, increase our market opportunities and grow revenue through internal development efforts and external acquisitions and partnerships. We have completed a number of acquisitions in recent years, including the acquisition of specific assets of ViewCentral, LLC in 2016 and the acquisitions of BridgeFront LLC in 2015 and LeadRocket, Inc. and Clicktools Ltd. in 2014. We may continue to acquire or make investments in other companies, products, services and technologies in the future. Acquisitions and investments may cause disruptions in, or add complexity to, our operations and involve a number of risks, including the following:

• anticipated benefits, such as increased revenue, may not materialize if, for example, a larger than expected number of customers choose not to renew their contracts or if we are unable to cross-sell the acquired company's solutions to our existing customer base;

• we may have difficulty integrating and managing the acquired technologies or products with our existing product lines, and maintaining uniform standards, controls, procedures and policies across locations;

• we may experience challenges in, and have difficulty penetrating, new markets where we have little or no prior experience and where competitors have stronger market positions;

• integrating the financial systems and personnel of the acquired business and retaining key employees may be difficult, and, to the extent we issue shares of stock or other rights to purchase stock to such individuals, existing stockholders may be diluted;

• our ongoing business and management's attention may be disrupted or diverted by transition or integration issues and the complexity of overseeing geographically and culturally diverse locations;

• we may find that the acquired business or assets do not further our business strategy, or that we overpaid for the business or assets, or that we do not realize the expected operating efficiencies or product integration benefits;

• our use of cash consideration for one or more significant acquisitions may require us to use a substantial portion of our available cash or incur substantial debt, and if we incur substantial debt, it could result in material limitations on the conduct of our business;

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• we may fail to uncover or realize the significance of, or otherwise become exposed to, liabilities and other issues assumed from an acquired business, such as claims from terminated employees or third-parties and unfavorable revenue recognition or other accounting practices; and

• we may experience customer confusion as a result of product overlap, particularly when we offer, price and support various product lines differently.

These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows. Furthermore, during periods of operational expansion, we often need to increase the size of our staff, our related operations and third party partnerships, and potentially amplify our financial and accounting controls to ensure they remain effective. Such changes may increase our expenses, and there is no assurance that our infrastructure will be sufficiently scalable to efficiently manage any growth that we may experience. If we are unable to leverage our operating cost investments as a percentage of revenue, our ability to generate or increase profits will be adversely impacted. In addition, from time to time, we may enter into negotiations for acquisitions and other investments that are not ultimately consummated, which could result in significant diversion of management time, as well as out-of-pocket expenses.

Some of our products rely on third-party software licenses to operate, and the loss of or inability to maintain these licenses, or errors, discontinuations or updates to that software, could result in higher costs, delayed sales, customer claims or termination of existing agreements.

We license technology from several software providers for our reporting, analytics and integration applications, and we anticipate continuing to license technologies from these or other providers in connection with our current and future products. We also rely on generally available third-party software to run our applications. Any of these software applications may not continue to be available on commercially reasonable terms, if at all, or new versions may be released that are incompatible with our offerings. Some of the products could be difficult to replace, and developing or integrating new software with our products could require months or years of design and engineering work. Modification or loss of access to any of these technologies could result in delays in providing our products until equivalent technology is developed or, if available, is identified, licensed and integrated. Acquisitions of third-party technologies by other companies, including our competitors, may have a material adverse impact on us if the acquirer seeks to cancel or change the terms of our license.

In addition, we depend upon the successful operation of third-party products in conjunction with our products or services. As a result, undetected errors in those third-party products could prevent the implementation, or impair the functionality of, our products, delay new product introductions, limit the availability of our products via our on-demand service and injure our reputation. Our use of additional or alternative third-party products could result in new or higher royalty payments by us if we are required to enter into license agreements for such products.

Our success depends upon our ability to develop new solutions and enhance our existing solutions rapidly and cost-effectively. Failure to introduce new or enhanced solutions that meet customer needs may adversely affect our operating results.

The markets for sales effectiveness solutions and cloud computing is generally characterized by:

• rapid technological advances,

• changing customer needs, and

• frequent new product introductions and enhancements.

To keep pace with technological developments, satisfy increasingly sophisticated customer requirements, achieve market acceptance and effectively respond to competition, we must quickly identify emerging trends and requirements, accurately define and design enhancements and improvements for existing solutions, and introduce new solutions that satisfy our customers' changing demands. Accelerated introductions for new solutions require high levels of expenditures for research and development that could adversely affect our operating results. Further, any new solutions we develop may not be introduced in a timely manner or be available in a distribution model favored by our target markets and, therefore, may not achieve the broad market acceptance necessary to generate significant revenue. If we are unable to quickly and successfully develop or acquire and distribute new products and services cost-effectively, or enhance existing solutions, or if we fail to position and price our solutions to meet market demand, our business and operating results will be adversely affected.

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Our offshore product development, support and professional services may prove difficult to manage or may not allow us to realize our cost reduction goals, produce effective new solutions and provide professional services to drive growth.

We use offshore resources to perform new product and services development and provide support and professional consulting efforts, which requires detailed technical and logistical coordination. We must ensure that our international resources and personnel are aware of and understand development specifications and customer support, as well as implementation and configuration requirements, and that they can meet applicable timelines. If we are unable to maintain acceptable standards of quality in support, product development and professional services through our international third-party service providers, our attempts to reduce costs and drive growth through new products and margin improvements in technical support and professional services may be negatively impacted, which would adversely affect our results of operations. Outsourcing services to offshore providers may expose us to misappropriation of our intellectual property or that of our customers, or make it more difficult to defend intellectual property rights in our technology.

The loss of key personnel, higher than normal employee attrition in key departments or the inability of replacement personnel to quickly and successfully perform in their new roles could adversely affect our business.

Our success depends to a significant extent on the abilities and effectiveness of our personnel, and, in particular, our chief executive officer and other executive officers. All of our existing personnel, including our executive officers, are employed on an "at-will" basis. If we lose or terminate the services of one or more of our current executives or key employees or if one or more of our current or former executives or key employees joins a competitor or otherwise competes with us, or if we do not have an effective succession or development plan in place for such individuals, our ability to successfully implement our business plan could be impaired. Likewise, if a number of employees from specific departments were to depart, our business may be adversely affected. If we are unable to quickly identify, hire, develop and retain qualified replacements for our executives, other key positions or employees within specific departments, our ability to execute our business plan and continue to maintain and grow our business could be harmed. Competition for highly skilled personnel is intense in the San Francisco Bay Area where our headquarters are located, so we may need to invest heavily to attract and retain new personnel, and we may never realize returns on those investments. Even if we can quickly hire qualified replacements, we would expect to experience operational disruptions and inefficiencies during any transition.

If we are unable to hire and retain qualified employees and contractors, including sales, professional services and engineering personnel, our growth may be impaired.

To scale our business successfully, increase productivity, maintain a high level of quality and meet customers' needs, we need to recruit, retain and motivate highly skilled employees and contractors in all areas of our business, including sales, professional services and engineering. In particular, if we are unable to hire and retain talented personnel with the skills, and in the locations, we require, we might need to redeploy existing personnel or increase our reliance on contractors. Furthermore, we have increased and intend to continue to increase our sales force and, if we are not successful in attracting and retaining qualified personnel, or if new sales personnel are unable to achieve desired productivity levels within a reasonable time period, we may not be able to increase our revenue and realize the anticipated benefits of these investments.

As our customer base increases and as we continue to evaluate and modify our organizational structure to increase efficiency, we are likely to experience staffing constraints in connection with the deployment of trained and experienced professional services and support resources capable of implementing, configuring, maintaining and supporting our products and related services. Moreover, as a company focused on the development of complex products and the provision of online services, we are often in need of additional software developers and engineers. We have relied on our ability to grant equity compensation as one mechanism for recruiting, retaining and motivating such highly skilled personnel. Our ability to provide equity compensation depends, in part, upon receiving stockholder approval for an increase in shares authorized for issuance pursuant to our equity compensation plan. If we are not able to secure such approval from our stockholders, our ability to recruit, retain and motivate our personnel may be adversely impacted, which would negatively impact our operating results.

Changes in the terms of our current or future indebtedness or our credit rating may adversely affect our financial condition and results of operations.

We cannot provide assurances that additional borrowing capacity will be available under the Revolver, including pursuant to the accordion feature, or that future indebtedness will be obtainable on terms as favorable as the Revolver. As a result, in the future, we may be subject to higher interest rates and our interest expense may increase, which may have an adverse effect on our financial results. Furthermore, changes by any rating agency to our outlook or credit rating could negatively affect the value of both our debt and equity securities and increase the interest amounts we pay on outstanding or future debt. These risks could adversely affect our financial condition and results.

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If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common stock may be negatively affected.

We are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Effective planning and management processes are necessary to meet these requirements. We expect that we will need to continue to improve existing, and implement new, operational and financial systems, procedures and controls to manage our business effectively in the future. We are also required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the trading price of our common stock could be negatively affected, and we could become subject to investigations by The Nasdaq Stock Market LLC, the Securities and Exchange Commission or other regulatory authorities, which could be costly for the Company.

If we fail to adequately protect our proprietary rights and intellectual property, we may lose valuable assets, experience reduced revenue and incur costly litigation.

Our success and ability to compete depends on our internally-developed technology and expertise, including the proprietary technology embedded in our solutions, as well as our ability to obtain and protect intellectual property rights. We rely on a combination of patents, trademarks, copyrights, service marks, trade secrets, contractual provisions and other similar measures to establish and protect our proprietary rights. We cannot protect our intellectual property if we are unable to enforce our rights or if we do not detect its unauthorized use. Despite our precautions, unauthorized third parties may be able to copy or reverse engineer our solutions and use information that we regard as proprietary to create products and services that compete with ours. Provisions in our agreements prohibiting unauthorized use, copying, transfer and disclosure of our licensed programs and services may be unenforceable under the laws of some jurisdictions. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and the outcome of any actions taken in any foreign jurisdiction to enforce our rights may be different than if such actions were determined under the laws of the United States. To the extent that we engage in international activities, our exposure to unauthorized copying and use of our products, services and proprietary information increases.

We enter into various restrictive agreements with our employees and consultants, as well as with customers and third parties with whom we have strategic relationships. We cannot ensure that these agreements will be effective in controlling access to and distribution of our products, services and proprietary information. These agreements also do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our solutions. Litigation may be necessary to enforce our intellectual property rights and protect our trade secrets. Litigation, whether successful or unsuccessful, could result in substantial costs and diversion of management resources, either of which could seriously harm our business.

Our results of operations may be adversely affected if we are subject to a protracted infringement claim or one that results in a significant damage award.

From time to time, we receive claims that our products, services offerings or business infringe or misappropriate the intellectual property rights of third parties, and we have in the past, and may continue in the future, to assert claims of infringement against third parties on such bases, such as the lawsuit we settled with Versata Software, Inc., Versata Development Group, Inc. and Versata, Inc. in November 2014. Our competitors or other third parties may also challenge the validity or scope of our intellectual property rights. For more information, see "Item 3. Legal Proceedings." We believe that claims of infringement are likely to increase as the functionality of our solutions expand and we introduce new solutions, including technology acquired or licensed from third parties. Any infringement claim, whether offensive or defensive, could:

• require costly litigation to resolve;

• absorb significant management time;

• cause us to enter into unfavorable royalty or license agreements;

• require us to discontinue the sale of, or materially modify, all or a portion of our products or services;

30

• require us to indemnify our customers or third-party service providers; and

• require us to expend additional development resources to redesign our products or services.

Inclusion of open source software in our products may expose us to liability or require release of our source code.

We currently use open source software in our products and may use more in the future. We could be subject to suits by parties claiming ownership of what we believe to be open source software that has been incorporated into our products. In addition, some open source software is provided under licenses which require that proprietary software, when combined in specific ways with open source software, become subject to the open source license and thus freely available. While we take steps to minimize the risk that our products, when incorporated with open source software, would become subject to such provisions, few courts have interpreted open source licenses. As a result, the enforcement of these licenses is unclear. If our products became subject to open source licenses, our ability to continue commercializing our solutions, along with our operating results, would be materially and adversely affected.

Sales to customers in international markets pose risks and challenges for which we may not achieve the expected results.

We continue to invest substantial time and resources to grow our international operations. If we fail to do so successfully, our business and operating results could be seriously harmed. Such expansion may require substantial financial resources and management attention. International operations involve a variety of risks, particularly:

• greater difficulty in supporting and localizing our solutions;

• complying with numerous regulatory requirements, taxes, trade and export laws and tariffs that may conflict or change unexpectedly, including labor, tax, privacy and data protection;

• using international resellers and complying with anti-bribery and anti-corruption laws;

• greater difficulty in establishing, staffing and managing foreign operations;

• greater difficulty in maintaining acceptable quality standards in support, product development and professional services by our international third-party service providers;

• differing abilities to protect our intellectual property rights; and

• possible political and economic instability.

We may be affected by fluctuations in currency exchange rates.

We are potentially exposed to adverse movements in currency exchange rates. Although most of our revenue and expenses occur in U.S. Dollars, some occur in local currencies and the amounts occurring in local currencies may increase as we expand our international operations. An increase in the value of the U.S. Dollar could increase the real cost to our customers of our products in those markets outside the U.S., and a weakened U.S. Dollar could increase the cost of our expenses, as well as overseas capital expenditures. Therefore, fluctuations in the exchange rate of foreign currencies may have a negative impact on our revenue and operating activities.

Our services revenue produces substantially lower gross margins than our recurring revenue, and periodic variations in the proportional relationship between services revenue and higher margin recurring revenue may harm our overall gross margins.

Our services revenue, which includes fees for consulting, implementation and training, represented 24% of our revenue in 2015 and 22% of our revenue for the three months ended March 31, 2016. Our services revenue has a substantially lower gross margin than our recurring revenue.

The percentage of total revenue represented by services revenue has varied significantly from period to period principally because the number of new recurring revenue customer transactions varies from quarter to quarter.

31

Deployment of solutions may require substantial technical implementation and support by us or third-party service providers. We may lose sales opportunities and our business may be harmed if we do not meet these implementation and support requirements, which may cause a decline in revenue and an increase in our expenses.

We deploy solutions, such as large enterprise-wide deployments, that require a substantial degree of technical and logistical expertise. It may be difficult for us to manage these deployments, including the timely allocation of personnel and resources by us and our customers. Failure to successfully manage the process could harm our reputation, both generally and with specific customers, harming our sales and causing customer disputes, which could adversely affect our revenue and increase our technical support and litigation costs. If actual remediation services exceed our accrued estimates, we could be required to take additional charges, which could be material.

We engage third-party partners, systems integrators and software vendors to provide customer referrals, cooperate with us in the design, sales and marketing of our solutions, provide insights into market demands, and provide our customers with systems implementation services or overall program management. In some cases, we may not have formal agreements governing such relationships, and the agreements we do have generally do not include specific obligations with respect to exclusivity, generating sales opportunities or cooperating on future business.

From time to time, we also consider new or unusual strategic relationships, which can pose additional risks. For example, while reseller arrangements offer the advantage of leveraging larger sales organizations than our own to sell our products, they also require considerable time and effort on our part to train and support the reseller's personnel, and require the reseller to properly motivate and incentivize its sales force. Also, if we enter into an exclusive reseller arrangement, the exclusivity may prevent us from pursuing the applicable market ourselves, and if the reseller is not successful in the particular location, our results of operations may be adversely affected.

Should any of these third-parties go out of business, perform unsatisfactory services or choose not to work with us, we may be forced to develop new capabilities internally, which may cause significant delays and expense, thereby adversely affecting our operating results. These third-party providers may offer products of other companies, including products competitive with ours. If we do not successfully or efficiently establish, maintain and expand our industry relationships with influential market participants, we could lose sales and service opportunities, which would adversely affect our results of operations.

Our credit agreement contains restrictive covenants and financial covenants that may limit our operational flexibility. Furthermore, if we default on our obligations under the credit agreement, our operations may be interrupted and our business and financial results could be adversely affected.

In May 2014, we entered into a credit agreement with Wells Fargo Bank, National Association ("Wells Fargo"), under which Wells Fargo agreed to provide a revolving loan to us in an amount not to exceed $10.0 million, with an accordion feature that allows us to increase the maximum borrowing amount by not less than $5.0 million and not more than $10.0 million ("Revolver"). We may draw upon the Revolver to finance our operations or for other corporate purposes. In September 2014, we increased the maximum borrowing amount to $15.0 million. The Revolver contains a number of restrictive covenants, and its terms may restrict our current and future operations, including:

• our flexibility to plan for, or react to, changes in our business and industry conditions;

• our ability to use our cash flows, or obtain additional financing, for future working capital, capital expenditures, acquisitions or other general corporate purposes;

• place us at a competitive disadvantage compared to our less leveraged competitors; and

• increase our vulnerability to the impact of adverse economic and industry conditions.

In addition, if we fail to comply with the covenants or payment obligations specified in the Revolver, we may trigger an event of default and Wells Fargo would have the right to: (i) terminate its commitment to provide additional loans under the Revolver, and (ii) declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, Wells Fargo would have the right to proceed against the Revolver collateral, which consists of substantially all of our assets. If the debt under the Revolver were to be accelerated we may not have sufficient cash or be able to sell sufficient collateral to repay this debt, which would have an immediate material adverse effect on our business, results of operations and financial condition.

32

Our solutions have unpredictable sales cycles, making it difficult to plan our expenses and forecast our results.

It is difficult to determine how long the sales cycles for our solutions will be, thereby making it difficult to predict the quarter in which a particular sale will close and to plan expenditures accordingly. Moreover, to the extent that sales are completed in the final two weeks of a quarter, the impact of recurring revenue transactions is typically not reflected in our financial statements until subsequent quarters. The period between our initial contact with a potential customer and ultimate sale of our solutions is relatively long due to several factors, which may include:

• the complex nature of some of our products;

• the need to educate potential customers about the uses and benefits of our solutions;

• budget cycles of our potential customers that affect the timing of purchases;

• the expiration date of existing point solutions that we seek to replace;

• customer requirements for competitive evaluation and often lengthy internal approval processes and protracted contract negotiations (particularly of large organizations) before purchasing our solutions; and

• potential delays of purchases due to announcements or planned introductions of new solutions by us or our competitors.

The length and unpredictability of our sales cycle make it difficult for us to project revenues and plan for levels of expenditures to support our solutions appropriately. If we do not manage our sales cycle successfully, we may misallocate resources and our financial results may be harmed.

Our latest product features and functionality may require existing on-premise license customers to migrate to our SaaS solutions. Moreover, we may choose or be compelled to discontinue maintenance support for older versions of our software products, forcing our on-premise customers to upgrade their software in order to continue receiving maintenance support. If existing on-premise license customers fail to migrate or delay migration to our on-demand solution, our revenue may be harmed.

We continue to promote our on-demand product offerings to existing customers who currently have on-premise perpetual and term licenses. Customers with on-premise licenses may need to migrate to our on-demand solutions to take full advantage of the features and functionality in those solutions. We expect to periodically terminate maintenance support on older versions of our on-premise products for various reasons including, without limitation, termination of support by third-party software vendors whose products complement ours or upon which we are dependent. Regardless of the reason, a migration is likely to involve additional cost, which our customers may delay or decline to incur. If a sufficient number of customers do not migrate to our on-demand product offerings, our continued maintenance support opportunities and our ability to sell additional products to these customers, and as a result, our revenue and operating income, may be harmed.

Risks Related to Our Stock

Our stock price is likely to remain volatile.

The trading price of our common stock has in the past, and may in the future, be subject to wide fluctuations in response to many factors, including those described in this section. The volume of trading in our common stock is limited, which may increase volatility. Investors should consider an investment in our common stock as risky and should purchase our common stock only if they can withstand significant losses. Other factors that affect the volatility of our stock include:

• our actual and anticipated operating performance and the performance of other similar companies;

• actual and anticipated fluctuations in our financial results;

• failure of securities analysts to maintain coverage of us;

• ratings changes by any securities analysts who follow us;

33

• failure to meet our projected results or the published operating estimates or expectations of securities analysts and investors;

• failure to achieve revenue or earnings expectations;

• price and volume fluctuations in the overall stock market, including as a result of trends in the global economy;

• significant sales by existing investors, coupled with limited trading volume for our stock;

• announcements by us or our competitors of significant contracts, results of operations, projections, or new technologies;

• lawsuits threatened or filed against us;

• adverse publicity;

• acquisitions, commercial relationships, joint-ventures or capital commitments;

• changes in our management team or board of directors;

• publication of research reports, particularly those that are inaccurate or unfavorable, about us or our industry by securities analysts; and

• other events or factors, including those resulting from war, incidents or terrorism or responses to these events.

Additionally, some companies with volatile market prices for their securities have been the subject of securities class action lawsuits. Any such suit could have a material adverse effect on our business, results of operations, financial condition and price of our common stock.

Future sales of substantial amounts of our common stock, including securities convertible into or exchangeable for shares of our common stock could cause our stock price to fall.

We may issue additional shares of our common stock, including securities convertible into or exchangeable for, or that represent the right to receive, shares of our common stock. Such issuances will dilute the ownership interest of our stockholders and could adversely affect the market price of our common stock. We cannot predict the effect that future sales of shares of our common stock or other equity-related securities would have on the market price of our common stock. In addition, sales by existing stockholders of a large number of shares of our common stock in the public trading market (or in private transactions), including sales by our executive officers, directors or institutional investors, or the perception that such additional sales could occur, could cause the market price of our common stock to drop. We have stock options and restricted stock units outstanding for shares of our common stock. Our stockholders may incur dilution upon exercise of an outstanding stock option or vesting of outstanding restricted stock units.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.

Our certificate of incorporation and bylaws contain provisions that could make it harder for a third-party to acquire us without the consent of our board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. In addition, our board of directors has staggered terms, which means that replacing a majority of our directors would require at least two annual meetings. A potential acquirer would also be required to provide advance notice of its proposal to replace directors at any annual meeting, and would not be able to accumulate votes at a meeting, which would require such potential acquirer to hold more shares to gain representation on the board of directors than if cumulative voting were permitted. Furthermore, Section 203 of the Delaware General Corporation Law limits business combination transactions with 15%

34

stockholders that have not been approved by the board of directors. All of these factors make it more difficult for a third-party to acquire us without negotiation. These provisions may apply even if the offer may be considered beneficial by some stockholders. Our board of directors could choose not to negotiate with a potential acquirer that it does not believe is in our strategic interests. If a potential acquirer is discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by these or other measures, under some circumstances, the market price of our common stock could be reduced.

Item 6. Exhibits

Please refer to the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CALLIDUS SOFTWARE INC.
Date:	May 4, 2016	By:	/s/ BOB L. COREY
			Bob L. Corey
			Executive Vice President, Chief Financial Officer
			(duly authorized officer)

36

EXHIBIT INDEX TO

CALLIDUS SOFTWARE INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2016

Exhibit Number	Description
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2016 and 2015, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 and (iv) Notes to Condensed Consolidated Financial Statements

37

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Leslie J. Stretch, certify that:

1. I have reviewed this quarterly report of Callidus Software Inc. on Form 10-Q;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2016
	/s/ LESLIE J. STRETCH
	Leslie J. Stretch
	President and Chief Executive Officer
	(Principal Executive Officer)

1

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Bob L. Corey, certify that:

1. I have reviewed this quarterly report of Callidus Software Inc. on Form 10-Q;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2016
	/s/ BOB L. COREY
	Bob L. Corey
	Executive Vice President, Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Callidus Software, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 4, 2016
	/s/ LESLIE J. STRETCH
	Leslie J. Stretch
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ BOB L. COREY
	Bob L. Corey
	Executive Vice President, Chief Financial Officer
	(Principal Financial Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

1

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 28, 2016
Document and Entity Information
Entity Registrant Name	CALLIDUS SOFTWARE INC
Entity Central Index Key	0001035748
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		56,770,918
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 81,830	$ 77,232
Short-term investments	20,074	19,977
Accounts receivable, net of allowances of $1,342 and $1,310 at March 31, 2016 and December 31, 2015, respectively	42,737	43,461
Prepaid and other current assets	10,888	11,385
Total current assets	155,529	152,055
Property and equipment, net	23,921	20,540
Goodwill	49,825	50,146
Intangible assets, net	13,852	14,885
Deposits and other noncurrent assets	3,993	4,016
Total assets	247,120	241,642
Current liabilities:
Accounts payable	3,442	3,636
Accrued payroll and related expenses	9,322	12,510
Accrued expenses	13,392	11,017
Deferred revenue	78,301	74,644
Total current liabilities	104,457	101,807
Deferred revenue, noncurrent	4,373	5,186
Deferred income taxes, noncurrent	1,441	1,477
Other noncurrent liabilities	6,074	4,371
Total liabilities	$ 116,345	$ 112,841
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding	$ 0	$ 0
Common stock, $0.001 par value; 100,000 shares authorized; 59,099 and 58,612 shares issued and 56,760 and 56,273 shares outstanding at March 31, 2016 and December 31, 2015, respectively	57	56
Additional paid-in capital	435,631	428,776
Treasury stock; 2,339 shares at March 31, 2016 and December 31, 2015	(14,430)	(14,430)
Accumulated other comprehensive loss	(2,082)	(1,735)
Accumulated deficit	(288,401)	(283,866)
Total stockholders’ equity	130,775	128,801
Total liabilities and stockholders’ equity	$ 247,120	$ 241,642

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Accounts receivable, allowances (in dollars)	$ 1,342	$ 1,310
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	59,099,000	58,612,000
Common stock, shares outstanding	56,760,000	56,273,000
Treasury stock, shares	2,339,000	2,339,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue:
Recurring	$ 37,606	$ 28,893
Services and license	10,772	10,852
Total revenue	48,378	39,745
Cost of revenue:
Recurring	9,962	8,358
Services and license	8,261	7,661
Total cost of revenue	18,223	16,019
Gross profit	30,155	23,726
Operating expenses:
Sales and marketing	18,903	13,726
Research and development	7,242	6,038
General and administrative	8,255	7,418
Restructuring and other	316	116
Total operating expenses	34,716	27,298
Operating loss	(4,561)	(3,572)
Interest income and other income (expense), net	225	(190)
Interest expense	(43)	(67)
Loss before provision for income taxes	(4,379)	(3,829)
Provision for income taxes	156	214
Net loss	$ (4,535)	$ (4,043)
Net loss per share
Basic and Diluted (in dollars per share)	$ (0.08)	$ (0.08)
Basic and Diluted (in shares)	56,690	50,709
Comprehensive income (loss):
Net loss	$ (4,535)	$ (4,043)
Unrealized gain on available-for-sale securities	48	6
Foreign currency translation adjustments	(395)	(699)
Comprehensive loss	$ (4,882)	$ (4,736)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss	$ (4,535)	$ (4,043)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	1,688	1,387
Amortization of intangible assets	1,360	1,288
Provision for doubtful accounts	529	94
Stock-based compensation	6,453	4,817
Loss on foreign currency from market-to-market derivative	78
Excess tax benefit from stock-based compensation	(21)	0
Deferred income taxes	71	(59)
Loss on disposal of property and equipment	0	6
Net amortization on investments	(45)	5
Changes in operating assets and liabilities:
Accounts receivable	195	3,350
Prepaid and other current assets	437	(230)
Other noncurrent assets	(3)	247
Accounts payable	(558)	2,089
Accrued expenses	1,073	(781)
Accrued payroll and related expenses	(3,188)	(939)
Accrued restructuring and other expenses	(266)	0
Deferred revenue	2,844	772
Net cash provided by operating activities	6,112	8,003
Cash flows from investing activities:
Purchases of investments	(3,700)	0
Proceeds from maturities and sale of investments	3,600	0
Purchases of property and equipment	(1,521)	(7,063)
Purchases of intangible assets	(267)	(234)
Net cash used in investing activities	(1,888)	(7,297)
Cash flows from financing activities:
Proceeds from follow-on offering, net of issuance costs	0	64,370
Proceeds from issuance of common stock	1,467	1,581
Restricted stock units acquired to settle employee withholding liability	(1,085)	(1,959)
Excess tax benefit from stock-based compensation	21	0
Payment of consideration related to acquisitions	(104)	(226)
Payment of principal under capital leases	0	(112)
Net cash provided by financing activities	299	63,654
Effect of exchange rates on cash and cash equivalents	75	(35)
Net increase in cash and cash equivalents	4,598	64,325
Cash and cash equivalents at beginning of period	77,232	34,200
Cash and cash equivalents at end of period	81,830	98,525
Supplemental disclosures of cash flow information:
Cash paid for interest on capital leases	0	8
Non-cash investing and financing activities:
Purchases of property and equipment through accounts payable and other accrued liabilities	3,548	3,775
Income Taxes Paid	$ 261	$ 167

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation and Summary of Accounting Policies

All amounts included herein related to these condensed consolidated financial statements as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are unaudited and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Callidus Software Inc.'s ("Company") Annual Report on Form 10-K for the year ended December 31, 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the Securities and Exchange Commission ("SEC") rules and regulations regarding interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments for the fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the full fiscal year ending December 31, 2016.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include wholly-owned subsidiaries in Australia, Canada, Germany, Hong Kong, India, Japan, Malaysia, Mexico, Netherlands, New Zealand, Serbia, Singapore, and the United Kingdom. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

Preparation of the unaudited condensed consolidated financial statements in conformity with GAAP and the rules and regulations of the SEC requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, the reported amounts of revenue and expenses during the reporting period and the accompanying notes. Estimates are used for, but not limited to, uncertain tax liabilities, allowances for doubtful accounts, the useful lives of fixed assets and intangible assets, goodwill and intangible asset impairments, stock-based compensation forfeiture rates, accrued liabilities, the allocation of the value of purchase consideration for business acquisitions and other contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates such estimates and assumptions on an ongoing basis for continued reasonableness, using historical experience and other factors, including the current economic environment. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such evaluation. Illiquid credit markets, volatile equity and foreign currency markets and fluctuations in information technology spending by prospective customers can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates. Changes in those estimates, if any, resulting from continuing changes in the economic environment, will be reflected in the consolidated financial statements in future periods.

Revenue Recognition

     The Company generates revenue by providing software as a service ("SaaS") solutions through on-demand subscription, on-premise perpetual and term licenses and related software maintenance, and professional services. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Recurring Revenue. Recurring revenue, which includes SaaS revenue and maintenance revenue, is recognized ratably over the stated contractual period. SaaS revenue consists of subscription fees from customers accessing our cloud-based service offerings. Maintenance revenue consists of fees from customers purchasing licenses and receiving support for such on-premise solutions. The Company also recognizes SaaS and maintenance revenue associated with customers using its products in excess of contracted usage ("Overages"). Overages are primarily attributed to SaaS products and such Overages are recorded in SaaS revenue in the period incurred. Revenue related to Overages was immaterial during the three months ended March 31, 2016 and 2015.

Service and License Revenue. Service and license revenue primarily consists of training, integration and configuration services. Generally, the Company's professional services arrangements are billed on a time-and-materials basis. Time and material services are recognized as the services are rendered based on inputs to the project, such as billable hours incurred. For fixed-fee professional services arrangements, the Company recognizes revenue under the proportional performance method of accounting and estimates the proportional performance on a monthly basis, utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If the Company does not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion. Service and license revenue also includes revenue from perpetual licenses, which is recognized upon delivery of the product, using the residual method, assuming all the other conditions for revenue recognition have been met.

In a limited number of arrangements with non-standard acceptance criteria, the Company defers the revenue until the acceptance criteria is satisfied. Reimbursements, including those related to travel and out-of-pocket expenses, are included in services and license revenue, and an equivalent amount of reimbursable expenses is included in cost of services and license revenue.

In general, recurring revenue agreements are entered into for 12 to 36 months, and the professional services are performed within nine months of entering into a contract with the customer, depending on the size of integration.

SaaS agreements provide specified service level commitments, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers a portion of their subscription and support fees. Based on the Company's historical experience meeting its service level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments.

The Company recognizes revenue when all of the following conditions are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The fees are fixed or determinable; and    

• Collection of the fees is reasonably assured.

If the Company determines that any one of the four criteria is not met, it will defer recognition of revenue until all the criteria are met.

Multiple-deliverable arrangements with on-demand subscription. For on-demand subscription agreements with multiple-deliverables, the Company evaluates each element to determine whether it represents a separate unit of accounting. The Company determines the best estimated selling price of each deliverable in an arrangement based on a selling price hierarchy of methods contained in Finance Accounting Standards Board ("FASB") Accounting Standards Update (“ASU”) No. 2009-13, "Revenue Recognition (Accounting Standards Codification (“ASC”) Topic 605)-Multiple-Deliverable Revenue Arrangements." The best estimated selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”), if available, third-party evidence (“TPE”), if VSOE is not available, or estimated selling price (“ESP”), if neither VSOE nor TPE is available. Total arrangement fees are allocated to each element using the relative selling price method. The Company has currently established VSOE for most deliverables, except for fixed fee service arrangements and on-premise software licenses.

The Company considered all of the following factors to establish the ESP for fixed fee service arrangements when sold with its on-demand services: the weighted average actual sales prices of professional services sold on a stand-alone basis for on-demand services; average billing rates for fixed fee service agreements when sold with on-demand services, cost plus a reasonable mark-up and other factors such as gross margin objectives, pricing practices and growth strategy. The Company is currently using cost plus a reasonable mark-up to establish ESP for fixed fee service arrangements.

Multiple-deliverable arrangements with on-premise license. For arrangements with multiple deliverables, including license, professional services and maintenance, the Company recognizes license revenue using the residual method of accounting pursuant to the requirements of the guidance contained in ASC 985-605, "Software Revenue Recognition." Under the residual method, revenue is recognized when VSOE for fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more of the delivered elements in the arrangement. If evidence of fair value cannot be established for the undelivered elements, all of the revenue is deferred until evidence of fair value can be established, or until the items for which evidence of fair value cannot be established are delivered. For maintenance and certain professional services, the Company is able to establish VSOE because it has a sufficient history of selling these deliverables at an established price. The Company's revenue arrangements do not include a general right of return relative to the delivered products.

Generally, for the Company's term-based licenses, if the only undelivered element is maintenance, the entire amount of revenue is recognized ratably, over the maintenance period.

Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenue.

Recent Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting" which simplifies the accounting for share-based transactions, including the income tax consequences, classification of awards as either equity or liabilities on the balance sheet, and classification of employee taxes paid on statement of cash flows when an employer withholds shares for tax-withholding purposes. The new standard is effective for interim and annual periods beginning after December 15, 2016 and early adoption is permitted. The Company has elected not to early adopt. The Company is currently evaluating the impact of the adoption of ASU 2016-09 on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases and amounts previously recognized in accordance with the business combinations guidance for leases. The Company is currently evaluating its expected adoption method and timeline, and the impact of this new standard on its consolidated financial statements.    

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes, (ASU 2015-17)", which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of the Company's net current deferred tax liabilities to net non-current deferred tax liabilities in its consolidated balance sheets as of December 31, 2015. No prior periods were adjusted retrospectively.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 may also impact how the Company accounts for certain direct costs associated with its revenues. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted one year earlier. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company has not elected a transition method and is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements and does not plan to early adopt this standard.

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Financial Instruments

3 Months Ended

Mar. 31, 2016

Financial Instruments

Financial Instruments

Financial Instruments

As of March 31, 2016 and December 31, 2015, all investment debt securities were classified as available-for-sale and carried at estimated fair value, which is determined based on the inputs discussed in Note 3.

The Company classifies all highly liquid instruments with an original maturity on the date of purchase of three months or less as cash and cash equivalents.  The Company classifies available-for-sale securities that have a maturity date longer than three months as short-term investments, including those investments with a maturity date of longer than one year that are highly liquid and which the Company does not intend to hold to maturity.

Realized gains and losses are calculated using the specific identification method. As of March 31, 2016 and December 31, 2015, the Company had no short-term investments in a material unrealized loss position.

The components of the Company’s cash, cash equivalents, and investments classified as available-for-sale were as follows at March 31, 2016 and December 31, 2015 (in thousands):

March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	81,800	$	—	$	—	$	81,800
Cash equivalents:
Money market funds	30		—		—		30
Total cash equivalents	30		—		—		30
Total cash and cash equivalents	$	81,830	$	—	$	—	$	81,830
Short-term investments:
Certificates of deposits	$	1,500	$	—	$	—	$	1,500
U.S. government and agency obligations	9,105		26		—		9,131
Corporate notes and U.S. government agency obligations	9,421		22		—		9,443
Total short-term investments	$	20,026	$	48	$	—	$	20,074

December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash	$	77,191	$	—	$	—		$	77,191
Cash equivalents:
Money market funds	41		—		—			41
Total cash equivalents	41		—		—			41
Total cash and cash equivalents	$	77,232	$	—	$	—		$	77,232
Short-term investments:
Certificate of deposits	$	1,500	$	—	$	—		$	1,500
U.S. government and agency obligations	7,423		—		(16		)	7,407
Corporate notes and U.S. government agency obligations	11,087		—		(17		)	11,070
Total short-term investments	$	20,010	$	—	$	(33	)	$	19,977

The market value and the amortized cost of available-for-sale debt securities by contractual maturities as of March 31, 2016 were as follows (in thousands):

Contractual maturity	Amortized Cost		Estimated Fair value
Less than 1 year	$	6,508	$	6,535
Between 1 and 2 years	13,518		13,539
Total	$	20,026	$	20,074

The Company had no realized gains or losses on sales of its investments for the three months ended March 31, 2016 and 2015. The Company had net purchases of investments of $0.1 million during the three months ended March 31, 2016 and none during the three months ended March 31, 2015.

The short-term investments in highly rated credit securities generally have minor to moderate fluctuations in the fair values from period to period. The Company monitors credit ratings, downgrades and significant events surrounding these securities in order to assess whether any of the impairments will be considered other-than-temporary. The Company did not identify any securities held as of March 31, 2016 or as of December 31, 2015 for which the fair value declined significantly below amortized cost and were considered other-than-temporary impairments.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company measures financial assets at fair value on an ongoing basis. The estimated fair value of the Company’s financial assets was determined using the following inputs at March 31, 2016 and December 31, 2015 (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets  for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
March 31, 2016	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	30	$	30	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	9,131		—		9,131		—
Corporate notes and obligations (2)	9,443		—		9,443		—
Total	$	20,104	$	30	$	20,074	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	191	$	—	$	—	$	191
Foreign currency derivative contract (3)	78		—		78		—
Total	$	269	$	—	$	78	$	191

_____________________________________________________________________________

(1) Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

(2) Included in short-term investments on the unaudited condensed consolidated balance sheet.

(3) Included in accrued expenses on the unaudited condensed consolidated balance sheet.

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2015	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	41	$	41	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	7,407		—		7,407		—
Corporate notes and obligations (2)	11,070		—		11,070		—
Total	$	20,018	$	41	$	19,977	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	324	$	—	$	—	$	324
Total	$	324	$	—	$	—	$	324

_____________________________________________________________________________

(1) Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

(2) Included in short-term investments on the unaudited condensed consolidated balance sheet.

(3) Included in accrued expenses on the unaudited condensed consolidated balance sheet.

Valuation of Investments

Level 1 and Level 2

The Company’s available-for-sale securities include money market funds, certificates of deposit, corporate notes and U.S. government agency obligations. The Company values these securities using a pricing matrix from a pricing service provider, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs). The Company classifies all of its available-for-sale securities, except for money market funds, as having Level 2 inputs. The Company validates the estimated fair value of certain securities from a pricing service provider on a quarterly basis. The valuation techniques used to measure the fair value of the financial instruments having Level 2 inputs, all of which have counterparties with high credit ratings, were derived from the following: non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data. 

During the three months ended March 31, 2016, the Company hedged an Australian Dollar receivable to reduce the risk that earnings would be adversely affected by changes in the Australian currency exchange rate. The notional amount of the derivative instrument acquired during the three months ended March 31, 2016 was $1.2 million. The Company accounts for the derivative instrument at fair value with changes in the fair value recorded as a component of interest income and other income (expense), net of $0.1 million for the period ending March 31, 2016.

Level 3

Contingent consideration and related liabilities are defined as earn-out payments which the Company may pay in connection with the acquisition of BridgeFront LLC ("BridgeFront"). Contingent consideration and related liabilities are classified as level 3 liabilities, as the Company uses unobservable inputs to value them, which is a probability-based income approach. Subsequent changes in the fair value of contingent consideration and related liabilities will be recorded in the Company's unaudited condensed consolidated statements of operations.

The Company did not have any transfers of its fair value measurement between Level 1, Level 2 and Level 3 during the periods presented.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Except as discussed below, there were no material changes in the Company's commitments under contractual obligations as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2015.

Oracle Agreement

In February 2016 the Company entered into a five-year agreement with Oracle to purchase software and support services for the Company's data centers. Pursuant to the agreement, the Company is required to make payments of $0.75 million on April 26, 2016, June 1, 2016, September 1, 2016 and November 1, 2016, and annual payments of $3.0 million beginning February 2017 and ending February 2020, for a total of $15.0 million. As of March 31, 2016, $1.5 million was included in accrued expenses and $2.2 million was included in other noncurrent liabilities in the unaudited condensed consolidated balance sheets.

Letter of Credit

The Company extended a $1.1 million letter of credit for one year to October 1, 2016 for leased space in Dublin, California. There is no balance outstanding under this line of credit.

Revolver Line of Credit

In May 2014, the Company entered into a credit agreement with Wells Fargo Bank, National Association ("Wells Fargo"), under which Wells Fargo agreed to make a revolving loan ("Revolver") to the Company in an amount not to exceed $10.0 million, with an accordion feature that allows the Company to increase the maximum borrowing amount by not less than $5.0 million and not more than $10.0 million. In September 2014, the Company increased the maximum borrowing amount to $15.0 million. The Revolver matures in May 2019. During the quarter ended June 30, 2015, the Company paid off the outstanding amount of $10.5 million. There is no balance outstanding as of March 31, 2016.

Pursuant to the agreement, the Company is required to maintain a leverage ratio of 3.00:1.00 and minimum liquidity of $7.5 million. The Company has met these leverage and liquidity covenants.

Outstanding borrowings under the Revolver bear interest, at the Company's option, at a base rate plus an applicable margin. The applicable margin ranges between 0.75% and 2.25% depending on the Company's leverage ratio. A fee of 0.25% per annum is payable with respect to the unused portion of the commitment. Interest is payable every three months.

Warranties and Indemnification

The Company generally warrants that its software will perform in accordance with its standard documentation. Under the Company’s standard warranty, should a software product not perform as specified in the documentation within the warranty period, the Company will repair or replace the software or refund the license fee paid. To date, the Company has not incurred any incremental costs related to warranty obligations for its software.

The Company’s product license and on-demand agreements typically include a limited indemnification provision for claims by third parties relating to the Company’s intellectual property. To date, the Company has not incurred material costs, and has not accrued any costs, related to such indemnification provisions.

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Restructuring and Other

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Other

Restructuring and Other

Restructuring and other expenses primarily consist of costs associated with exit from excess facilities, employee terminations and incremental depreciation expense as a result of the change in the estimated useful life of assets to be abandoned.

The Company incurred $0.3 million of restructuring and other expenses during the three months ended March 31, 2016 and $0.1 million during the same period ended March 31, 2015.

The following tables set forth a summary of accrued restructuring and other expenses for the three months endedMarch 31, 2016 and 2015 (in thousands):

	December 31, 2015		Additions		Adjustments		Cash Payments			March 31, 2016
Facilities-related costs	$	17	$	316	$	18	$	(68	)	$	283
Total accrued restructuring and other expenses	$	17	$	316	$	18	$	(68	)	$	283

	December 31, 2014		Additions		Adjustments			Cash Payments			March 31, 2015
Severance and termination-related costs	$	—	$	109	$	—		$	(109	)	$	—
Facilities related costs	194		7		(6		)	(37		)	158
Total accrued restructuring and other expenses	$	194	$	116	$	(6	)	$	(146	)	$	158

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Net Loss Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss for the period by the weighted average common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss for the period by the weighted average common shares outstanding, the exercise of outstanding common stock options, the release of restricted stock units and purchases of shares pursuant to the Company's employee stock purchase plan ("ESPP"), to the extent these shares are dilutive. For the three months ended March 31, 2016 and 2015, the diluted net loss per share calculation was the same as the basic net loss per share calculation as all potential common shares were anti-dilutive.

     Diluted net loss per share does not include the effect of the following potential weighted average common shares because to do so would be anti-dilutive for the periods presented (in thousands):

	Three Months Ended March 31,
	2016	2015
Restricted Stock Units	3,417	2,800
Stock Options	637	1,109
ESPP Shares	19	3
Total	4,073	3,912

The weighted average exercise price of stock options excluded for the three months ended March 31, 2016 and March 31, 2015 was $6.68 and $5.95, respectively.

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Stock-based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock-based Compensation

Expense Summary

Stock-based compensation expense is measured based on the grant-date fair value of the stock-based awards. The Company recognizes stock-based compensation expense, for the portion of the awards that are ultimately expected to vest, on a straight-line basis, over the requisite service period for those awards with graded vesting and service conditions.

The table below sets forth a summary of stock-based compensation expense for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Stock options	$	145	$	170
Restricted stock units
Performance-based awards	1,179		748
Service-based awards	4,758		3,644
ESPP shares	371		255
Total stock-based compensation	$	6,453	$	4,817

As of March 31, 2016, there was total unrecognized compensation expense of $0.7 million, $6.2 million, $30.4 million and $1.2 million related to stock options, performance-based awards, service-based awards and ESPP shares, respectively, which were expected to be recognized over weighted average periods of 1.3 years, 1.7 years, 2.2 years and 0.7 years, respectively.

The table below sets forth the functional classification of stock-based compensation expense for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Cost of recurring revenue	$	509	$	288
Cost of services and other revenue	512		342
Sales and marketing	2,154		1,458
Research and development	1,170		797
General and administrative	2,108		1,932
Total stock-based compensation	$	6,453	$	4,817

Performance-based Awards

In 2015, the Company granted performance-based restricted stock units with vesting contingent on successful attainment of pre-set SaaS revenue growth and recurring revenue gross profit targets over the three-year period from July 1, 2015 through June 30, 2018. During the three months ended March 31, 2016, $0.4 million of expense, net of forfeiture, was recognized.

In 2014, the Company granted performance-based restricted stock units with vesting contingent on absolute SaaS revenue growth over the three-year period from January 1 2014 through December 31, 2016, and on the Company’s relative total stockholder return over the three-year period from 2014 through 2016 versus an index of 17 SaaS companies. During the three months ended March 31, 2016, $0.8 million of expense, net of forfeiture, was recognized.

Determination of Fair Value

The fair value of service-based awards is estimated based on the market value of the Company’s stock on the date of grant. Vesting of a portion of the performance awards granted during 2014 is based on relative stockholder return and therefore, is subject to a market condition. As a result, the fair value of performance awards is calculated using a Monte Carlo simulation model that estimates the distribution of the potential outcomes of the grants of performance awards based on simulated future index of the peer companies.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model. No stock options were granted during the three months ended March 31, 2016 and March 31, 2015.

The fair value of each ESPP share is estimated on the enrollment date of the offering period using the Black-Scholes valuation model and the assumptions noted in the following table:

	Three Months Ended March 31,
Employee Stock Purchase Plan	2016	2015
Expected life (in years)	0.50 to 1.00	0.49 to 1.00
Risk-free interest rate	0.42% to 0.51%	0.07% to 0.25%
Volatility	45% to 51%	42% to 46%
Dividend yield	None	None

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense for each of the three month periods ended March 31, 2016 and March 31, 2015 was $0.2 million. In both periods the tax expense was mainly attributable to sales to foreign customers subject to withholding taxes and income in the foreign jurisdictions subject to income taxes.

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Segment, Geographic and Customer Information

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment, Geographic and Customer Information

Segment, Geographic and Customer Information

The accounting principles guiding disclosures about segments of an enterprise and related information establish standards for the reporting by business enterprises of information about operating segments, products and services, geographic areas and major customers. The method of determining which information is reported is based on the way that management organizes the operating segments within the Company for making operational decisions and assessments of financial performance. The Company’s chief operating decision maker is considered to be the Company’s chief executive officer ("CEO"). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. By this definition, the Company operates in one business segment, which are the development, marketing and sale of the Company's sales and marketing effectiveness cloud software and related services.

The following table summarizes revenue for the three months ended March 31, 2016 and 2015 by geographic areas (in thousands):

	Three Months Ended March 31,
	2016		2015
United States and Canada	$	39,885	$	30,925
EMEA	4,876		3,681
Asia Pacific	2,542		2,701
Other	1,075		2,438
	$	48,378	$	39,745

Substantially all of the Company’s long-lived assets are located in the United States and United Kingdom. Long-lived assets located outside the United States and United Kingdom are immaterial.

During the three months ended March 31, 2016 and 2015, no customer accounted for more than 10% of total revenue.

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Related Party Transactions

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related-Party Transactions

Related-Party Transactions

In the normal course of business, the Company entered into agreements with Lithium Technologies, Inc. (“Lithium”), whose Chief Financial Officer is a member of the Company's Board of Directors.

In 2013, Lithium entered into a two-year web hosting agreement with the Company, which was extended for another three years in 2015 in the amount of $138,000 per year, from which the company recognized approximately $37,613 in hosting revenue during the three months ended March 31, 2016. In addition, during 2015, the Company entered into various agreements with Lithium for professional services, and recognized approximately $4,290 in professional services revenue during the three months ended March 31, 2016.

In 2015, the Company purchased a one-year consulting and training service contract for Social Success Services from Lithium for $60,000, which was paid in full in October 2015. As of March 31, 2016, $19,500 was included in prepaid and other current assets.

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Subsequent Event

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

On April 7, 2016, the Company acquired specific assets of ViewCentral LLC. ("ViewCentral"), a privately-held company and a leader in the extended enterprise learning market. The Company acquired specific assets of ViewCentral to expand its Litmos mobile learning solution with a full revenue management and e-commerce platform designed for selling and optimizing profitable training for customers and channel. The purchase consideration was $4.0 million in cash. The Company expects to complete its valuation of the assets by the end of the second quarter of 2016.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Summary of Accounting Policies

All amounts included herein related to these condensed consolidated financial statements as of March 31, 2016 and for the three months ended March 31, 2016 and 2015 are unaudited and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Callidus Software Inc.'s ("Company") Annual Report on Form 10-K for the year ended December 31, 2015. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the Securities and Exchange Commission ("SEC") rules and regulations regarding interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments for the fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the full fiscal year ending December 31, 2016.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include wholly-owned subsidiaries in Australia, Canada, Germany, Hong Kong, India, Japan, Malaysia, Mexico, Netherlands, New Zealand, Serbia, Singapore, and the United Kingdom. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

Preparation of the unaudited condensed consolidated financial statements in conformity with GAAP and the rules and regulations of the SEC requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, the reported amounts of revenue and expenses during the reporting period and the accompanying notes. Estimates are used for, but not limited to, uncertain tax liabilities, allowances for doubtful accounts, the useful lives of fixed assets and intangible assets, goodwill and intangible asset impairments, stock-based compensation forfeiture rates, accrued liabilities, the allocation of the value of purchase consideration for business acquisitions and other contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates such estimates and assumptions on an ongoing basis for continued reasonableness, using historical experience and other factors, including the current economic environment. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such evaluation. Illiquid credit markets, volatile equity and foreign currency markets and fluctuations in information technology spending by prospective customers can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates. Changes in those estimates, if any, resulting from continuing changes in the economic environment, will be reflected in the consolidated financial statements in future periods.

Revenue Recognition

The Company generates revenue by providing software as a service ("SaaS") solutions through on-demand subscription, on-premise perpetual and term licenses and related software maintenance, and professional services. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Recurring Revenue. Recurring revenue, which includes SaaS revenue and maintenance revenue, is recognized ratably over the stated contractual period. SaaS revenue consists of subscription fees from customers accessing our cloud-based service offerings. Maintenance revenue consists of fees from customers purchasing licenses and receiving support for such on-premise solutions. The Company also recognizes SaaS and maintenance revenue associated with customers using its products in excess of contracted usage ("Overages"). Overages are primarily attributed to SaaS products and such Overages are recorded in SaaS revenue in the period incurred. Revenue related to Overages was immaterial during the three months ended March 31, 2016 and 2015.

Service and License Revenue. Service and license revenue primarily consists of training, integration and configuration services. Generally, the Company's professional services arrangements are billed on a time-and-materials basis. Time and material services are recognized as the services are rendered based on inputs to the project, such as billable hours incurred. For fixed-fee professional services arrangements, the Company recognizes revenue under the proportional performance method of accounting and estimates the proportional performance on a monthly basis, utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If the Company does not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion. Service and license revenue also includes revenue from perpetual licenses, which is recognized upon delivery of the product, using the residual method, assuming all the other conditions for revenue recognition have been met.

In a limited number of arrangements with non-standard acceptance criteria, the Company defers the revenue until the acceptance criteria is satisfied. Reimbursements, including those related to travel and out-of-pocket expenses, are included in services and license revenue, and an equivalent amount of reimbursable expenses is included in cost of services and license revenue.

In general, recurring revenue agreements are entered into for 12 to 36 months, and the professional services are performed within nine months of entering into a contract with the customer, depending on the size of integration.

SaaS agreements provide specified service level commitments, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers a portion of their subscription and support fees. Based on the Company's historical experience meeting its service level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments.

The Company recognizes revenue when all of the following conditions are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The fees are fixed or determinable; and    

• Collection of the fees is reasonably assured.

If the Company determines that any one of the four criteria is not met, it will defer recognition of revenue until all the criteria are met.

Multiple-deliverable arrangements with on-demand subscription. For on-demand subscription agreements with multiple-deliverables, the Company evaluates each element to determine whether it represents a separate unit of accounting. The Company determines the best estimated selling price of each deliverable in an arrangement based on a selling price hierarchy of methods contained in Finance Accounting Standards Board ("FASB") Accounting Standards Update (“ASU”) No. 2009-13, "Revenue Recognition (Accounting Standards Codification (“ASC”) Topic 605)-Multiple-Deliverable Revenue Arrangements." The best estimated selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”), if available, third-party evidence (“TPE”), if VSOE is not available, or estimated selling price (“ESP”), if neither VSOE nor TPE is available. Total arrangement fees are allocated to each element using the relative selling price method. The Company has currently established VSOE for most deliverables, except for fixed fee service arrangements and on-premise software licenses.

The Company considered all of the following factors to establish the ESP for fixed fee service arrangements when sold with its on-demand services: the weighted average actual sales prices of professional services sold on a stand-alone basis for on-demand services; average billing rates for fixed fee service agreements when sold with on-demand services, cost plus a reasonable mark-up and other factors such as gross margin objectives, pricing practices and growth strategy. The Company is currently using cost plus a reasonable mark-up to establish ESP for fixed fee service arrangements.

Multiple-deliverable arrangements with on-premise license. For arrangements with multiple deliverables, including license, professional services and maintenance, the Company recognizes license revenue using the residual method of accounting pursuant to the requirements of the guidance contained in ASC 985-605, "Software Revenue Recognition." Under the residual method, revenue is recognized when VSOE for fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more of the delivered elements in the arrangement. If evidence of fair value cannot be established for the undelivered elements, all of the revenue is deferred until evidence of fair value can be established, or until the items for which evidence of fair value cannot be established are delivered. For maintenance and certain professional services, the Company is able to establish VSOE because it has a sufficient history of selling these deliverables at an established price. The Company's revenue arrangements do not include a general right of return relative to the delivered products.

Generally, for the Company's term-based licenses, if the only undelivered element is maintenance, the entire amount of revenue is recognized ratably, over the maintenance period.

Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenue.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, "Leases" which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key information about leasing arrangements. Accordingly, a lessee will recognize a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. Both the asset and liability will initially be measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial costs directly attributable to negotiating and arranging the lease will be included in the asset. For leases with a term of 12 months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. In transition, lessees are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases and amounts previously recognized in accordance with the business combinations guidance for leases. The Company is currently evaluating its expected adoption method and timeline, and the impact of this new standard on its consolidated financial statements.    

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes, (ASU 2015-17)", which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of the Company's net current deferred tax liabilities to net non-current deferred tax liabilities in its consolidated balance sheets as of December 31, 2015. No prior periods were adjusted retrospectively.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 may also impact how the Company accounts for certain direct costs associated with its revenues. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted one year earlier. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company has not elected a transition method and is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements and does not plan to early adopt this standard.

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Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Financial Instruments

Summary of cash, cash equivalents and investments classified as available-for-sale

The components of the Company’s cash, cash equivalents, and investments classified as available-for-sale were as follows at March 31, 2016 and December 31, 2015 (in thousands):

March 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash	$	81,800	$	—	$	—	$	81,800
Cash equivalents:
Money market funds	30		—		—		30
Total cash equivalents	30		—		—		30
Total cash and cash equivalents	$	81,830	$	—	$	—	$	81,830
Short-term investments:
Certificates of deposits	$	1,500	$	—	$	—	$	1,500
U.S. government and agency obligations	9,105		26		—		9,131
Corporate notes and U.S. government agency obligations	9,421		22		—		9,443
Total short-term investments	$	20,026	$	48	$	—	$	20,074

December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash	$	77,191	$	—	$	—		$	77,191
Cash equivalents:
Money market funds	41		—		—			41
Total cash equivalents	41		—		—			41
Total cash and cash equivalents	$	77,232	$	—	$	—		$	77,232
Short-term investments:
Certificate of deposits	$	1,500	$	—	$	—		$	1,500
U.S. government and agency obligations	7,423		—		(16		)	7,407
Corporate notes and U.S. government agency obligations	11,087		—		(17		)	11,070
Total short-term investments	$	20,010	$	—	$	(33	)	$	19,977

Schedule of contractual maturities of available-for-sale debt securities

The market value and the amortized cost of available-for-sale debt securities by contractual maturities as of March 31, 2016 were as follows (in thousands):

Contractual maturity	Amortized Cost		Estimated Fair value
Less than 1 year	$	6,508	$	6,535
Between 1 and 2 years	13,518		13,539
Total	$	20,026	$	20,074

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2015	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	41	$	41	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	7,407		—		7,407		—
Corporate notes and obligations (2)	11,070		—		11,070		—
Total	$	20,018	$	41	$	19,977	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	324	$	—	$	—	$	324
Total	$	324	$	—	$	—	$	324

_____________________________________________________________________________

(1) Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

(2) Included in short-term investments on the unaudited condensed consolidated balance sheet.

(3) Included in accrued expenses on the unaudited condensed consolidated balance sheet.

The estimated fair value of the Company’s financial assets was determined using the following inputs at March 31, 2016 and December 31, 2015 (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets  for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
March 31, 2016	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	30	$	30	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	9,131		—		9,131		—
Corporate notes and obligations (2)	9,443		—		9,443		—
Total	$	20,104	$	30	$	20,074	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	191	$	—	$	—	$	191
Foreign currency derivative contract (3)	78		—		78		—
Total	$	269	$	—	$	78	$	191

_____________________________________________________________________________

(1) Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

(2) Included in short-term investments on the unaudited condensed consolidated balance sheet.

(3) Included in accrued expenses on the unaudited condensed consolidated balance sheet.

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2015	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (1)	$	41	$	41	$	—	$	—
Certificates of deposit (2)	1,500		—		1,500		—
U.S. government and agency obligations (2)	7,407		—		7,407		—
Corporate notes and obligations (2)	11,070		—		11,070		—
Total	$	20,018	$	41	$	19,977	$	—
Liabilities:
Contingent consideration and related liabilities (3)	$	324	$	—	$	—	$	324
Total	$	324	$	—	$	—	$	324

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Restructuring and Other (Tables)

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Summary of accrued restructuring expenses

The following tables set forth a summary of accrued restructuring and other expenses for the three months endedMarch 31, 2016 and 2015 (in thousands):

	December 31, 2015		Additions		Adjustments		Cash Payments			March 31, 2016
Facilities-related costs	$	17	$	316	$	18	$	(68	)	$	283
Total accrued restructuring and other expenses	$	17	$	316	$	18	$	(68	)	$	283

	December 31, 2014		Additions		Adjustments			Cash Payments			March 31, 2015
Severance and termination-related costs	$	—	$	109	$	—		$	(109	)	$	—
Facilities related costs	194		7		(6		)	(37		)	158
Total accrued restructuring and other expenses	$	194	$	116	$	(6	)	$	(146	)	$	158

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of potential weighted average common shares excluded from computation of diluted net loss per share

Diluted net loss per share does not include the effect of the following potential weighted average common shares because to do so would be anti-dilutive for the periods presented (in thousands):

	Three Months Ended March 31,
	2016	2015
Restricted Stock Units	3,417	2,800
Stock Options	637	1,109
ESPP Shares	19	3
Total	4,073	3,912

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Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock-based compensation expenses

The table below sets forth a summary of stock-based compensation expense for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Stock options	$	145	$	170
Restricted stock units
Performance-based awards	1,179		748
Service-based awards	4,758		3,644
ESPP shares	371		255
Total stock-based compensation	$	6,453	$	4,817

Schedule of functional classification of stock-based compensation expense

The table below sets forth the functional classification of stock-based compensation expense for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Cost of recurring revenue	$	509	$	288
Cost of services and other revenue	512		342
Sales and marketing	2,154		1,458
Research and development	1,170		797
General and administrative	2,108		1,932
Total stock-based compensation	$	6,453	$	4,817

Schedule of valuation assumptions for determining the fair value of stock options and employee stock purchase plans

The fair value of each ESPP share is estimated on the enrollment date of the offering period using the Black-Scholes valuation model and the assumptions noted in the following table:

	Three Months Ended March 31,
Employee Stock Purchase Plan	2016	2015
Expected life (in years)	0.50 to 1.00	0.49 to 1.00
Risk-free interest rate	0.42% to 0.51%	0.07% to 0.25%
Volatility	45% to 51%	42% to 46%
Dividend yield	None	None

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Segment, Geographic and Customer Information (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Summary of revenues by geographic areas

The following table summarizes revenue for the three months ended March 31, 2016 and 2015 by geographic areas (in thousands):

	Three Months Ended March 31,
	2016		2015
United States and Canada	$	39,885	$	30,925
EMEA	4,876		3,681
Asia Pacific	2,542		2,701
Other	1,075		2,438
	$	48,378	$	39,745

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Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Financial instruments
Cash and cash equivalents	$ 81,830	$ 77,232	$ 98,525	$ 34,200
Cash and cash equivalents
Financial instruments
Cash and cash equivalents	81,830	77,232
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value, Cash and Cash Equivalents	81,830	77,232
Cash
Financial instruments
Cash and cash equivalents	81,800	77,191
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value, Cash and Cash Equivalents	81,800	77,191
Money market funds
Financial instruments
Cash and cash equivalents	30	41
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value, Cash and Cash Equivalents	30	41
Cash equivalents
Financial instruments
Cash and cash equivalents	30	41
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value, Cash and Cash Equivalents	30	41
Short-term investments
Financial instruments
Amortized Cost	20,026	20,010
Gross Unrealized Gains	48	0
Gross Unrealized Losses	0	(33)
Estimated FV, Available for Sale Securities	20,074	19,977
Certificates of deposit
Financial instruments
Amortized Cost	1,500	1,500
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated FV, Available for Sale Securities	1,500	1,500
U.S. government and agency obligations
Financial instruments
Amortized Cost	9,105	7,423
Gross Unrealized Gains	26
Gross Unrealized Losses	0	(16)
Estimated FV, Available for Sale Securities	9,131	7,407
Corporate notes and obligations
Financial instruments
Amortized Cost	9,421	11,087
Gross Unrealized Gains	22	0
Gross Unrealized Losses	0	(17)
Estimated FV, Available for Sale Securities	$ 9,443	$ 11,070

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Financial Instruments (Details 2)	3 Months Ended
	Mar. 31, 2016 USD ($) investment	Mar. 31, 2015 USD ($)	Dec. 31, 2015 investment
Contractual maturity, Amortized Cost
Less than 1 year	$ 6,508,000
Between 1 and 2 years	13,518,000
Total	20,026,000
Contractual maturity, Estimated Fair value
Less than 1 year	6,535,000
Between 1 and 2 years	13,539,000
Total	$ 20,074,000
Other disclosures pertaining to available-for-sale securities
Short-term investments in a material unrealized loss position with maturities of greater than 12 months | investment	0		0
Realized gains or losses on sales of investments	$ 0	$ 0
Purchases of investments, net of proceeds from maturities of investments	$ 100,000	$ 0

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Fair Value Measurements (Details) - USD ($)		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Liabilities:
Interest income and other income (expense), net		$ 225,000	$ (190,000)
Foreign Exchange Forward
Liabilities:
Derivative, notional amount		1,200,000.0
Interest income and other income (expense), net		100,000
Ongoing basis | Estimate of Fair Value Measurement
Assets:
Assets, Fair Value		20,104,000		$ 20,018,000
Liabilities:
Contingent consideration and related liabilities, fair value	[1]	191,000		324,000
Foreign currency derivative contract	[1]	78,000
Liabilities, Fair Value		269,000		324,000
Ongoing basis | Money market funds | Estimate of Fair Value Measurement
Assets:
Assets, Fair Value	[2]	30,000		41,000
Ongoing basis | Certificates of deposit | Estimate of Fair Value Measurement
Assets:
Assets, Fair Value	[3]	1,500,000		1,500,000
Ongoing basis | U.S. government and agency obligations | Estimate of Fair Value Measurement
Assets:
Assets, Fair Value	[3]	9,131,000		7,407,000
Ongoing basis | Corporate notes and obligations | Estimate of Fair Value Measurement
Assets:
Assets, Fair Value	[3]	9,443,000		11,070,000
Ongoing basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Assets, Fair Value		30,000		41,000
Liabilities:
Contingent consideration and related liabilities, fair value	[1]			0
Foreign currency derivative contract	[1]	0
Liabilities, Fair Value		0		0
Ongoing basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds
Assets:
Assets, Fair Value	[2]	30,000		41,000
Ongoing basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Certificates of deposit
Assets:
Assets, Fair Value	[3]	0		0
Ongoing basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government and agency obligations
Assets:
Assets, Fair Value	[3]	0		0
Ongoing basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate notes and obligations
Assets:
Assets, Fair Value	[3]	0		0
Ongoing basis | Significant Other Observable Inputs (Level 2)
Assets:
Assets, Fair Value		20,074,000		19,977,000
Liabilities:
Contingent consideration and related liabilities, fair value	[1]			0
Foreign currency derivative contract	[1]	78,000
Liabilities, Fair Value		78,000		0
Ongoing basis | Significant Other Observable Inputs (Level 2) | Money market funds
Assets:
Assets, Fair Value	[2]	0		0
Ongoing basis | Significant Other Observable Inputs (Level 2) | Certificates of deposit
Assets:
Assets, Fair Value	[3]	1,500,000		1,500,000
Ongoing basis | Significant Other Observable Inputs (Level 2) | U.S. government and agency obligations
Assets:
Assets, Fair Value	[3]	9,131,000		7,407,000
Ongoing basis | Significant Other Observable Inputs (Level 2) | Corporate notes and obligations
Assets:
Assets, Fair Value	[3]	9,443,000		11,070,000
Ongoing basis | Significant Unobservable Inputs (Level 3)
Assets:
Assets, Fair Value		0		0
Liabilities:
Contingent consideration and related liabilities, fair value	[1]	191,000		0
Foreign currency derivative contract	[1]	0
Liabilities, Fair Value		191,000		324,000
Ongoing basis | Significant Unobservable Inputs (Level 3) | Money market funds
Assets:
Assets, Fair Value	[2]	0		0
Ongoing basis | Significant Unobservable Inputs (Level 3) | Certificates of deposit
Assets:
Assets, Fair Value	[3]	0		0
Ongoing basis | Significant Unobservable Inputs (Level 3) | U.S. government and agency obligations
Assets:
Assets, Fair Value	[3]	0		0
Ongoing basis | Significant Unobservable Inputs (Level 3) | Corporate notes and obligations
Assets:
Assets, Fair Value	[3]	$ 0		$ 0

[1] Included in accrued expenses on the unaudited condensed consolidated balance sheet.

[2] Included in cash and cash equivalents on the unaudited condensed consolidated balance sheet.

[3] Included in short-term investments on the unaudited condensed consolidated balance sheet

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Commitments and Contingencies (Details)	1 Months Ended	3 Months Ended
	Feb. 29, 2016	Mar. 31, 2016 USD ($)	Jun. 30, 2015 USD ($)	Oct. 31, 2014 USD ($)	Sep. 30, 2014 USD ($)	May. 31, 2014 USD ($)
Contractual cash obligations
Term of agreement	5 years
Quarterly payments required over first 12 months		$ 750,000
Payments due February 2017		3,000,000
Payments due February 2018		3,000,000
Payments due February 2019		3,000,000
Payments due February 2020		3,000,000
Total purchase commitment		15,000,000
Line of credit outstanding		$ 0
Dublin (CA) Headquarters
Contractual cash obligations
Debt instrument, face amount				$ 1,100,000.0
Extension term		1 year
Letters of credit outstanding				$ 0
Line of Credit | Wells Fargo Credit Agreement
Contractual cash obligations
Line of credit, borrowing capacity					$ 15,000,000	$ 10,000,000
Minimum liquidity			$ 7,500,000
Line of Credit | Wells Fargo Credit Agreement | Revolving Credit Facility
Contractual cash obligations
Repayments of lines of credit			$ 10,500,000
Required leverage ratio		3.00
Commitment fee percentage		0.25%
Line of Credit | Wells Fargo Credit Agreement | Minimum
Contractual cash obligations
Line of credit, borrowing capacity						5,000,000
Line of Credit | Wells Fargo Credit Agreement | Minimum | Revolving Credit Facility
Contractual cash obligations
Basis spread on variable rate		0.75%
Line of Credit | Wells Fargo Credit Agreement | Maximum
Contractual cash obligations
Line of credit, borrowing capacity						$ 10,000,000.0
Line of Credit | Wells Fargo Credit Agreement | Maximum | Revolving Credit Facility
Contractual cash obligations
Basis spread on variable rate		2.25%
Accrued Expenses
Contractual cash obligations
Total purchase commitment		$ 1,500,000
Other Noncurrent Liabilities
Contractual cash obligations
Total purchase commitment		$ 2,200,000

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Restructuring and Other (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	$ 316	$ 116
Restructuring Reserve [Roll Forward]
Balance at the beginning of the period	17	194
Additions	316	116
Adjustments	18	(6)
Cash Payments	(68)	(146)
Balance at the end of the period	283	158
Severance and termination-related costs
Restructuring Reserve [Roll Forward]
Balance at the beginning of the period		0
Additions		109
Adjustments		0
Cash Payments		(109)
Balance at the end of the period		0
Facilities related costs
Restructuring Reserve [Roll Forward]
Balance at the beginning of the period	17	194
Additions	316	7
Adjustments	18	(6)
Cash Payments	(68)	(37)
Balance at the end of the period	$ 283	$ 158

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Net Loss Per Share Net Income (Loss) Per Share (Calculation of basic and diluted net income (loss) per share) (Details) - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share, Diluted
Anti-dilutive securities excluded from computation of diluted net loss per share (in shares)	4,073	3,912
Restricted Stock Units
Earnings Per Share, Diluted
Anti-dilutive securities excluded from computation of diluted net loss per share (in shares)	3,417	2,800
Stock Options
Earnings Per Share, Diluted
Anti-dilutive securities excluded from computation of diluted net loss per share (in shares)	637	1,109
Antidilutive securities excluded from computation of earnings per share, weighted average exercise price	$ 6.68	$ 5.95
ESPP shares
Earnings Per Share, Diluted
Anti-dilutive securities excluded from computation of diluted net loss per share (in shares)	19	3

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Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock-based compensation
Stock-based compensation expense	$ 6,453	$ 4,817
Stock options
Stock-based compensation
Stock-based compensation expense	145	170
Unrecognized compensation expense, stock options	$ 700
Recognition period for compensation expense not yet recognized	1 year 3 months 18 days
Performance-based awards
Stock-based compensation
Stock-based compensation expense	$ 1,179	748
Compensation expense not yet recognized	$ 6,200
Recognition period for compensation expense not yet recognized	1 year 7 months 28 days
Service-based awards
Stock-based compensation
Stock-based compensation expense	$ 4,758	3,644
Compensation expense not yet recognized	$ 30,400
Recognition period for compensation expense not yet recognized	2 years 2 months 9 days
ESPP shares
Stock-based compensation
Stock-based compensation expense	$ 371	$ 255
Compensation expense not yet recognized	$ 1,200
Recognition period for compensation expense not yet recognized	8 months 12 days
Granted in 2015 | Performance stock units
Stock-based compensation
Stock-based compensation expense	$ 400
Granted in 2014 | Performance stock units
Stock-based compensation
Stock-based compensation expense	$ 800

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Stock-based Compensation (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Classification of stock-based compensation expense
Stock-based compensation expense	$ 6,453	$ 4,817
Cost of recurring revenues
Classification of stock-based compensation expense
Stock-based compensation expense	509	288
Cost of services and other revenues
Classification of stock-based compensation expense
Stock-based compensation expense	512	342
Sales and marketing
Classification of stock-based compensation expense
Stock-based compensation expense	2,154	1,458
Research and development
Classification of stock-based compensation expense
Stock-based compensation expense	1,170	797
General and administrative
Classification of stock-based compensation expense
Stock-based compensation expense	$ 2,108	$ 1,932

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Stock-based Compensation (Details 3) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2015	Dec. 31, 2014 company
Stock-based compensation
Stock-based compensation expense	$ 6,453	$ 4,817
Performance stock units
Stock-based compensation
Performance period			3 years
Performance stock units | Granted in 2015
Stock-based compensation
Stock-based compensation expense	400
Performance stock units | Granted in 2014
Stock-based compensation
Stock-based compensation expense	800
Number of companies in performance index | company				17
ESPP shares
Stock-based compensation
Stock-based compensation expense	$ 371	$ 255
Fair value assumptions using the Black-Scholes-Merton valuation model
Risk-free interest rate, minimum (as a percent)	0.42%	0.07%
Risk-free interest rate, maximum (as a percent)	0.51%	0.25%
Volatility, minimum (as a percent)	45.00%	42.00%
Volatility, maximum (as a percent)	50.80%	46.00%
Dividend yield (as a percent)	0.00%	0.00%
ESPP shares | Minimum
Fair value assumptions using the Black-Scholes-Merton valuation model
Expected life (in years)	6 months	5 months 27 days
ESPP shares | Maximum
Fair value assumptions using the Black-Scholes-Merton valuation model
Expected life (in years)	1 year	1 year

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 156	$ 214

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Segment, Geographic and Customer Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) segment customer	Mar. 31, 2015 USD ($) customer
Segment Reporting [Abstract]
Number of operating segments | segment	1
Revenues by geographic area
Revenues	$ 48,378	$ 39,745
Number of customers accounted for more than 10% of total revenues | customer	0	0
United States
Revenues by geographic area
Revenues	$ 39,885	$ 30,925
EMEA
Revenues by geographic area
Revenues	4,876	3,681
Asia Pacific
Revenues by geographic area
Revenues	2,542	2,701
Other
Revenues by geographic area
Revenues	$ 1,075	$ 2,438

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Related Party Transactions (Details) - Lithium - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2013	Dec. 31, 2015
Service Agreements
Related party transactions
Agreement term		2 years	3 years
Revenue recongnized in related party transaction	$ 138,000
Annual subscription recorded in prepaid expense and other current assets	4,290
Service Agreements | Affiliated Entity
Related party transactions
Agreement term			1 year
Related party transaction amount			$ 60,000
Hosting Agreement
Related party transactions
Revenue recongnized in related party transaction	37,613
Subscription Arrangement | Affiliated Entity | Prepaid Expenses and Other Current Assets
Related party transactions
Related party transaction amount	$ 19,500

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Subsequent Event (Details) $ in Millions	Apr. 07, 2016 USD ($)
Subsequent Event | ViewCentral LLC
Business Acquisition [Line Items]
Purchase consideration	$ 4.0